Company That Led Failed Great Northern Paper Restart Pursues A New Venture In Maine
Company That Led Failed Great Northern Paper Restart Pursues A New Venture In Maine
By Darren Fishell, BDN Staff • December 29, 2017
Darren Fishell | BDN
The paper trail tells of Organic Nutrition's backstory, its key technology and more recent backing from the Portsmouth-based private equity firm Cate Street Capital, who led the failed restart of the Great Northern Paper mill in East Millinocket.
Cate Street Capital, the firm that leveraged $16 million in public money for its failed restart of East Millinocket’s Great Northern Paper Co. mill, has another project for Maine. This time, it is backing two entrepreneurs who want to grow farm-raised fish, fed with insects, and use the fish waste to grow produce in nutrient-rich water, a technique called hydroponics.
Their company, Organic Nutrition Inc., plans to do that with a headquarters in Florida and a hydroponics facility on the campus of St. Joseph’s College in Standish.
The Maine facility, planned for construction in 2018, is part of the college’s Institute for Local Food Systems Innovation. Organic Nutrition began construction on its Florida facility in October, according to property records.
angram 3DS
A computer rendering by the Kittery-based firm Tangram 3DS depicts a finished Florida facility of Organic Nutrition Inc., an agriculture and aquaculture business backed by the Portsmouth private equity firm Cate Street Capital. Cate Street also used the Kittery company to produce renderings of its scuttled Thermogen Industries projects in Millinocket and Eastport.
With Organic Nutrition, business partners Ernie Papadoyianis and Xavier “Sal” Cherch are seeking a comeback story after a dispute with their previous financiers ended in an adversarial 2009 bankruptcy.
Out of the bankruptcy, they retained their patented aquaculture system and other research. Now, with Cate Street’s backing, the duo wants to put their inventions to work. It could be Cate Street’s comeback in Maine, too.
The eventual bankruptcy of Great Northern Paper left behind a trail of debt that the attorney overseeing the case attributed in part to mismanagement, as managers at Cate Street inked unfavorable deals with related companies plunged the company into more debt and despite clear signs that it was out of cash.
An investigation by the Maine Sunday Telegram into Cate Street’s deal also prompted state and federal regulators to close loopholes in incentive programs that Cate Street used to deliver roughly $16 million in Maine tax dollars to out-of-state financiers, for investments that didn’t improve any part of the East Millinocket mill.
To get Organic Nutrition off the ground, Cate Street plans to use a combination of private financing, federal government support, its partnership with St. Joseph’s and a program that gives foreign investors a fast-track to citizenship.
Bill Diamond, a Democratic senator who represents Standish and who served on the Government Oversight Committee that reviewed the Great Northern deal, said he didn’t know Cate Street Capital was backing Organic Nutrition. But he toured St. Joseph’s in October to hear about its plans and sees no reason for concern.
“I think that’s a wonderful program and I think they are going to be one of the leaders in the east,” Diamond said.
The Maine plan
The facility in Maine will support a new certificate program at St. Joseph’s and provide support to other hydroponics businesses, according to the college. Organic Nutrition committed $750,000 to the effort, helping to match a $2 million grant from the U.S. Economic Development Administration.
“The Organic Nutrition Hydroponic Farm will help entrepreneurs across the region scale up small greenhouse pilot programs into larger operations, preparing them for transition to stand-alone, for-profit businesses,” St. Joseph’s said in a news release.
The college anticipates the farm will sell about $120,000 worth of strawberries a year, by 2021, during a time when demand is highest for the fruit most often shipped from outside New England, according to an economic study the college commissioned.
The institute also will include the Hannaford Food Venture Center, focused on new food production technology, a commercial test kitchen where budding food manufacturers can use professional equipment and a livestock farm.
St. Joseph’s College
The site plan for the Institute for Local Food Systems Innovation at St. Joseph’s College in Standish shows three major components: at left, Organic Nutrition’s hydroponics greenhouse; at center, the Hannaford Food Venture Center; and, at right, a livestock barn.
As the hydroponic farm is just one part of St. Joseph’s plan, Organic Nutrition is just one of its founders’ ventures.
Cherch and Papadoyianis also lead North American Medical Holdings, a company that aims to build a network of health clinics providing controversial and unregulated hormone mixtures they tout as anti-aging treatments and possible treatments for conditions like erectile dysfunction.
