Pocatello and Idaho are hoping that bankruptcy proceedings that have begun over the $700 million Hoku polysilicon leads to a buyer that keeps the plant intact.
JH Kelly, the Vancouver-Washington-based contractor that built the plant and paid off all of its contractors wants the $25 million it has coming. Overall Hoku owes nearly $1 billion.
Baoding Tianwei Group, the Chinese government-backed energy company that took over Hoku Corp. before it failed, wants some of the more than $270 million it invested.
U.S. Bankruptcy Trustee Gary Rainsdon wants to raise money fast to pay for the mounting costs of maintaining the high tech plant that was completed before it closed. The sooner this gets resolved the more value remains for the debtors.
For Tianwei and China the Hoku issue may signal what American companies and communities can expect when they invite Chinese investment as Pocatello did. In the heyday as the polysilicon plan was under Construction Tianwei officials told contactors that they could expect to get paid because “the full faith of the Chinese government is behind us,” said JH Kelly Senior Vice President Mark Fleischauer.
In the heady days of 2011 this certainly appeared to be a good promise.
Baoding Tianwei Group and Wells Fargo cut a financing deal in the wake of Chinese President Hu Jintao’s visit to the United States. Ding Qiang, vice chairman and president of Tianwei, who holds a post in the Chinese government, visited Pocatello during the visit and met with local and state officials.
JCF Funding of Henderson, Nevada, a financial and development consulting group made an offer on the plant it said exceeded the $25 million expected value of scrapping out the plant. It has on its team former Hoku Plant Manager Ed Church, who had been seeking a deal to save the plant.
It said in a press release it has been working with Idaho Falls-based AHSCO Trust and Arco Hills Silica Co., which is prepared to run the plant. It said it would employ 200 people in Pocatello and the surrounding communities and has plans for additional 1,500 jobs over the next two to three years.
The company hopes to buy the state-of-the art plant and sell polysilicon for solar panels on the world market, the same goal as Hoku. The difference, JCF said in its press release is that three quarters of China’s solar grade polysilicon producers face closure as the Chinese government overhauls what it called “a bloated and inefficient industry,.”
It revealed that the plant will need update for this to happen including a new rail spur, a silicon grinding operation and some wiring of the control system. While it has Hoku’s Pocatello team behind it, it’s not clear it has the capital to pull off its risky venture.
JH Kelly’s Fleischauer said it would prefer the plant remain intact but it wants to get paid. It proposed to Pocatello officials that if it ended up with the plant it would set aside $1 million to help find another tenant.
“It’s a painful thing for a contractor to disassemble a plant you built,” he said.
Tianwei is the wild card. It may decide that selling off the plant in pieces offers it the best chance to simply move the polysilicon production to China.
If that happens American states and communities may think differently when companies from the second largest economy in the world come calling with offers to invest.