Enough is Enough on Cate Street in Portsmouth

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Power to the People is a column by Donald M. Kreis, New Hampshire’s Consumer Advocate. Kreis and his staff of four represent the interests of residential utility customers before the NH Public Utilities Commission and elsewhere.

By Donald M. Kreis, Power to the People

Governor Sununu is right:  Enough is enough.

In fact, as the state’s ratepayer advocate I find it downright refreshing that our state’s chief executive is willing to state forthrightly that it is time to stop infinitely funding public policy initiatives, even virtuous ones, via the electric bills paid by Granite Staters.

As Governor Sununu pointed out in the message accompanying his veto of House Bill 142, which would have provided more ratepayer subsidies to the Burgess Biopower plant in Berlin, Eversource customers have already been on the hook for more than $200 million since 2014  in order to keep the wood-burning electricity generator operating.  “The Power Purchase Agreement with Burgess Biopower is a great example of what can go wrong when the good intentions of a sympathetic government get exploited and abused by opportunists in the private sector,” declared the Governor.

That’s an important point.  The veto is not a condemnation of the bipartisan coalition that has, for more than a decade, supported efforts to keep Berlin and its surrounding communities viable by repurposing what was once the paper mill in the middle of the major city in the economically challenged North Country.

Rather, the veto is an explicit rebuke of the management and ownership team at Burgess Biopower which, the Governor noted, “has made bad promise after bad promise to our elected officials.”

Since the Governor called out the management and ownership team, it’s worth exposing that group to a bit of sunshine.  Berlin Biopower is operated by Delta Power Services of Houston, a subsidiary of Babcock & Wilson Power Generation Group.  Babcock & Wilson is the giant Texas-based builder of power plants that constructed Burgess Biopower.

The plant’s three owners – each of which has a one-third interest in the facility – are 3Cubed LLC, Gestamp Biomass, and Cate Street Capital or some successor to it.  The first is a subsidiary of CSE Spain SAL, the second is owned by Acek Desarrolo Y Gestion Industrial SL (also of Spain), and the third – well, let’s zero in a bit on that one.

The third owner is – or was — Cate Street Capital, the Portsmouth based private equity firm that originally developed what was then known as Berlin Station, along with another private equity firm called Starwood Energy Group Global, LLC.  Starwood, now known as Lotus Infra, seems to have extricated itself.

An interesting factoid about Cate Street Capital is that it filed for bankruptcy protection in 2020.  What drove Cate Street Capital into bankruptcy was its purchase, for $1, of the former Great Northern Paper mill in East Millinocket, Maine.

According to a 2017 investigation by the Portland Press Herald, the mill in East Millinocket closed forever, just a year after Cate Street bought it and got Maine to commit $16 million in taxpayer money to the project.  The newspaper’s conclusion, in a nutshell: “Maine taxpayers [were] on the hook to pay Great Northern’s investors $16 million through 2019 for investing $8.2 million in a mill that shuttered in 2014. And the people of East Millinocket have nothing to show for it.”

The Press Herald described a complicated scheme involving a series of one-day loans among affiliated companies.  There is no evidence anything like that has happened here in New Hampshire, but at a higher level the story is the same:  Private equity investors charging into communities challenged by the implosion of northern New England’s paper industry, persuading state officials to commit taxpayer funds and/or ratepayer funds to projects touted as economic rescue plans.  Then the plans fail.

Maine taxpayers forked over $16 million.  In New Hampshire, the bill to Eversource ratepayers has been $200 million.  Enough, indeed, is enough.

For a while it looked like the Cate Street Capital bankruptcy would spell trouble for Berlin Biopower, but that apparently has not happened.  As a former journalist, I am in awe of a paragraph I dug up from the June 2, 2020 edition of the NH Business Review, in the middle of a story explaining that Cate Street Capital had transferred its contract to sell the electricity from Berlin BioPower to CS Operations, Inc., operating out of the same address (One Cate Street in Portsmouth).

Here’s the paragraph:

“‘CS Operations Inc. (CSO) is not a continuation of Cate Street Capital Inc. (CSC); they are wholly separate entities,’ said Sarah Boone, vice president, public affairs and Administration of CSO. ‘Neither CSO nor CSC ever owned Burgess BioPower (BBP). At one time, CSC had a management contract with BBP, which it assigned to CSO as CSC was winding down. CSC has not conducted business in more than two years. The CSC bankruptcy filing has no impact on Burgess BioPower.’”

Okay.  But perhaps you are wondering:  Why would anyone think that Cate Street Capital is still an owner of Berlin Biopower?

Well, a 2022 article from S&P Market Intelligence identifies the third owner as a subsidiary of Jenis Investment Company LLC.  The New Hampshire Secretary of State lists One Cate Street in Portsmouth as the principal address of the firm and lists Sharon Hallé, spouse of Cate Street Capital’s president, John Hallé, as the managing principal of Jenis.

The Secretary of State’s corporations database indicates that the registration for Cate Street Capital of 1 Cate Street in Portsmouth has been withdrawn.  All I can say for sure is that businesses associated with John Hallé, located at One Cate Street in Portsmouth, seem to multiply and mutate.

In law school one learns that incorporation is the gift that keeps on giving, thanks to limited liability.  If someone incorporated Office of the Consumer Advocate LLC with the Secretary of State, and made it the owner, in turn of a second incorporated business – call this one OCA LLC — then if OCA LLC stiffs its creditors they generally cannot go after Office of the Consumer Advocate LLC or its ultimate owners.  It doesn’t matter if OCA LLC declares bankruptcy.

It matters not a bit to me as the state’s ratepayer advocate who owns what among current and former businesses, with seemingly interlocking interests, located at One Cate Street in Portsmouth.  The point is that the venture capitalists and the companies from Spain that control Burgess Biopower did not lobby for House Bill 142 because they care deeply about the future of New Hampshire’s North Country.

Meanwhile, veto override day at the State House is not until January 3.  The bipartisan vote of 269 to 109 – a veto-proof majority – suggests it would be premature to consign House Bill 142 to oblivion.

From a ratepayer perspective – and, I daresay, from the perspective of the struggling people of the North Country – it would be great if the veto override vote never happens.  The owners of Burgess Biopower should decide, as the Governor decided, that enough is enough – and then they should come up with a new plan to save not themselves but, rather, what was once the proud industrial enterprise in the heart of Berlin.

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