The company wants to sell its so-called “bioidentical” hormone treatments at clinics across the country, under the name “Body & Life” and the slogan, “Your body. Your life!”
That company is still in the works. A website for the health clinic, registered to Cherch and a defunct aquaculture-related entity Closed Containment Systems Inc., asks visitors to “stay tuned while we finish preparing our interactive website to service you best.”
Organic Nutrition’s origins
Organic Nutrition emerged from Papadoyianis and Cherch’s aquaculture research started in 1996. By 2007, they had restarted an aquaculture facility in Florida City and had trademarked their circular, solid-walled fish farming pen as the “Aqua-Sphere.”
The vision, then, was largely the same: to build a better feedstock for fish farming and to use waste from the aquaculture process as fertilizer for hydroponic crops.
“We’re taking a liability of aquaculture, which is the waste, and creating an asset out of it,” Papdoyianis said in a 2007 interview with the Discovery Channel Canada show “What’s That About.”
The company’s first prototype of its circular tank cut about 30 days off the growth cycle for the fish, compared with rectangular “raceways” used at their Florida City operation.
Regulatory filings in 2008 tell of big ambitions for that year, with plans get more Aqua-Spheres into the water and to make moves on other research to breed insects to feed those fish. The planning began after a meeting on the topic in June 2006, with executives at their previous company, Neptune Industries Inc.
“In the weeks that followed, several suggestions arose as alternative sources for fish meal, including rats, insects, snails, worms and fish processing waste, and extensive research was conducted,” the filing states. “The team quickly concluded that insects appeared to offer the greatest commercial potential.”
Behind the scenes, trouble was brewing over ownership of Papadoyianis and Cherch’s aquaculture technology.
A deep recession complicated their effort to get additional loans as Neptune was staring down payments coming due, from roughly $2.5 million in debt instruments it issued to investors. On Feb. 13, 2009, three of those investors forced Neptune into bankruptcy. Papadoyianis, Cherch and various investors in Neptune fired back two weeks later, accusing financiers of foul play to enrich themselves by sabotaging Neptune.
They eventually settled the claims, the last of which they resolved in 2009 as part of the bankruptcy they left with their inventions and trademarks intact.
Enter Cate Street
By 2011, Papadoyianis and Cherch had caught the eye of Cate Street. The Portsmouth-based investment firm listed Organic Nutrition as one of its earliest portfolio companies, according to an archived webpage.
In May of 2012, as Cate Street CEO Halle told Maine officials that its East Millinocket mill restart would not go beyond making newsprint, Organic Nutrition had started the process of securing its trademark on “entoponics.”
With Cate Street’s backing, Papadoyianis and Cherch were back in business.
Last year, they won their trademark for the word “entoponics,” which they define as using insect components and waste to produce vegetables, fruits, plants and algae.
In August, the company announced it secured a $5 million loan guaranteed by the U.S. Department of Agriculture to finance the first phase of its Florida operation, along with roughly $1.5 million from private investors, who received equity in the company.
In November, Cate Street CEO John Halle told the South Florida Business Journal that the company hopes to capture customers like Carnival Cruise Lines or supermarket chain Publix, which receive some greens shipped from California.
Eventually, the August statement said, Organic Nutrition plans to build that facility out to 500,000 square feet of hydroponics greenhouses and seven Aqua-Sphere fish farming systems.
That vision includes pairing its fish and hydroponics operations with breeding facilities for Black Soldier Flies, according to promotional company videos posted on YouTube. It plans to use food waste to grow the insects. The insects would provide protein meal to their tank-based fish farming systems, and it plans to use the fish waste as fertilizer for its hydroponic crops.
While the details of their plans have emerged in Florida and Maine, Organic Nutrition said in its August statement that it’s planning five facilities in four states. It has not disclosed details of those other plans.
It hopes to fuel some of its future projects with $50 million in foreign investment through the China-based Da Tang Investment Group and the EB-5 program. The EB-5 Immigrant Investor Program gives expedited green cards to investors who put more than $500,000 into a qualifying U.S. business.
Leaders of Cate Street, Organic Nutrition or the U.S. contact for Da Tang Investment Group did not respond to requests for comment left in mid-December and this week.
On Wednesday, a company website at organicnutritioninc.com disappeared at least two weeks after going live. Google saved portions of the page Dec. 25.