PORTLAND, Maine — An investment firm has withdrawn at least $20 million it considered committing to Thermogen Industries, the company created and managed by Cate Street Capital that plans to build a high-tech $140 million wood pellet plant in Millinocket.
Portland-based CEI Capital Management, the for-profit subsidiary of Coastal Enterprises Inc., said in a written statement that Thermogen’s change of plans for its wood pellet plant in February meant it no longer met underwriting requirements. After three years working with banks, company representatives and community leaders, CEI wrote that the “decision was not made lightly.”
Alexandra Ritchie, managing director for Cate Street Capital, did not respond to multiple emails and phone calls Tuesday seeking more information about how the company would proceed with financing its $140 million project.
Doug Ray, spokesman for the state’s Department of Economic and Community Development, said the apparent setback for the project was disappointing news for the Katahdin region.
The restart of the Great Northern Paper mill in East Millinocket, a project also managed by Cate Street, has been regularly pushed back since the mill laid off 212 workers in February. Construction on the Thermogen project missed multiple deadlines stated by company representatives, who first announced plans to start construction at the former Katahdin Avenue paper mill in 2012 and begin producing wood pellets in 2013.
The company in February scrapped its plan for a $70 million pellet plant using a technology similar to microwaving called torrefaction in favor of a $140 million pellet plant using a different process pioneered by a Texas company, Zilkha Renewable Energy.
In addition to $20 million in credits through the Maine New Markets Tax Credit program, CEI planned to allocate an unspecified amount of tax credits to the project through a similar federal program started in 2000 to spur economic development in rural areas.
The program allows investors in qualified community development entities to get the equivalent of 39 percent of their investment back in the form of tax credits over a period of seven years.
The Finance Authority of Maine had approved the subsidiary of CEI Capital Management to receive tax credits for investing in Thermogen along with Missouri-based USBCDE Sub-CDE 101 LLC and CCG Sub-CDE 25 LLC, based in New Jersey. The other two entities qualified to invest another $10 million each through the state’s New Markets Tax Credit program.
Representatives from the other entities were not available Tuesday for comment about their planned investments in Thermogen.
Qualifying companies don’t receive the tax credits approved by FAME until an investment is made. Bill Norbert, FAME’s spokesman, said in an email that the agency has not been notified that investments from the other entities have been made, but noted that the investment firms have a couple of years to do so.
Upon approving the tax credits in August 2013, FAME officials said in a statement they thought the investment would be made within 180 days. The news that CEI has withdrawn its tax credit allocation from the project comes 211 business days after that decision.
CEI said in its statement that Cate Street Capital may submit another application for the New Markets Tax Credit program in the future, starting that process anew.
The company is also in line for $16 million in financing through FAME’s major business expansion program, which is contingent on its payment of past due taxes to the Internal Revenue Service and the towns of Millinocket and East Millinocket.
In March, a company spokesman told Biomass Magazine that Thermogen planned to make up the rest of its financing for the pellet project through equity investment.
CEI’s withdrawal is the latest hurdle for the project, which faces a 2 p.m. Thursday deadline from Millinocket officials to pay back property taxes with proceeds from the company’s auction of its No. 11 papermaking machine and other equipment last week. If that deadline is not met, town officials said they would reinstate a lien against the company’s papermaking equipment sold at auction.
That lien would prevent transfer of the equipment, the sale of which was to pay the company’s past-due taxes to the Internal Revenue Service and the town.