Biogas project operators accuse Banco Popular of predatory lending
Biomass Green Fuels is seeking $156 million in damages in its lawsuit filed with the San Juan Superior Court.
A renewable energy venture meant to spearhead Puerto Rico’s transition to sustainable fuel has devolved into a legal conflict, with the developers of the Biomass Green Fuels (BGF) project accusing Banco Popular de Puerto Rico (BPPR) of predatory lending and fraudulent practices.
The lawsuit filed in the San Juan Superior Court by BGF and co-founder Gregory Boyd claims that BPPR used its financing position to gain control over valuable renewable fuel assets, allegedly in violation of federal banking statutes. Boyd is seeking $156 million in damages.
According to the 64-page counterclaim Boyd filed, BPPR’s loans for the $30 million project required BGF to sell its renewable liquified natural gas (RLNG) at a “65% discount to its fair market value” and transfer carbon and environmental credits valued in the millions to BPPR.
The plaintiff alleges this was part of a “tying arrangement” that forced BGF to supply RLNG at below-market rates and hand over valuable credits, which Boyd claims violates federal anti-tying regulations.
The BGF project initially held promise as Puerto Rico’s first biorefinery, aiming to convert landfill gas into renewable fuel, advancing the island’s energy independence and environmental goals.
However, Boyd claims that BPPR imposed conditions that stifled BGF’s revenue potential while allowing BPPR to use the RLNG and credits to boost its environmental, social and governance (ESG) profile, an increasingly valuable metric for public companies.
Boyd’s suit further alleges that BPPR failed in its fiduciary duties by acting as both lender and administrative agent, while approving payments to companies affiliated with co-defendants Olmar López and Cristina Ríos-Mena, who own companies involved in the project’s construction.
Boyd claims BPPR disregarded warnings that these affiliated contractors were behind on project milestones, leading to excessive costs and delays.
According to the filings, Boyd claims that BPPR failed to monitor construction properly, approve drawdowns based on incomplete documentation, and address “blatant” conflicts of interest involving the López companies, whom he accuses of self-dealing.
The complaint also states that BPPR’s amendments to the initial loan agreement further complicated the financing structure, giving BPPR access to RLNG supplies while allegedly restricting Boyd’s ability to intervene in management decisions.
Boyd claims that the bank’s actions contributed to BGF’s financial instability, leading to numerous defaults on the loan terms and rendering the project unable to operate fully.
Point of contention
One particularly contentious point of the case is the bank’s alleged requirement for a discounted RLNG supply contract. Boyd claims BPPR mandated BGF to supply fuel at 65% below market rates, ensuring that BPPR would benefit from cheaper fuel while BGF struggled with operating costs and revenue shortfalls.
BPPR’s alleged demands for exclusive rights to all associated carbon credits and other environmental incentives exacerbated BGF’s financial challenges, according to the claim. In total, Boyd estimates the environmental credits would have been worth tens of millions of dollars had BGF retained them.
The legal dispute escalated in April 2022, when Boyd and BGF co-owner Jonathan Lassers filed a separate federal lawsuit under the Racketeer Influenced and Corrupt Organizations (RICO) Act. This suit alleges racketeering by BPPR and the López companies, accusing BPPR executives of conspiring to divert funds from the BGF project to the López-affiliated entities.
Boyd claims that when he presented evidence of financial misconduct to BPPR leadership, including then-CEO Javier Ferrer, his concerns were dismissed, and the bank continued funding the López companies.
Boyd’s counterclaim seeks damages for BPPR’s alleged misconduct and requests release from his obligations as a guarantor. He contends that BPPR’s practices transformed the project into a tool for its ESG goals, rather than a viable energy venture, leaving BGF unable to realistically repay the loans.
