Yesterday’s mention of BlueEarth Biofuels sent me back to check on the status of the company’s lawsuit against Hawaiian Electric. The suit, which alleged that HECO violated nondisclosure provisions of their contract when it entered into negotiations with others, first to take over BlueEarth’s proposed project, and later to pursue other projects that could draw on the confidential research and planning done by BlueEarth. The lawsuit is still ongoing in federal court here in Honolulu, although the scope has narrowed after a number of charges were dismissed.
But what caught my eye was BlueEarth’s sharp criticism of the “incestuous nature of the principals” involved in HECO’s latest deal with Aina Koa Pono, a company promising to use a new and commercially untested technology to create biofuels in a $350 million processing facility on the Big Island.
Michael Hurst, a Dallas attorney representing BlueEarth, argued in a February 4, 2011 hearing that Aina Koa Pono’s plan is “not only fairly similar to the BlueEarth Project, in scope and format, but many of the same cast of characters that received confidential information in the BlueEarth Project either as potential investors of BlueEarth” or in other capacities.
And the structure is — is remarkably similar — the same as — as the BlueEarth Project, that is a subsidiary buying the majority of the plant offtake; cost plus payment scenarios for the fuel by HECO; and the use of private capital based on a long-term tolling agreement with HECO….
And — and most importantly, this — this is the project — this is essentially replacing, or apparently will be replacing BlueEarth as the main platform to launch HECO’s goal or requirement to reduce Hawaii’s dependence on non-renewable energy.
Hurst said BlueEarth had entered into discussions with Sennet Capital regarding financing of its project.
Recall that DBEDT Director Richard Lim was a co-founder of Sennet Capital along with Kenton Eldridge.
Eldridge is now managing partner of Sennet Capital, and co-founder and part of the management team of Aina Koa Pono. Honolulu attorney Paul Alston, who represents Hawaiian Electric in the BlueEarth litigation, is also an investor in AKP as well as its general counsel. At the same time, Alston is a member of Sennet’s Board of Advisors and his firm represents Sennet.
Karl Stahlkopf, formerly chief technology officer for HECO and was in charge of their renewable energy efforts, moved over to Sennet Capital in 2009, and is also involved in the AKP project, according to Hurst.
Bill Kaneko, an attorney in Alston’s firm and registered lobbyist for Aina Koa Pono, was chairman of Gov. Neil Abercrombie’s campaign and remains a central figure in the governor’s inner circle of advisors.
Joining Eldridge as co-founder of Aina Koa Pono is Melvin H. Chiogioji, who went out through the revolving door after 27 years in federal jobs to form his own contracting firm, Mele Associates, which has become a relatively successful defense contractor.
Chiogioji and Mele Associates were large campaign backers of Neil Abercrombie’s congressional campaigns, and were generous supporters of his gubernatorial bid as well.
All this may not have helped BlueEarth’s legal case, but it does shed some additional light on the power structure of these energy initiatives.
In any case, I’m out of time this morning. I’ll try to sort out additional details later.
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“… Aina Koa Pono, a company promising to use a new and untested technology to create biofuels in a $350 million processing facility on the Big Island.”
The incestuousness, I am used to. But what caught my eye are the huge expenditures being made on technology in its infancy made by a new company run by … lawyers and provincial insiders, mostly. This is not a formula for success.
I am all for renewable energy, but all the signs point toward a collective misfire.
Renewable energy seems to be a long way off on the horizon, and when it happens it could be home generation that leads the way, followed later by a smart grid and only much later by wind and geothermal linking the islands together.
So it could be that Hawaii is doing this all backwards — and from the top down. And the people at the top are not exactly seasoned veterans of energy development.
It could be that the first stage will be diversifying Hawaii’s non-renewable sources, and shifting away from a sole reliance on petroleum and coming to utilize things like imported liquid natural gas. Later it will be (home-generated) solar, then even much later geothermal, and then finally wind.
That is just my (semi-educated) guess. But looking at those at the helm of these projects, I don’t feel that my lack of expertise is something unusual.
Sennett has had an abysmal track record. Without the high tech tax credits they would have taken a total bath on their investments. Just look at their portfolio. Yet in Hawaii they are considered one of the leading venture capital / private equity firms around – even if they would have gotten utterly crushed on the Mainland.
Wasn’t the deal set up so that the higher costs of the fuel produced by Aina Koa would be paid by all HECO customers and not just those on the Big Island who actually get the energy? I could be wrong but I thought the point of all that high priced legal firepower was to persuade the PUC to let HECO dun all its customers for very high alternative fuel. I think they succeeded.
To me, these are the people who really have an idea of how to make biofuel production work in Hawaii: http://mauinow.com/2011/01/31/pacific-biodiesel-win-2-4m-military-contract-venture-capital-award/
The key to much is HECO’s ability to make us all pay. If that could not happen, perhaps these ventures would not go forward.
I don’t have a problem with the idea that the transition to new sources of power is going to have costs involved. We should expect to pay.The questions have to do with the reasonableness of those costs, including social and environmental costs, and how those are distributed. And, of course, whether some are more favorably placed so that they end up with more than their fair share of benefits.
Ian, thanks for the note of rationality that concludes this string of comments.