Investor working to complete financing for Millinocket pellet mill despite FAME shortfall

Representatives of Cate Street Capital, which is hoping to fund a pellet mill in Millinocket, listen during a meeting of the Finance Authority of Maine board of directors meeting on April 17.
Nick Sambides Jr. | BDN
Representatives of Cate Street Capital, which is hoping to fund a pellet mill in Millinocket, listen during a meeting of the Finance Authority of Maine board of directors meeting on April 17.
Posted April 23, 2014, at 11:05 a.m.
Last modified April 23, 2014, at 5:59 p.m.

MILLINOCKET, Maine — The New Hampshire investment firm that could create a new market for the state’s forest products industries intends to proceed with its plans to build a $140 million pellet mill despite a recent $9 million reduction in a state bond, officials said Wednesday.

Thermogen Industries leaders are “disappointed” with a Finance Authority of Maine decision last week to reduce a $25 million bond to $16 million, but are working to close that gap with its investors, said Dammon Frecker, Thermogen’s project manager.

“While this setback is certainly unfortunate, our team’s passion and determination [are] inspiring and I have full confidence that we will prevail,” Frecker said in a statement released Wednesday. “We are working around the clock to restructure our financing plan and finalize a new path forward.”

“We are committed to developing this project and putting people back to work,” he added.

Cate Street Capital is a Portsmouth investment firm bankrolling Thermogen and Great Northern Paper Co. LLC, which owns a temporarily closed paper mill in East Millinocket and an industrial park in Millinocket where the pellet mill will be sited.

Frecker also disclosed for the first time Wednesday plans to build three pellet mills producing 300,000 tons of pellets annually — in Millinocket, Eastport and an undisclosed Maine site. The company had previously announced plans to build a facility in Eastport.

“As these efforts are underway but early in stages, we are unfortunately not able to disclose the [third] site location,” Frecker said. “But we can share with you that the intention would be to construct an additional facility with the same 300,000 tons per year of capacity, resulting in almost a million tons of biocoal being produced within the state of Maine, creating upwards of 1,000 direct and indirect jobs.”

No timelines are set for the assemblage of finances for the Millinocket facility, the construction of pellet mills or the paper mill’s restart, officials said.

FAME’s board of directors voted 8-5 in support of the reduced loan on April 17. Members said Cate Street had $16 million in equity and they didn’t want to put taxpayers on the hook for $9 million more, although taxpayers could be forced to pay the bond if the project fails.

The board followed staff advice despite the project having acquired new technology that experts said improved what the board approved in October. The new machinery prompted the review. Thermogen has worked with investors since April 17, Frecker said.

“Now it is a matter of working through the details as to how exactly it will get done,” Frecker said.

Cate Street promises have produced increasing skepticism in the Katahdin region since June 2013, when GNP’s tax and financial problems surfaced. The East Millinocket mill ceased production in late January and 212 workers were laid off on Feb. 6.

Vendors and the Internal Revenue Service have sought at least $6.8 million from GNP for late payments since April 11. The company also owes East Millinocket and Millinocket $3 million in property taxes. As of Wednesday, no new liens were filed with the Penobscot County Registry of Deeds.

Millinocket Town Councilor Michael Madore echoed the area’s impatience when he saw Thermogen’s announcement.

“I am glad they are continuing their efforts,” Madore said. “We have been a supporter of theirs from the beginning. In saying that, I wish them well in their endeavor, but more importantly, I wish they would hurry up.”

Cate Street has sought to build the pellet mill since fall 2011. The paper mill was originally set to reopen by May 1, but the reopening has been delayed indefinitely.

“I think the people of the Katahdin region and the council have been very patient, and [with] all the delays I think [residents believe that] it is time for them to fish or cut bait,” Madore said. “Either build it and let us move forward or not build it and let us plan for our next eventuality.”

The closing on the FAME loan, which requires payment of the overdue town property taxes, will coincide with the closing on the pellet mill’s private investment, Frecker said.

“We have to bring a number of pieces together — in particular, to have all of those pieces close simultaneously,” Frecker said. “The greater the number of participants you have, the more complicated these things tend to be.”

“No one,” Frecker added, “wants to get it done sooner than us.”

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