December 14, 2017
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Cate Street link is part of what’s known about latest redeveloper of shuttered Maine mill

By Darren Fishell, BDN Staff
Updated:

EAST MILLINOCKET, Maine — In private meetings, the company hoping to reboot the shuttered Great Northern Paper mill property has presented an uncomfortable fact: Its first U.S. investment was through Cate Street Capital, the firm whose revival effort fizzled after two years despite $16 million in state aid.

Recently published regulatory documents and other records shed more light on the leaders of Capergy US, whose subsidiaries lead various businesses that seek to turn Maine’s forests into marketable energy. That includes Stored Solar, which operates two wood-to-energy plants in West Enfield and Jonesboro, subsidized by a $13.4 million taxpayer bailout for two years.

The U.S. arm of Capergy, a French company, put $120 million into a bundle of projects in 2013. It includes three plants in Spain and a stake in Cate Street Capital’s biomass plant in Berlin, New Hampshire.

After three years, a spokesman said the company was unsatisfied by “limitations on the development strategy.” By February 2016, it pulled out and shifted attention toward its big vision for repurposing defunct mills and biomass plants in Maine.

Legal disputes have now stymied the company’s initial financing plan in East Millinocket and its biomass energy plants are putting out a fraction of the electricity they had planned.

Without East Millinocket or other business partners, the company wrote in February that the subsidized biomass operations will fail. While it has said in court that its biomass plants can’t survive alone, it objects to the term “subsidy,” preferring to call its arrangement with Maine taxpayers a “bio-economy on-ramp incentive.”

The company has a tough road ahead in a challenging industry. And Capergy’s two owners, William Harrington and Fahim Samaha, have volunteered spotty information about their ability to build that new “bio-economy,” incentives or no.

Trouble in New York

As Capergy US sought government funding to restart its two biomass plants, it boasted to regulators of more than a century of experience in energy-related ventures.

Capergy claimed an investment portfolio totaling about $3 billion worldwide since 1987, including the Cate Street venture. It plans to gather $500 million for its latest round. But a recent biomass venture by Harrington, one half of Capergy US and Stored Solar’s director, did not go so well.

Harrington’s effort to restart a troubled New York biomass plant failed in 2015, after taking over the plant in late 2013 under a subsidiary of his company Sterling Energy Group. The company hoped to bring Niagara Generation out of cold storage.

Media reports indicated that in August 2015, employees said they weren’t being paid and that Sterling had defaulted on a $6 million mortgage and a loan from the Niagara County Development Corp.

An Ohio contractor sued Niagara Generation around that time, alleging it hadn’t been paid for engineering and design work. Harrington’s company didn’t respond to the lawsuit and the contractor, Codaco Engineering, won a $106,800 default judgment in early 2016, according to court records.

Two months into the restart effort in Maine, a trade association alleged some of its members supplying Stored Solar’s Jonesboro plant weren’t being paid. The company in late March said it resolved the issue it called an “invoicing dispute.”

Harrington and a spokesman for Stored Solar declined to comment on the Niagara investment. But court records describe how he got there.

Harrington’s career in construction started in the late 1960s, and by 1991 he had become the CEO of mechanical contractor Foster Wheeler Zack, which produced and installed the type of boiler used in the Niagara plant. Sterling credited its restart of the plant to its “considerable expertise” using that particular boiler.

[ The documents behind an ambitious plan for Maine’s forests]

In a LinkedIn profile, Harrington said he ended his position as president and CEO of Sterling in June 2015 and began working as a project development consultant and expert witness.

According to a state filing, the company still owns a coal power plant in Crawfordsville, Indiana, which federal records show has been idle since December 2014.

A worldly venture

Capergy, Samaha’s company, boasts investments across multiple sectors and continents. His wife, Kimberly Samaha, is also an executive at the company, according to documents submitted to Maine regulators.

Since January, she’s acted as CEO of Synthesis Venture Fund Partners, which leads the fundraising effort for the Maine investment plan, branded as the Maine Born Global Challenge.

Fahim and Kimberly boast electrical engineering degrees and resumes with a long list of international project development and finance experience, spanning the Middle East, Africa and Europe, according to their biomass bid documents.

After months of requests for more information, the company on Monday sent details of its corporate history to the Bangor Daily News, mirroring much of the information in the bid documents, but for at least one detail. The description of the 2013 investment makes no mention of the Cate Street investment in New Hampshire.

The bid documents outline nearly $3 billion in investments, dating back to 1982. The company said Monday that its projects employ more than 2,500 people worldwide with executives that “have a successful track record and offers to its industry and financial project partners capital contribution, technical expertise, and asset management skills.”

The documents show the New Hampshire plant was its first project in the United States, and one of its shortest-held.

