PORTLAND, Maine — A New Jersey contractor is suing Cate Street Capital and two Millinocket-based firms, claiming it was not paid for $3.85 million in site preparation work for a wood pellet production plant.
A Penobscot County Superior Court judge has since approved contractor Conti Enterprises’ request to move ahead with attaching a $3.85 million lien to property owned by GNP West LLC, Thermogen I LLC and Cate Street Capital Inc. That order was filed with the Penobscot County Registry of Deeds on Feb. 22.
Steven Hedges, a New Jersey-based attorney for Conti, said the company is still awaiting a response to the lawsuit from Cate Street and the two other defendant companies it manages.
“This lawsuit is about wanting to get paid for work that we’ve completed,” Hedges said.
The complaint alleges Cate Street did not pay Conti for preliminary design and engineering work at the site in Millinocket and that it should have received a $12.6 million contract to complete all engineering, procurement and construction for the project.
Hedges said Conti is no longer working with Cate Street, and the lawsuit alleges leaders of the Thermogen project began shopping around the full engineering and construction contract to other firms.
Alexandra Ritchie, a spokeswoman for Cate Street, did not respond to an email requesting comment Monday and was not immediately available for comment Thursday afternoon.
The lawsuit was filed before town officials in Millinocket granted two Cate Street entities a property tax abatement totaling $356,541 for 2014, which was a portion of the $1.23 million abatement the company requested.
Cate Street still owes Millinocket $1 million in back property taxes, plus interest.
Town Manager Peggy Daigle wrote in an email Thursday that she was not aware of the lawsuit.
“I know nothing of this legal action,” Daigle wrote.
She did not respond to a follow-up question asking whether she thinks the company should have notified the town of this lawsuit before negotiating the abatement, but wrote the abatement “had nothing to do with this action and everything to do with valuation.”
The company has been working to develop its Thermogen plan since 2011 but ran into hurdles raising money for the project, with investors last year pulling more than $30 million of investment incentivized by the state-level New Markets Tax Credit program.
Last year, the accounting and consulting firm Novogradac granted Cate Street its Financial Innovation Award, in part for using the federal New Markets Tax Credit program and long-term power purchasing agreements to arrange a complex financing package for its Burgess BioPower plant in Berlin, New Hampshire. The New Hampshire plant was converted from a former paper mill and was an example economic development officials hoped Cate Street could replicate in Maine.
The Legislature in May 2012 raised the cap for qualifying investments from $10 million to $40 million to accommodate Cate Street’s vision for restarting the Great Northern Paper mill in East Millinocket and making high-tech wood pellets in Millinocket. Athens Energy in Athens and St. Croix Tissue in Baileyville also have qualified for that program, which returns 39 percent of the total qualifying investment over seven years.
In 2012, Thermogen began seeking to import a Scottish Rotawave technology to produce torrefied “Aurora Black” wood pellets and build a separate facility in Eastport, later changing its plans to use a steam-thermal technology in Millinocket. The change increased the estimated project cost in Millinocket from $70 million to $140 million and prompted the Finance Authority of Maine to require a new review of the $25 million bond.
The Finance Authority of Maine later approved a $16 million bond if Thermogen amassed all of its required financing. It has not.
Bill Norbert, spokesman for the Finance Authority of Maine, said enough time has passed that the company would have to reapply for the $16 million bond it won previously.
Karl Wilkins, a spokesman for the Maine Department of Environmental Protection, said last week that its review of Thermogen’s air-quality permit is ongoing and should finish within three months.
Cate Street also was the firm orchestrating the restart of the Great Northern Paper mill, which filed for bankruptcy in September after shutting down for months with hopes of restarting.
At the time of the bankruptcy, GNP declared $65 million in debts and $28.15 million in assets. The California investment firm Hackman Capital bought the shuttered mill and related assets in December for $5.4 million.
An attorney for the bankruptcy trustee in that case, Jeremy Fischer, wrote in court filings that the trustee could claim that the company’s managers violated their fiduciary duty, to act in the interest of investors, by operating too close to insolvency while taking on additional debts.
The trustee argued its proposal to settle creditors’ claims was preferable to pursuing a prolonged legal battle that would expend money from the estate.