SEARSMONT, Maine — A Searsmont-based energy company is suing a bankrupt Canadian firm after alleging that a piece of faulty machinery it provided has cost the Maine company more than $10 million so far.
Although KMW Energy, Inc., based in Ontario, is insolvent, it has an insurance policy through Liberty Mutual Insurance Co., said Robert Ruesch, the Portland attorney representing Georges River Energy LLC in the breach of contract lawsuit filed Wednesday in U.S. District Court.
“The damages, to the extent there’s a recovery, would be paid by Liberty,” Ruesch said Thursday, noting that a bankruptcy court gave Georges River Energy permission to pursue KMW.
Georges River Energy, an offshoot of the family-owned Robbins Lumber Inc., was founded to oversee a new co-generation plant that would produce electricity and steam for the lumber mill to operate its lumber drying kilns and heat its buildings. The plant would use sawdust, bark and chips from the lumber mill as fuel for the 8.5 megawatt steam turbine.
In 2016, Georges River Energy entered into a $12.8 million contract with KMW Energy to make the project a reality.
KMW recommended that an Indian company design and manufacture the steam turbine. But when it was delivered to Maine and installed — a few months later than promised — the turbine failed to meet the terms of the contract, according to the lawsuit.
“Almost immediately after the turbine was put in service and began operating, it became clear that there were significant problems with the turbine,” the lawsuit said.
Among other problems, the turbine didn’t generate as much electricity as required by the contract and also generated insufficient leftover steam to supply the kilns at Robbins Lumber. That means the lumber company has continued to operate its existing energy system alongside the new system, which cost it money.
Experts determined that the turbine failed to comply with industry standards and that its construction was substandard, which could lead to failure, serious injury and death, the lawsuit said.
In May 2019, Georges River Energy notified KMW that it was rejecting the turbine and wanted a new one.
In July 2019, the Canadian company promised it would do so, and began to take steps that included soliciting proposals from other turbine manufacturers. But in April 2020, KMW filed for insolvency protection in the Ontario Superior Court of Justice.
“They did indicate this was one of the reasons for the filing,” Ruesch said, adding that the Maine energy company is steadfast in its goal. “We’re ultimately looking for a replacement turbine.”
Reusch said hopefully the companies could resolve the matter without a court trial.