“The Hawaii Clean Energy Initiative … sparks rent seeking activity (pursuit of special privilege and benefits) throughout the State of Hawaii.” – Prof. Lee H. Endress, UHERO March 7, 2013

by Andrew Walden

A newly formed company with ties to Senator Donovan DelaCruz and Governor Neil Abercrombie is seeking $200 Million in State bond financing. 

HB338HD2 “authorizes the issuance of special purpose revenue bonds for Kaiuli Energy LLC for the planning, design, and construction of its seawater air conditioning district cooling system to serve Waikiki and nearby areas….”   The bill passed the House unanimously and March 7 crossed over to the Senate with referrals to the Committees on ENE and WAM.

Support for HB338 comes from the usual tax credit lobbyists: Blue Planet, Ulupono, and the State High Technology Development Corporation as well as Kyo-Ya and Hilton.

Offering comments on the bill, Kalbert K. Young, Director of the State Department of Budget and Finance explains, “the Department has no position on the issuance of SPRBs as contemplated in this bill” but dryly points out:

According to (its) Business Plan, Kauili was founded in 2011 and currently does not generate any revenue.  As such the Department would expect that further details be presented as this project progresses…. The Department is required, among other things, to determine whether Kaiuli is a responsible party, whether by reason of economic assets or experience in the type of enterprise to be undertaken….” 

According to BREG, Kaiuli Energy LLC is wholly owned by Makalii Holdings LLC, a company registered May 19, 2011  and already listed as “not in good standing”.  The four “managers” of Makalii Holdings LLC are listed as:

• Keslie Hui:  Chief Operating Officer at Monarch Properties, inc
• Adam Wong:  VP of WCIT Architecture, Equity Partner, Anekona Real Estate Development, and Director at Makai Ocean Engineering
• Rob Iopa:  President at WCIT Architecture, Historic Hawaii Foundation Board Member, and a Fellow of Mufi Hannemann’s Pacific Century Fellows
• Ray Soon: One of three directors of Governor Abercrombie's transition nonprofit, New Day Hawaii, Soon formerly worked as Cayetano’s DHHL Director, and Kamehameha Schools vice president for communications.  As a Clinton appointee, he served nine years on the federal Advisory Council on Historic Preservation.  Soon is a founding board member of the Council for Native Hawaiian Advancement and Chairman of the Board of Hawaiian Homes Technologies, (a CNHA company) and sits on the boards of Ho’okako’o Corporation, PILI, Inc, and the Advisory Council of the Queen Liliuokalani Children Center. 

Pacific Business News identifies another Kaiuli Energy partner not listed on BREG:

• Darryl Nakamoto, former CFO of Hoku Corp. 

According to his Senate website, Senator Donovan DelaCruz (D-Wahiawa) is “Director of Communications at WCIT.”

Kaiuli has no revenues, so is Kaiuli a responsible party with “experience in the type of enterprise to be undertaken?” 

Testifying in support of HB338 Darryl Nakamoto straight-facedly claims: 

“Kaiuli’s management team is comprised of Hawaii business and community leaders with the necessary experience critical to the project’s success.  As the former CFO of Hoku Corporation, I have over seven years of experience in alternative energy and raising funds for large scale ventures.” 

A Hoku news release makes Nakamoto’s experience sound like a good fit for Kaiuli:

"Mr. Nakamoto's key accomplishments include Hoku's 2005 initial public offering on the Nasdaq Global Market, and raising over $300 million in debt and equity capital, including the Company's transaction with Tianwei New Energy that resulted in Tianwei becoming Hoku's majority stockholder in 2009.”

But that Hoku news release came in March, 2012--as Nakamoto resigned.  What Nakamoto launched with $300M in Other People’s Money ended with construction of Hoku’s Idaho polysilicon plant grinding to a halt due to unpaid electric bills, creditors demanding repayment of tens of millions of dollars in loans, and NASDAQ delisting the insolvent company.  Hoku’s “success” consisted of paying its executives fat salaries so they could prance around town pretending to exemplify high-tech entrepreneurship -- right up until the Act 221 Tax Credits ran out.   So yes, Nakamoto’s experience at Hoku gives him precisely “the necessary experience critical to the project’s success.”

He’s not the only one.  Ray Soon knows a thing or two about “the necessary experience critical to the project’s success.”  For instance, Anne Keala Kelly explains how Soon handled money to lobby for the Akaka Bill:

“When the Chair of the CNHA, Ray Soon, was still the Director of the Department of Hawaiian Homelands (DHHL), he initiated the transfer of $150,000 of trust assets to the Sovereign Councils of the Hawaiian Homelands Assembly (SCHHA). Micah Kane, a leading Republican who played a key role in Linda Lingle's gubernatorial campaign, completed the transfer when he became the DHHL director. Once transferred, the money was allocated to lobby for the Akaka Bill. SCHHA then hired the CNHA to put together a plan. So the money literally went from Soon's old job to his new job. Robin Danner, president of the CNHA and the Vice Chair of SCHHA, was also on both the giving and receiving end.”

The Star-Advertiser July 10, 2011, explains how Soon scored a $186,000 contract to 'Dig the State Historic Preservation Division out of Chaos':

Ray Soon, the Solutions Pacific head, is a former state official and a supporter of Gov. Neil Abercrombie; he's listed as an officer in the administration's transition nonprofit, New Day Hawaii. Some eyebrows were raised over that, and over his addition of a subcontractor, former SHPD chief Don Hibbard, who left the division in 2002 under the critical glare of a state audit.

According to the Star-Advertiser, Solutions Pacific was “tasked to help fulfill a two-year schedule of corrective actions.”  But in February 2013, SHPD offered the Feds a laundry list of excuses for its failure to perform.  SHPD may by facing loss of federal certification and the funding which comes with it, but sequestration has  stalled a scheduled visit by federal inspectors.  What does this mean?  Civil Beat April 30, 2012 explains:

The state agency charged with safeguarding Hawaii's historic and archeological treasures is in such disarray that the federal government is threatening to revoke its certification and funding.  That could in turn hold up billions of dollars in state projects, including the Honolulu rail project, government officials say.

So now legislators are preparing to give him $200M to dig up Waikiki.

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