The three year old $25 million tax free bond funded state of the art Entsorga waste-to-fuel facility in Martinsburg, West Virginia has been shut down.
The question is why.
And there are very few answers.
West Virginia’s Economic Development Authority, which issued the tax free bonds to fund the facility, did not return calls seeking comment.
The facility was a joint venture operation between the Italy based green technology company Entsorgafin SPA and Renovare Environmental (formerly BioHiTech) which ran the Martinsburg facility under a Renoware subsidiary name – Entsorga Martinsburg.
But then there was an apparent falling out between the partners — and a lawsuit.
“As a result of the pending litigation, we are working to have our name removed from the facility,” said Christopher Maloney, CEO of Entsorga Inc., the North American subsidiary of Entsorgafin SPA.
Renovare Environmental did not return calls seeking comment.
But in an April filing with the Securities and Exchange Commission (SEC), Renovare reported that in September 2020, “a minority owner of Entsorga West Virginia (Entsorgafin), who also provided intellectual property, equipment and engineering services relating to the set-up and initial operation of the facility, was claiming it was owed $917,420 related to services contracted as part of the facility’s construction and initial start-up and operation.”
In May 2021. Renovare Environmental reached a settlement with the Italian firm. But then, according to Renovare’s SEC filing, “on November 1, 2021, the company failed to repay a note then due.”
In February 2022, Entsorgafin filed a lawsuit in federal court in the Southern District of New York seeking payment on the notes.
Last week, the lawsuit was referred to a magistrate for settlement.
The Entsorga Martinsburg facility is collateral for the bonds issued by the state of West Virginia Economic Development Authority.
Renovare says in its SEC filing that “while the bond trustee has not provided a forbearance agreement in connection with the issuance of December 31, 2021 financial statements, they have not taken any actions resulting from our default under the most recent forbearance agreement.”
“Under the terms of the bonds, the trustee may declare a default and take actions to secure or foreclose on their collateral, which includes the facility, other assets and the membership interests in Entsorga West Virginia.”
As for the payments on the bonds, the company reports that “as of December 31, 2021 and 2020 the company was not in compliance with all of the financial and other covenants and was in default on principal repayments due in through February 2021.”
“The company and the bond trustee have entered into a series forbearance agreements and amendments, most recently on November 15, 2021 with the bond trustee that provides, they will not accelerate the repayment of the bonds due to the defaults through October 1, 2022.”
“During December 2021, Entsorga West Virginia failed to make payments under the forbearance agreement and. . .subsequent to December 31, 2021, the company commenced a review of its facility collateralizing West Virginia Economic Development Authority bonds that resulted in a decision to pause production operations.”