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Hu Honua faces nearly $37M in liens

The stalled Hu Honua Bioenergy project in Pepeekeo ran into more trouble, as three creditors say they’re owed delinquent unpaid bills, including one for more than $35 million.

Three applications for mechanic’s and materialman’s liens were filed last month in Hilo Circuit Court. The largest, filed Jan. 30 by the project’s main contractor, Hawaiian Dredging Construction Co., claims Hu Honua owes $35,166,862.50. Another, claiming an unpaid bill of $1,303,976.45, was filed Jan. 29 by American Electric Co. The third, filed Jan. 16 by General Supply and Services, dba Gexpro, seeks payment of $53,286.

A lien application filed Dec. 18 by Wesco Distribution Inc. seeking $215,174.74 was withdrawn Jan. 16, according to court records.

“We at Hawaiian Dredging have not been paid a significant sum for work that has been done since early 2013,” said Gary Yokoyama, vice president and general counsel for Hawaiian Dredging, on Thursday. “We’re in the process of demobilizing from the site.”

Yokoyama said “a lot of work … remains to be completed before the plant can be up and running.”

The project is a 21.5-megawatt, biomass-fueled power plant under construction on the 25-acre site of the former Hilo Coast Processing Co. power plant.

Yokoyama said American Electric is a subcontractor to Hawaiian Dredging, Gexpro is a direct supplier to Hu Honua and Wesco is a supplier to ESI of Tennessee, the project’s engineering firm.

Erik Eike, a Honolulu attorney representing American Electric, said Hu Honua’s bill has been unpaid for “almost a year at this point.”

“We got the word that discussions between Hawaiian Dredging and Hu Honua were not progressing satisfactorily, so we filed our lien,” he said.

Eike said Yokoyama attempted to get subcontractors paid before talks between Hawaiian Dredging and Hu Honua broke down more than a week ago. He said there will probably be more lien applications filed.

Yokoyama said he’s not aware of any more liens, specifically, but would not be surprised if more subcontractors file legal action against Hu Honua.

Hawaiian Dredging’s filing also names: Maukaloa Farms LLC, who leased the site to Hu Honua; plus “Doe” defendants, entities currently unknown that might be named in the future. A hearing is set for 8 a.m. March 13 before Judge Greg Nakamura.

Gexpro’s filing also names: Maukaloa Farms; Ethanol Research Hawaii, a former lessee whose lease was assumed by Hu Honua; Colonial Bank, which holds a mortgage on the property for $17,277,377 by Maukaloa Farms; Wesco; plus Doe defendants. A hearing is set for 8:30 a.m. Feb. 25 before Nakamura.

American Electric’s filing also names: Hawaiian Dredging; Maukaloa Farms; Colonial Bank; and Doe entities. A hearing is set for 8 a.m. Feb. 14 before Judge Glenn Hara.

“It will be a return hearing, which is usually a non-event, to see if they’ll contest it, which they probably will,” Eike said. “If that happens, then they’ll schedule a probable cause hearing for a date in the future, which is when the actual evidence will be presented.”

The lien applications all seek interest and attorney’s fees, as well.

Hu Honua also has other civil litigation pending.

A suit filed Sept. 23 by Maukaloa Farms alleges Hu Honua breached the provisions of the lease it assumed from Ethanol Research Hawaii.

That suit claims Hu Honua’s lease prohibited “any and all construction on the property by HHB that exceeds $500,000 (other than repairing or refurbishing existing equipment)” without “pre-approved plans and specifications, proof of HHB’s financial ability to pay, and a construction bond in the amount of the construction contract.”

The action claims Hu Honua “secured contractors to perform substantial improvements … including: erecting new structures on the property from the ground up; installing brand new equipment on the property necessary for the development of a biomass power plant; developing roads and parking lots on the property; and improving existing structures on the property, among other substantial improvements.”

The suit alleges the cost of improvements “far exceeds $500,000 and is outside the scope of repairing or refurbishing existing equipment on the property.”

Also alleged is that Maukaloa Farms “never received proof of an acceptable construction contract for the improvements, proof of HHB’s financial ability to pay for the improvements” and Maukaloa did not receive “plans and specifications … for review and approval” and did not receive “a construction bond in the amount of HHB’s construction contract for the improvements.”

The suit claims Hu Honua was given 30-day written notice of “material default under the lease” June 7, and a demand was made for a construction bond, but Hu Honua “failed to cure its default under the lease.”

Another suit filed Sept. 9 in a state court in Delaware — where Hu Honua Bioenergy is registered as a limited liability company — claims the owners of the project attempted to back out of an agreement to pay a lump sum of $5.5 million to the former majority owner following state approval of a power purchase agreement with Hawaii Electric Light Co.

A Hu Honua spokeswoman said the company does not comment on matters in litigation.

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