February 22, 2013






Wood pellet firm plans to create 75 jobs in Eastport
 by Edward French


     The investment company that is revitalizing the mills in Millinocket and East Millinocket is now poised to convert a former herring processing factory site in Eastport into a facility that will use waste wood from Maine's forests to make a clean fuel replacement for coal that will be shipped through the port.
     Thermogen Industries, a subsidiary of Cate Street Capital, has signed a letter of intent with the Eastport Port Authority to lease land next to the port terminal to build a torrefied wood pellet manufacturing facility that would create approximately 75 new jobs within two years. The agreement was signed at the February 19 meeting of the port authority board.
     The facility, which will be located on a portion of the 40-acre former BASF site on Broad Cove, will be capable of producing 200,000 to 300,000 tons of torrefied wood pellets annually. The work for the estimated 60 to 90 workers would be in two or three shifts, with the plant operating seven days a week, 24 hours a day. In addition to the new jobs, which will be skilled labor positions paying wages equivalent to those at paper mills, Thermogen's production is expected to support over 300 additional jobs for those who will be supplying and trucking the wood. The plant, which will cost at least $50 million, also will be providing 200 to 250 construction jobs while it is being built.
     John Hallé, president and CEO of Cate Street Capital Inc., says, "Strategically, it's a great location for us. A guaranteed gate to the outside world is very important to us." He says that the company plans to ship 300,000 tons annually through the port, both into the U.S. and Canada and to Europe. Hallé adds that Thermogen might ship some of the torrefied wood pellets from its smaller Millinocket plant through Eastport. "It's strategically important to get to a port," he emphasizes.
     To supply the Eastport facility, Thermogen will buy 800,000 tons of wood annually within 50 miles of Eastport, spending $25 million each year on wood. The plant will only use biomass material that's left behind from wood harvesting operations and will not compete for wood with the pulp and paper industries in the state. Thermogen plans to sign long-term contracts with wood suppliers.
     Following completion of engineering and site design, Thermogen will begin the permitting process with the state, with a goal of starting construction as early as possible in 2014. Construction is expected to take another nine to 12 months. Hallé notes that the permitting for the Millinocket torrefied wood pellet plant took six to eight months, but now that the state is familiar with the product the timeline should be faster.
     "This is an industry that will be around for a long time," Hallé says. "This is a long-term industry that has legs." Pointing out that more and more industries are converting to cleaner fuels such as pellets because of government mandates to no longer burn coal, he notes that England will be burning 10 million tons of pellets annually and New England an estimated 3.5 million tons. Coal-fired plants will burn the torrefied wood in lieu of coal to lower emissions and meet new environmental regulations. Thermogen has exclusive North American rights for the microwave technology to produce its torrefied wood product, named Aurora Black.
     Hallé adds, "This site is ideal for both Thermogen and Eastport. Our clean fuel product, torrefied wood pellets, will be shipped overseas as an alternative fuel for coal-fired power plants that need to reduce harmful emissions. Locating next to the Federal Marine Terminals would greatly reduce our shipping costs while providing new, incremental business for the port."
     Eastport Port Director Chris Gardner notes that the greatest impact will not be to the port but rather to the community, with the creation of jobs and expansion of the tax base. "The port's just glad we could help bring it here."
     Port authority board member Bob Peacock notes that the property taxes that will be paid by Thermogen "will be the answer" to the city's tax problems. City Manager Jon Southern says the plant, which may be valued at an estimated $80 million, "could potentially halve the taxes in Eastport." With the facility providing approximately 75 jobs "it will bring young families back to the area and will provide jobs to anyone who wants one."
     Under the two-year lease agreement, Thermogen will pay the port authority $5,000 a month, or $60,000, the first year, and $90,000 the second year. The company's plans will require energy transmission infrastructure capable of delivering up to 12 megawatts of power, and the port authority has agreed it will inform Thermogen of any proposed project at their site that would use more than 5 MW of power. Gardner says that clause gives the company time to protect its investment, if necessary. After the initial two-year contract with the port authority, both parties will be looking at continuing with ongoing 20-year contracts.
     Hallé says the company has built good reputations with the towns where it has located its operations. "We've gone above and beyond to be a part of the community" by contributing to the towns. He says noise from the facility should not be an issue, as the microwave technology is an electrical process. The company will be looking at a buffer zone around the plant, which it might buy or lease from the city. Southern says if the city sells the land it will go through a public bid process.
     Previously, the port authority had approached the city about acquiring the 10.7-acre buffer zone parcel, and Gardner says it's still possible that the port authority might make the purchase. The port authority expects to close by July 1 on the BASF site on Broad Cove, which it is purchasing for $350,000, and will be paying full property taxes on the parcel.
     Gardner points out that the port authority's construction of the bulk conveyor system infrastructure to load the pellets onto ships was an important factor in Cate Street's decision to select Eastport. Although bringing the biomass into Eastport will increase truck traffic on Route 190, Gardner says that shipping the biomass into the port could be a possibility, since the conveyor system is bi-directional. Noting that anticipation of possible products can help bring more business to the port, he uses a hockey analogy to describe the port authority's strategy: "Gretzky says you have to skate to where the puck is going to be, not where it is."
     Hallé says Governor LePage's staff, state, city and port officials all worked collaboratively with Thermogen on this project. "Rosaire Pelletier, the state senior forest products advisor, first introduced us to Eastport a few years ago, and we've enjoyed a good relationship with the town ever since." Gardner notes that Cate Street is being assisted in being able to finance the Eastport project by the state's New Markets Capital Investment Program that provides refundable state tax credits. The legislation had been sponsored by former Senate President Kevin Raye of Perry.
     John Henshaw, executive director of the Maine Port Authority, comments, "I think this is a real opportunity for the port in the long-term." Using a renewable energy source and having the wood pellet torrefication plant on port authority land "is a huge benefit and opportunity," he says. "It bodes well for this endeavor."
     The torrefication process involves changing the properties of the wood using microwave technology, which creates a black pellet akin to charcoal. It burns with a BTU heat output and has handling characteristics that are similar to coal. The pellets can be ground up and burned like coal but they burn much cleaner. Hallé notes that most wood pellet manufacturing uses natural gas, while the microwave process cooks wood from the inside out.
     Torrefied wood has at least 25% more heat per pellet than typical wood pellets. White pellets have about 6,500 to 7,500 BTUs per pound, while the torrefied pellets have up to 11,000 BTUs per pound. Also, with white pellets, significant investment must be made for fire suppression, which is not an issue with the black pellets. The black pellets can be burned both in commercial and industrial operations and also for residential use.
     Cate Street Capital, a venture capital company founded in 2009 in Portsmouth, N.H., focuses on finding and supporting green technologies and environmentally sustainable projects. The company purchased the Great Northern Paper mills in Millinocket and East Millinocket in 2011, restarting the East Millinocket mill that year. That mill now employs over 300 people and produces 160,000 tons of paper a year. In Millinocket, Thermogen broke ground in October for a torrefied wood pellet facility at that mill, which shut down in 2008, and plans to begin operations there by January 2014. That plant will have a capacity of 100,000 tons a year. Cate Street Capital also is constructing a biomass power plant at a former pulp mill in Berlin, N.H.

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