Sprague's largest employer, Fusion Paperboard, will close Sept. 22.
The paper mill notified its 145 employees of the closure Wednesday, a company spokeswoman said.
In a statement released Thursday, the company said: "The paper mill has been a manufacturer of recycled boxboard since the 1960's, withstanding many changes in the paper industry and operating in increasingly difficult market conditions. Despite recent efforts, the operation can no longer be sustained.
"We will make every effort to fulfill existing orders and help customers as they transition to alternate suppliers."
Fusion is collaborating with the state Department of Labor to provide job placement assistance to the displaced workers.
Sprague First Selectman Catherine Osten said the oversupply of recycled paper, Fusion Paperboard's main product, has hurt the operation.
"The market has too many plants." Osten said. "By closing the plant, it allows the market to resize itself. That's what the company told me."
The plant has existed under different ownership for decades. The current owner, OpenGate Capital, is a private investment firm that is willing to buy assets that corporations wish to shed, even in "complex and challenging situations," its website says. The fund, which says it has $3 billion in revenues annually, said it is open to buying facilities that are losing money, breaking even, or profitable. More than half its acquisitions are outside the United States, the website says.
Fusion Paperboard borrowed $2 million from the state Department of Economic and Community Development — less than the $3 million it was authorized to borrow — at 3 percent interest in September. It still owes $1,878,862.92 on the loan. It promised then that it would hire 20 employees at an average salary of $55,000 by 2016.
The state issued bonds to cover the loan. Under its terms, the company will have to repay in full now, along with a 7.5 percent penalty.
"DECD's initial concern is with the affected employees and their families and the impact on the municipality," said spokesman David Treadwell.
"We are disappointed that it's closing," said Sheri Cote, vice president of the Chamber of Commerce of Eastern Connecticut. "We were surprised to hear it." The Eastern Connecticut Workforce Investment Board, partner of the chamber, will provide training to the laid off workers, Cote said.
The company's departure will leave AMGRAPH Packaging Inc., which makes flexible packaging for the food and pharmaceuticals industries, among others, as the town's largest employer. The family-owned company has about 130 employees, company founder Kenneth Fontaine said.
What will happen to plans for a 20-acre solar panel array on land owned by Fusion was not clear on Thursday. A Virginia company intended to buy and install the panels, and to sell the electricity generated there to Connecticut Light & Power and United Illuminating. The project was approved by the Department of Energy and Environmental Protection in September,