Thermogen Industries, the start-up that's struggling to launch a wood pellet plant at the old paper mill in Millinocket, got some more bad news this week.
Coastal Enterprises Incorporated says it's withdrawing a $20 million anticipated investment in Thermogen because changes to the proposed project have put it at odds with CEI's underwriting requirements. This loss of expected capital adds to the uncertainty over whether the project will be able to secure the funding it needs to get off the ground.
Three years ago, a for-profit subsidiary of CEI, CEI Capital Management, began working on a financing package with banks, community lenders, the state and Cate Street Capital, a New Hampshire-based private equity firm overseeing the Thermogen project. CEI investments, which target economically depressed areas of the state, have helped revitalize a tissue mill in Baileyville, a hotel in Presque Isle and sustainable forestry practices in Grand Lake Stream and Piscataquis County.
In Millinocket, CEI saw the opportunity to make a $20 million investment in Thermogen, and in the process, help restore jobs to the region. Christopher Roney, general counsel for the Finance Authority of Maine, says FAME approved the CEI investment
"They had asked us to essentially approve whether, if they did that transaction, that would qualify them for the New Markets Tax Credits at the state level," Roney says. CEI also then qualified for the federal New Markets Tax Credit, which seek to spur economic revitalization in low-income communities.
But late Monday, CEI announced that it was withdrawing the investment. Christen Graham, a spokesperson for CEI, would not agree to a taped interview, but did e-mail a statement from the company. It says the project no longer fits with CEI's underwriting requirements due to changes to the proposal, made by Cate Street Capital.
"I have to believe in Cate Street. That's all we've got here," says Clint Linscott, a selectman in East Millinocket, where another business backed by Cate Street, Great Northern Paper, temporarily shut down operations last winter and laid off nearly all of its 256 workers.
The mill hasn't turned a profit since it reopened it in the fall of 2011. Cate Street has long said that any plan to re-open the mill, re-hire the workers, and keep the business running over the long-term, depends on Thermogen gaining a foothold in the emerging market for bio-coal.
Alexandra Ritchie, Cate Street's spokeswoman, was unavailable for comment. But Clint Linscott says company officials have reassured him that the Thermogen project is still on track.
"Cate Street stays in touch," Linscott says. "They just call it a part of their investment package. They have other investors waiting."
In an e-mailed statement, Cate Street calls CEI's withdrawal another obstacle to overcome, and goes on to say that the firm remains committed to the Thermogen project and hopes to complete financing in the near future.
Besides the CEI application, the Finance Authority of Maine's Christopher Roney says queries have also been received from firms in New Jersey and Missouri, looking to invest another $20 million in the project. "We haven't heard that any investments have been made by any of the proposed investors," Roney says.
Roney notes that FAME has also pledged $16 million in bond money toward the Thermogen project. But that total is less than the $25 million Cate Street had originally hoped for and is dependent upon the firm satisfying certain conditions, including paying roughly the $3 million in back property taxes that Great Northern Paper owes the towns of Millinocket and East Millinocket.
