ELLSWORTH — Details on the agreement negotiated between the Municipal Review Committee (MRC) and bondholders for the shuttered Hampden waste facility the MRC oversees came out at a March 10 town hall meeting.
The MRC had earlier announced that the agreement will result in the sale of the Hampden waste facility by June 30.
“We set a line in the sand,” MRC board member Bob Butler said. “It became a line in concrete. And the bondholder got a shot of reality.”
The MRC will set the lowest bid of $1.5 million, with professional marketing to follow, to find an outside buyer. The buyer will purchase all Coastal Resources of Maine (CRM) assets and operate under existing permits using the existing technology in place. Also required is the financial capacity to complete facility improvements and operate at a loss until the facility is up and running with a positive cash flow. Technical ability to operate the plant, or a plan for operation, is also required.
“One of the most critical negotiations we accomplished is that [the sale] all needs to be completed by June 30,” MRC Executive Director Michael Carroll said, adding, “The MRC will have a new owner come June 30, whether it be a qualified buyer or the MRC.”
The $1.5 million “stalking horse” bid from the MRC would be minus costs incurred from March 1 until the purchase closing, including outstanding property taxes, utility costs and facility maintenance costs for repairs and upkeep. Carroll estimated those costs at around $500,000.
The bondholders are guaranteed to receive at least $1 million from the sale, a far cry from the original investments still owed.
“They’ve finally come to the realization that this is their best option,” MRC Board President Karen Fussell said. “They are hoping for more than $1.5 million.”
The existing debt from Coastal Resources of Maine to the MRC of $1.5 million will be written off as a bad debt.
“Just as the bondholder is getting what they get from the market, so is MRC,” board member George Aronson said. “This is part of the negotiation that enabled us to get here.”
If MRC purchases the facility – a move Fussell said she saw as a 50-50 chance – it will need start-up costs, cashflow and working capital needs of around $20 million, an amount that any outside buyer will also have to guarantee.
But while the MRC has the $1.5 million for the purchase, the additional amount may come from a full faith and credit guarantee by volunteering MRC members.
“We’re working on figuring out how to finance that since the MRC does not have that kind of funding available,” Fussell said. “It is very difficult to find a source of financing because everybody is looking for collateral. The complicated nature of this facility and the fact that’s it’s a single purpose asset … is not straightforward.”
The plan for members to guarantee the start-up costs is not finalized.
“We anticipate that we’ll have that more fully fleshed out and available to members in probably early April,” Fussell noted.
The financing would be for a limited time, she said, and communities “that are able to and interested in participating in providing that kind of backing would receive consideration in the future,” likely in the form of a tip fee discount.
The MRC would not own the facility but set up a limited liability company.
Blue Hill Select Board member Scott Miller asked if MRC’s bid was the winning bid, who would operate the plant? The answer was the MRC would provide oversight for a hired operator.
The MRC handles the municipal waste for 115 member communities that either followed or joined the MRC in its switch from Penobscot Energy Recovery Co. (PERC) to the brand-new waste-to-biofuel facility that opened in mid-2019. The $90 million facility uses Fiberight technology and was owned by Coastal Resources of Maine.
But in 2020, CRM was unable to secure needed financing to continue operating the plant, and it was shut down in May of that year and then placed in receivership by the courts, with bondholders overseeing its finances and the sale process.
Just as there were delays in starting operations at the plant, so did delays hamper the sale process. One potential buyer, Delta Thermo Energy, was given exclusive purchase rights last year but the sale fell through after dragging on the process for roughly nine months.
“Things seemed to come to a standstill,” Carroll said, noting a lack of communication from the bondholders earlier this year. “We were losing patience.”
While the plant remains shuttered, member waste is being diverted to landfills or to Penobscot Energy Recovery Co.
The MRC will hold another town hall meeting in mid-April.