As they work to close a deal to buy two Katahdin region paper mills, Cate Street Capital investors are starting construction of a $275 million biomass boiler in Berlin, N.H., that will employ about 240 full-time workers and be among the Northeast’s most environmentally advanced biomass plants, officials said Friday.
Cate Street continues to work to finish its deal with Brookfield Asset Management, owner of the East Millinocket and Millinocket paper mills, by mid-to-late September. The company signed a tentative agreement on Aug. 30 to buy the mills for an undisclosed price. Part of the deal is the immediate restart of and a $20 million to $25 million investment in the East Millinocket mill.
As that work in Maine continues, Cate Street is set to begin the most active phase of its New Hampshire plans. Due to go online in late 2013, the 75-megawatt boiler will be built by 400 construction workers over two years before 40 full-time workers begin plant operations and another 200 loggers supply it with approximately 750,000 tons of low-grade wood annually, Berlin city officials said.
“The ancillary benefits will probably make this the biggest economic engine in the Berlin city area in 50 years,” Berlin Mayor Paul Grenier said. “You could not, from my point of view, find a more ethical and moral company to deal with. They are straightforward. They are businesspeople and they have a vision. When they enter into a community, they look to be good neighbors.”
Cate Street Capital secured about $200 million in senior notes and $72.5 million in equity to finance the project earlier this week, said company spokesman Scott Tranchemontagne of Montagne Communications.
Boiler construction is due to begin in late September, with construction preparation work starting next week, Tranchemontagne said.
The company specializes in developing renewable-energy resources, including solar, biomass, water reclamation technology, torrefied wood-based energy products, environmentally conscious manufacturing processes and renewable food technologies, according to its website, catecapital.com.
A key element to securing the financing was a deal brokered by New Hampshire Gov. John Lynch between Public Service Co. of New Hampshire, the state’s primary and publicly owned electricity supplier, and five of the state’s six independent wood-fired biomass plants.
Operators of the plants agreed to drop a lawsuit before the New Hampshire Supreme Court that protested a tentative 20-year power agreement between Public Service and Cate Street. As part of the settlement, five of the independent power producers got 20-month power-supply contracts with Public Service, state officials said. The sixth already had a contract.
The lawsuit delayed the boiler construction for several months.
“It had significant impact,” Tranchemontagne said Friday of the lawsuit. “Anyone who tries to finance a project knows the difficulty in securing financing with uncertainty looming over the project. The challenge from the six small biomass boilers created uncertainty.”
Berlin is a city of 9,351 in Coos County, a section of northern New Hampshire. At one time the world’s largest producer of newsprint, the area has only one paper mill left, in nearby Gorham, N.H., and is economically distressed. Its largest employers include a state correctional facility, a valley hospital and its school system. The city’s average per-capita income was $19,942 in 2009, according to the New Hampshire state Website, nh.gov.
Cate Street and Berlin officials hope to find light manufacturers who could use steam, water or electricity generated by the boiler to make their own businesses go. Two 60-acre sites near the boiler’s location, on property that was formerly part of the Fraser Papers pulp mill that closed in 2006, could be developed as industrial parks, Grenier said.
“That has been a bread and butter land in Berlin for over 100 years,” Grenier said. “It is very important to develop that land as light industrial use so we can retain and create good-paying jobs.”
The company originally had planned to pipe hot water to the Gorham mill from the boiler, but the plan fell to the side when Cate Street’s attempt to purchase that mill was unsuccessful. Tranchemontagne said the company is looking for other businesses that could use the boiler’s steam or water.
“With the two-year construction ahead of us,” he said, “there is time to explore.”
In Maine, meanwhile, East Millinocket and Millinocket town officials are working to finish their portions of tentative property tax and TIF deals with Cate Street. They hope to see resolution by Sept. 16. Negotiations with the unions involved with the two mills also are progressing.
“We are making progress. Our original timetable remains in place,” Tranchemontagne said. “We need to get this done within the next couple of weeks to meet the orders we talked about.”