$70 million in Kior loan money turns into $600,000 for Mississippi. The Republicans made hay out of the beef plant fiasco, now it is their turn to take some lumps although both Democrats and Republicans overwhelmingly voted for the Kior project. It is now time to look at what MDA had to say about the project while it was merely a proposal instead of a failure. Amy McCullough reported in a 2011 Mississippi Business Journal article:
State leaders agree that affordable and reliable energy is essential for Mississippi’s future economic growth. Gov. Haley Barbour has said his energy policy is “more of it” and has aggressively promoted hefty incentive packages to a number of green energy projects, which have received enthusiastic support from the state Legislature.
Successful global companies like Nissan and Toyota have also received generous state incentives to locate plants in the state. But these companies have excellent and lengthy track records, unlike start-up energy companies.
Making loans to start-ups is “a relatively new position for the state to be in,” said Kathy Gelston, chief operating officer for the Mississippi Development Authority (MDA).
Wisely written clawbacks, or contract reversionary clauses, can recoup Mississippians’ money if a plant moves or doesn’t produce. But it’s hard to claw back money from a corpse if a start-up goes belly up.
The people of the State of Massachusetts are unhappy and reviewing clawback provisions in a deal they made with Evergreen Solar — a plant that announced this month that it is moving its manufacturing facility and 800 jobs to China.
Massachusetts taxpayers gave more than $40 million in combined grants and tax incentives to Evergreen’s plant, which opened in 2008. But manufacturing costs in China are 50 percent cheaper.
The company says that clawbacks in its state agreement dictate that Evergreen Solar only owes Massachusetts $4 million, according to Solar Novus Today. The state disagrees.....
We should continue financing research on solar technology as long as that research continues to produce cost-cutting breakthroughs… but we shouldn’t pretend that cheaper solar energy will end up employing millions of our less-skilled citizens. For decades, local economic success has come from entrepreneurship and education, not large-scale manufacturing.”
“In general, the way our programs work, if the state has invested money… then clawbacks basically state the company must maintain the jobs for a negotiated period of time. Normally that number is 10 years. And they must make an investment amount by a certain date,” Gelston said.
“A lot of them have really long construction cycle. In the event that that doesn’t occur then most of the time the clawbacks are written so that we would do a percentage. For example, if they had to invest $300 million and had only invested $150 million, they would have to pay back 50 percent” of the investment money.
“In the event the company doesn’t meet their investment commitment or job commitment, we have the ability to make them make full payment on that loan… The way we work these projects is we based the incentives we provide based on the investment the company is going to make and the jobs they’re going to create over the next several years,” she said.....
Since July 2010, the Mississippi Legislature has approved a $185 million alone in loans for three green energy projects — Soladigm, KiOR and Stion – which collectively represent more than $1.1 billion in planned investments in the State of Mississippi.
*Soladigm, founded in 2007, will build its first full-scale manufacturing facility for dynamic glass windows, in Olive Branch.
*KiOR, founded in 2007, will convert biomass to crude oil with three facilities near Columbus, Newtown and Franklin counties.
*Stion, founded in 2006, will manufacture high-efficiency, thin-film solar panels in Hattiesburg.
Such projects have received loans from a Mississippi Development Authority-administered fund called the Mississippi Industry Incentive Financing Revolving Fund, and Mississippians are on the hook for the money if any of these companies should go bankrupt. The Revolving Fund is funded with state bond proceeds.
When the state makes loans for equipment purchases, as it has for Soladigm, MDA makes sure the state has the first lien position on pieces of equipment, she said. And, “We normally don’t finance pieces that are not somewhat generic. For example, a generator is a generator; a crane is a crane,” Gelston said.
If a company went bankrupt, much of the equipment for cutting-edge renewable energy technology wouldn’t have much market value. Additionally, the start-ups “don’t want to run risk of their technology being seized,” Gelston said..... Rest of article.
Kingfish note: Just remember, WTVA reported earlier this week:
The equipment of biofuel company KiOR has been sold. Lowndes County officials announced the sale Monday morning. REG Energy of Indiana spent $1.7 million to purchase the hydrostater at the site. The company, which manufactures biofuel from natural fats and grease, will move the equipment to a site in Indiana.
Georgia Renewable Power purchased the remaining equipment for $1.5 million. The owner of the company may locate a wood chip mill at the site or move the equipment. KiOR manufactured crude oil from wood byproducts and refined it into gasoline and diesel. The plant never reached production levels anticipated and filed for Chapter 11 Bankruptcy in November of 2014.
The state, county and city of Columbus invested nearly $74 million on the KiOR project. The state is expected to get $600,000 from the sale with the rest going to local government. As for the land where KiOR was located, it could revert back to the county.