The Eastport Port Authority board voted 4-1 on August 31 to provide a $112,000 bridge loan to Phyto-Charter for a payment to the Brewer company that is building the phytosanitation equipment for shipping wood chips through the Port of Eastport. Port Director Chris Gardner believes there is little financial risk to the port authority because of the terms of the loan.
     With a 60-day period needed for building the equipment and work already having commenced, Stephean Chute, managing director of Phyto-Charter, is optimistic that the first trial wood chip shipment to Europe from the port will be made in November. The startup date has been announced several times previously, but financing and other issues have delayed the project, which will be the first use of the port authority's conveyor system.
     The shipboard heat-treating system that has been developed by Phyto-Charter to meet European Union (EU) requirements on the importation of wood fiber is being constructed by Nyle Systems of Brewer. Phyto-Charter contracted with the University of Maine's Forest Bioproducts Research Institute to conduct the research of the new heat treatment system, which satisfies the EU's concerns about the existence of the pinewood nematode, which could contaminate all species of wood fiber. The phytosanitary certificate will be issued by the U.S. Department of Agriculture. "It's an investment into the millions that Phyto-Charter is making," says Chute.
     "It's initially their project," Chute says of the use of the phytosanitation equipment for the port authority's operations. "We're dedicated to maximizing the cargo through the port."
    The shipment is being termed a trial cargo, but Chute notes that does not mean that the shipment will be determining whether the new equipment works. "It's to validate the equipment, and to validate the port authority as an export facility. And it's a validation of the marketplace."
    Where the cargo will end up, though, has not yet been finalized. Although arrangements had been put in place to ship the wood chips to Killybegs, Ireland, Chute says that exchange rate issues will determine the port that is selected, with several ports in Europe being feasible.

Port authority board concerns
     Concerning the port authority's financing deal with Phyto-Charter, Gardner says, "We're not carrying the loan. We're giving them time to seek third-party financing." He adds, "We have no reason to believe they won't get it." Once that financing is obtained, Phyto-Charter will repay the loan to the port authority. The port authority will co-sign on a third-party loan for Phyto-Charter but "we're hoping we won't have to," says Gardner.
     He notes that the port authority will not have to put up any collateral for the loan. Having placed a Uniform Commercial Code (UCC) filing for collateral on all of Phyto-Charter's equipment, which is worth $500,000, the port authority will become a lien-holder on the equipment. A UCC financing statement is filed by a creditor to give notice that it has an interest in the personal property of a debtor. "If they don't pay us back, we seize it."
     "It's a very, very low risk agreement between us and Phyto-Charter," says Gardner, adding, "It was a cash-flow problem, not an equity problem."
     Gardner also points out that the logging company E.J. Carrier Inc. is serious about its interest in shipping wood chips through the port, as it has so far made payments amounting to $407,000 to the port authority for its option to use the bulk storage yard and conveyor system for shipping the wood chips.
     Port authority board members had previously raised objections to providing a loan to Phyto-Charter. Gardner notes that the board's objections were that the port authority is not a bank, but he notes, "We have the right to enter into business ventures for the furtherance of port activities." At the port authority's August 17 meeting, the board had voted 3-2 against providing a $112,000 loan through the end of the year to Phyto-Charter, with Bob Peacock and Dean Pike voting in favor and Mary Repole, Elaine Abbott and Hollis Ferguson against. Gardner says that significant changes were then made in the proposal, with Phyto-Charter actively seeking third-party financing. He notes that Phyto-Charter believed it had a capital deal a few weeks ago but it didn't pan out. With payments due to Nyle Systems, Phyto-Charter didn't want to miss the deadline, which would have set the project back. At the August 31 meeting, board members Jett Peterson, Dean Pike, Bob Peacock and John Sullivan voted in favor of the bridge loan, with Hollis Ferguson against.
     Gardner states, "It's in our interest to get this over the hump but not to be their lender."