PIKEVILLE — The proposal from EnerBlu to build a more than $300 million battery cell manufacturing plant at the Kentucky Enterprise Industrial Park has been suspended by the company as it looks to move into another direction, EnerBlu announced Tuesday.
According to a release from the company, the suspension comes after the company’s primary potential investor withdrew its support for the Pikeville factory. EnerBlu said the investor, a predominant U.S.-friendly investment company that does not currently operate in Eastern Kentucky, had identified EnerBlu’s technologies and development plan as the ideal fit for its solar generation development roadmap. But, in January, that potential investor cited “a series of unexpected geopolitical factors that occurred in the final two months of 2018 as the reason for withdrawing support,” EnerBlu said.
In the announcement, EnerBlu announced the appointment of a new CEO, John Thomas, who most recently was EnerBlu’s chief product officer. Thomas said he regretted having to suspend plans for the Pikeville facility, but the decision was necessary.
“EnerBlu’s vision of a multi-gigawatt hour, Made in the USA battery campus to re-empower the Energy Capital of the U.S. is only achievable with the support of prominent partners in the energy sector,” Thomas said. “We are extremely disappointed with this potential investor’s decision and are well aware of the hope that EnerBlu’s project has generated in Pikeville and the Eastern Kentucky region.”
Pikeville City Manager Philip Elswick said the city is disappointed to learn the funding for EnerBlu was not secured.
“Throughout the process of working with EnerBlu, our city officials and local economic development authorities have given this partnership an abundance of attention for what we know could have been a transformative project for our community,” Elswick said.
Thomas said that, despite the setback and a new direction for the company, the company had a positive experience over the past year.
“Eastern Kentucky holds a tremendous opportunity for manufacturers, especially with their available skilled workforce, low cost, and development of sites,” Thomas said. “As we move forward as a company to develop a viable and impactful project, we encourage other companies to discover what we found within this region of Appalachia. We have experienced an incredible level of support from the leadership of the City of Pikeville, the contribution of the economic development executives was off the charts, universities, local electric utilities, and state and federal leaders did everything to pave the way.”
EnerBlu Executive Chairman Michael Weber said he is “entirely confident that (Thomas) and his team will pursue all options to bring industrial activities to Pikeville as we are reorganizing.”
Hope lost, but no money
When EnerBlu was announced, there was an abundance of enthusiasm from local, state and federal leaders for the jobs that could be brought to a work-ready workforce in Eastern Kentucky. Despite that enthusiasm, leaders earmarked that any incentives received for the project would only be made available when EnerBlu reached certain goals in its construction.
According to EnerBlu Chief Marketing Officer Xavier Guerin, EnerBlu received “no funds from the state or (Washington) D.C.” and the city confirmed EnerBlu had received no local money.
“Only incentive agreements were in place with preliminary approvals. These incentives based on very strict milestones would have kicked in at a later stage of the project development,” Guerin said. “We never reached any of those milestones.”
Anytime there are incentive deals, people look at the dollar amount and assume that company receives that money, but that is not the case, said One East Kentucky CEO Chuck Sexton.
“Smart incentives from a local perspective and from a state perspective are all performance-based. A company never receives a dollar unless they actually perform on their promises. (Performance-based incentives) protect taxpayer dollars and future taxpayer dollars,” Sexton said.
Sexton said that is the opposite of what other areas are currently dealing with, highlighting what the state of Wisconsin is currently dealing with following uncertainty around Foxconn Wisconsin. According to Bloomberg Businessweek, a $4.5 billion deal which was supposed to employ 13,000 workers is unlikely to reach those numbers.
“Foxconn was a huge announcement for the state of Wisconsin. Just last week, they scaled that back. Unfortunately many communities there had already spent quite a large some of money cobbling land together. That is the sort of thing you don’t want to see happen,” Sexton said. “With the City of Pikeville and the state of Kentucky, everything with EnerBlu, what they were going to get was all performance-based. Until they started employing people, they weren’t receiving anything. Unfortunately, there are portions of the country that have lost out on deals where they expended dollars on the front end.”
People can say (these businesses not coming through) only happens in Eastern Kentucky, and that’s “just not true,” Sexton said.
