The CEO of an electrical power plant under construction in Pepeekeo said the project is “moving forward” despite mounting legal problems, including a foreclosure suit filed by the project’s former general contractor.
The CEO of an electrical power plant under construction in Pepeekeo said the project is “moving forward” despite mounting legal problems, including a foreclosure suit filed by the project’s former general contractor.
John Sylvia, president of Hu Honua Bioenergy LLC, said Wednesday his company will pay $30 million owed to Hawaiian Dredging Construction Co. He added Hu Honua hopes to have a 30-megawatt power plant online “at the end of 2015 or very early in 2016, depending on events that are out of our control.”
Attorneys for Hawaiian Dredging filed the foreclosure suit Oct. 27 in Hilo Circuit Court, claiming Hu Honua has not paid the construction company the $30 million it settled a mechanics’ lien for in June.
The foreclosure action seeks to have Hu Honua’s leasehold interest in the property “sold in the manner provided by law,” with proceeds going to pay the settlement, plus Hawaiian Dredging’s expenses and attorney fees.
In its lien, Hawaiian Dredging sought about $35 million for unpaid construction bills for work on the plant — which, if completed, would burn wood chips to generate electricity.
The 25-acre site is the former Hilo Coast Processing Co. power plant that at one time burned bagasse, a sugar cane byproduct. The facility was later converted to burn coal.
The suit also accuses Hu Honua and co-defendants Island Bioenergy LLC and NIV LLC of fraudulently transferring Hu Honua’s assets in January in order for NIV to loan Hu Honua money despite Hu Honua’s insolvency. Island Bioenergy is described in the filing as “sole member and manager” of Hu Honua.
When asked if Hu Honua plans to pay Hawaiian Dredging or make what the creditor would consider a good faith payment prior to a foreclosure sale or auction Sylvia replied, “The short answer is yes.”
“The long answer is that is a very long and convoluted process,” he said. “But that doesn’t matter because we’re looking to clean all this mess up, as we’ve been working on for the last six to nine months. It’s very unfortunate. I give (Hawaiian Dredging) a lot of credit for being patient. I understand some of their irritation. Unfortunately, these things are complicated and they take time to clean up.”
Maukaloa Farms LLC, another defendant in the suit, is the fee owner of most of the property leased by Hu Honua. Another smaller property is owned by Continental Pacific LLC.
Continental Pacific is the developer of the nearby Pepeekeo Point subdivision, and the listed principals of both companies are J. Barron Strother and Jeremiah Henderson. Hilo Circuit Judge Glenn Hara dismissed Maukaloa and Continental Pacific from the lien in July.
“That ruling essentially prevents Hawaiian Dredging from attaching its lien to the fee interests of Maukaloa or Continental Pacific,” Maukaloa’s attorney, Jesse Schiel, said Monday. That means Hawaiian Dredging can’t claim the land on which the plant is being built.
Schiel added his client hadn’t been served with the suit.
Sylvia said Hu Honua’s current plan is to “put together a capital plan that allows the plant to be completed.”
“That includes satisfying amounts that are owed to (Hawaiian Dredging), which we’ve never disputed that we owed them, and a lot of (other) stuff … such as lienor leases, … exchanges of information, processes to clean up loose ends, organize materials, then the financing can close. Then, everybody will be satisfied and people can go off and do their separate things and we can get the plant built,” he said.
Sylvia added legal setbacks the company has experienced the past several months have had “a domino-type effect.”
Those include numerous liens by contractors, subcontractors and suppliers, and a lawsuit by Hawaiian Dredging, since resolved, accusing Hu Honua and Paragon Construction Consulting, a project crisis-management firm, of locking the contractor out of the site and committing industrial espionage, stealing Hawaiian Dredging computers with proprietary and attorney-client privileged information.
Hu Honua announced in February it had a new contractor, Performance Mechanical Inc. of Pittsburg, Calif.
The EPA in February also ordered the state Department of Health’s Clean Air Branch to modify or reissue the air pollution permit for the facility, taking into consideration factors such as pollutants that would be generated during start-up, shutdown and malfunctions in the facility, as well as by certain types of equipment such as backup generators.
Sylvia noted the EPA order was to DOH and Hu Honua was not a party.
“What they said to DOH in a couple of areas is, ‘You need to crystallize language about how you’re going to go about monitoring, so you can ensure compliance.’ We agreed to everything,” he said. “We have all the computer systems, all the data logging equipment. The comments were more to DOH about how to do the logging.”
The order was in response to a petition by a community group called Preserve Pepeekeo Health and Environment, which objected to the permit’s issuance.
“I understand, from some of our neighbors, their strong feelings,” Sylvia said. “Because I think the facility started off, before the current team got involved, behaving in a manner that warranted their concern. They were trying to use a very old air permit with a very old plant and claimed, ‘Hey, it’s cleaner than coal, so who cares.’ That’s not how we did it. … We stopped everything. We went back, and for two years we redesigned, re-engineered, and re-permitted the plant. And we even installed equipment on this plant that is above and beyond what is required by regulation. And we’ve done that because if you can do a better job, you do a better job. You don’t simply say, ‘Here’s the limit. That’s enough.’”
Hu Honua continues to post progress updates on its website. One dated Sept. 9 touts the purchase of a 30-megawatt steam turbine generator manufactured by Japan’s Shin Nippon Machinery Co.
“We’ve ordered the new turbine generator, which will greatly improve the efficiency of the facility and … make it a brand-new plant from top to bottom, as opposed to pretty much a brand-new plant but with an older turbine generator,” Sylvia said.
Hawaiian Dredging’s lead attorney, Keith Yamada, did not return a telephone call seeking comment.
Email John Burnett at jburnett@hawaiitribune-herald.com.