The company previously confirmed the investment but did not then detail other projects. It exited the investment with the Spanish energy company Gestamp, because it saw “limited development potential” in that group of biomass plants. Gestamp owned one-third of Cate Street’s New Hampshire project, according to regulatory filings.

Projections by regulators in New Hampshire reveal looming challenges for that facility. They expect the Berlin plant’s 20-year contract for power could end up costing ratepayers $100 million by 2019.

Once the plant brings in $100 million in payments above the market price for power, a measure meant to protect New Hampshire electricity customers kicks in and will chip away at the plant’s revenue in future years.

Neither Fahim or Kimberly Samaha responded directly to a request for more information about their industry experience in March, but they did answer certain questions through a spokesman in April and after months of requests in June.

Dan Cashman, a spokesman for the company in Maine, said Monday that corporate information is scarce because its principals “don’t like to toot their own horn.”

Anatomy of the deal

After pulling out of the New Hampshire investment and others in early 2016, the company began assembling the pieces of its Maine vision that could support hundreds of jobs in rural parts of the state.

The first piece fell into place by the fall, winning a deal for Maine to subsidize electricity from two biomass plants it had recently purchased.

All of that was supposed to happen alongside development of the ” centerpiece” of its grand vision, the $240 million Penobscot Biorefinery in East Millinocket.

Both projects serve as the company’s foothold for a larger vision and fundraising effort to build numerous “bio-energy parks” it said could turn unprofitable standalone biomass plants into sustainable businesses.

That plan is distinct from Cate Street’s proposal to ship microwaved wood pellets from East Millinocket to European power plants, because it calls for collaboration with other companies. Unlike Cate Street, the company said in April that its East Millinocket plan won’t require more state or local aid.

It has at least one similarity. It, too, makes big promises for commercially untested technology that they insist is ready to go to market.

[ Experts see challenges in pioneering biofuel plant technology]

In May 2016, Samaha and Harrington formed formed EMEP LLC and began negotiations to buy the shuttered Great Northern Paper mill. By June, they agreed to buy it for $1.75 million and in August got $50,000 from the Maine Technology Institute to support their application for a federal loan guarantee for the East Millinocket project.

Meanwhile, it pursued another foothold in its wood-to-energy plan. A bill to subsidize the state’s biomass industry with $13.4 million in new state aid passed with Gov. Paul LePage’s signature in April.

By June — the same month the company made an offer on the defunct East Millinocket mill — it formed the subsidiary Stored Solar to go after that biomass money and negotiate with Covanta to buy two mothballed wood-to-energy plants in West Enfield and Jonesboro.

In bid documents, the company said that it would use the subsidy to support upgrades to both facilities and to attract customers that could use byproducts such as heat or carbon dioxide in separate processes.

That includes businesses in agriculture, aquaculture, wood processing and food processing. The company in March said it had a deal in the works with a greenhouse pepper grower.

Those deals haven’t yet come to pass. Meanwhile, the company’s Jonesboro plant has been offline since late March and its overall output under the subsidy deal lags its own projections.

A rough start in Maine

For each of the two years of its subsidy deal, Stored Solar planned to generate 100 gigawatt-hours of electricity by May. It put out about two-thirds of that amount, which could leave it short of the threshold for receiving the state subsidy under the 2016 law.

To reach its goal, the plants would have to operate about 91 percent of the time from June through December. At the end of May, its Jonesboro plant remained completely offline for a second month.

Through May, the company missed out on about $453,308 in state subsidies it originally planned to generate. In April, regulators agreed to let Stored Solar collect the subsidy at the end of the year rather than monthly, eliminating a requirement that it put up cash or credit as a security deposit against payments.

The company has not detailed a timeline for restarting the Jonesboro plant or getting its East Millinocket project off the ground.

Last week, the company dropped its contract lawsuit claiming it negotiated a right to buy the property for $1.75 million.

But that development came nearly a year later than its original plan and has apparently jeopardized its use of a federal loan program to support 70 percent of the project’s cost.

“EMEP continues to research federal loan guarantees and additional funding options to move forward with its original energy park plan,” spokesman Cashman wrote Thursday.

While company officials said their plan wouldn’t require any additional state or local aid, it did lean on a partnership with Maine’s Department of Economic and Community Development in its initial applications for a loan for the U.S. Department of Energy.

Asked if the department had concerns about the company’s ability to carry out the project, spokesman Doug Ray wrote in an email that “due diligence is ongoing throughout any project as it develops.”

“If any red flags are discovered as part of that process, appropriate action follows,” Ray wrote. “Any person or company’s past successful investments in one of our neighboring states or elsewhere should be an example of what we strive for here in Maine.”


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