“Capitalism is at play. At the end of the day, the delivery of those results rest on the shoulders of the private sector. Whether it is a startup, like EnerBlu, or an existing large international corporation, like Foxconn, there are factors, that we are not aware of and that we cannot control, that can impact their ability to push that project to fruition,” Sexton said.
Eastern Kentucky workforce
EnerBlu did highlight the “remarkable” workforce in Eastern Kentucky as one of the many reasons it had shown interest in Pikeville.
“Having access to a remarkable workforce was one of the main reasons that led us to Pikeville. We are confident that other corporations will recognize those same attributes and qualities we identified right away when we visited Eastern Kentucky,” Guerin said.
Elswick said the area and its workforce are still looking forward.
“We know that Pikeville and its workforce have a bright future and we will continue to work with companies seeking a strong industrial park, economic opportunities and the skilled workforce that we offer,” Elswick said.
Sexton said he is already marketing the area and the workforce to prospective businesses. With site preparation work that was done for the area through an Abandoned Mine Lands grant, the site is even more marketable, Sexton said.
“It is our job to stay in communication with potential companies on their ability to put a project or a building in Eastern Kentucky. When we have something like this (announcement) happen, we spring into action immediately,” Sexton said. “We have already been in contact with one in particular that we would like to move on to that site for their manufacturing. When there is more due diligence and more prep done on a site, the more attractive that site becomes. The site work that has been completed to a certain degree more than it was before. That makes the site even more marketable.”
Sexton said with the Kentucky Enterprise Industrial Park providing so much opportunity, he would like to see multiple smaller projects look to the build at the park.
“Our theory on economic development has always been, while the home runs and the big announcements are great and we are certainly not going to push them away, our focus is on how we diversify the economy through multiple smaller projects,” Sexton said. “We look at facilities that offer the 50 to 100 maybe 150-job projects, where we have 10 to 20 companies that are smaller in nature. What that does is spread the community’s risk across multiple industries. So one devastating event or one market shift won’t push them all away.”
Former President and CEO Daniel Elliott, in a much-discussed conversation with the Southeast Kentucky Chamber of Commerce in January, did mention two international finance partners for EnerBlu — Citibank and SoftBank, a Japanese technology investment giant which is currently making major waves in the finance sectors of many countries.
Citibank is still mentioned by EnerBlu as an investment partner.
In the announced press release, new CEO Thomas said “EnerBlu is currently working with the assistance of Citibank on a revised plan that would require a lower capital investment, without compromising the potential mid- and long-term future of the company.”
EnerBlu said in the press release its primary potential investor, identified only as “a predominant U.S.-friendly investment company,” had, in January, “cited a series of unexpected geopolitical factors in the final two months of 2018 as the reason for withdrawing support of the planned facility.”
SoftBank, which has invested in U.S. wireless company Sprint and Uber, reported a decline in profit for the period of October through December 2018, in comparison from the same time-frame of 2017, according to Associated Press Business Writer Yuri Kageyema. The decline was from from 912.3 billion yen ($8.31 billion) to 698.3 billion yen ($6.4 billion).
SoftBank’s investments, according to the Financial Times, are backed by the SoftBank’s Vision Fund, a $100 billion wealth fund that is backed, in part, by the Saudi Arabia Sovereign Wealth Fund. Kageyama, the AP Business writer, reported that, SoftBank “has said it will diversify its funding source for investments,” after “the killing of Saudi journalist Jamal Khashoggi.”
This week, SoftBank’s Vision Fund disclosed it had dumped its entire stake of more than $3 billion in U.S.-based chipmaker Nvidia, as reported through CNBC and Reuters.
Reuters reported on declines in technology firms in SoftBank’s portfolio companies.
According to Reuters, “China’s slowing growth and its trade war with the United States are affecting valuations of unlisted technology firms that account for many of SoftBank’s portfolio companies.”
CNN Business reported SoftBank Chief Executive Masa Son as saying the Vision Fund offloaded its entire stake in Nvidia last month so it could concentrate on investing in promising “unicorns,” a term for tech startups that are worth at least a billion dollars.