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Posted Mar 9, 2023, 4:25 PM
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Join Date: Jan 2013
Posts: 2,286
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LGES’ Queen Creek Plant May Move Forward
Positive development here...project had been put on pause.
https://azbex.com/planning-developme...-move-forward/
Quote:
After spending the second half of 2022 in limbo as LG Energy Solution paused to reevaluate its investment due to the current state of the market, events since the first of the year strongly indicate the company’s Queen Creek battery plant project will move forward.
AZBEX was first to report on both the initial agreement between LGES, its subsidiary ES America LLC, the Town of Queen Creek and Pinal County to bring the project, with a total estimated valuation of $2.8B, to a 650-acre site at Germann Road and Ironwood Drive. We were also first to report when LGES put the project on hold. Following is a brief recap of 2022 events concerning the project:
- LGES, Queen Creek and Pinal County enter a development agreement concerning the plant, surrounding infrastructure and the development of a job training center. (AZBEX; March 18, 2022)
- Arizona Commerce Authority, Queen Creek and Pinal County confirm the plan in a press release on April 19, with an initial planned investment set at $1.4B.
- LGES pays $84.44M for the planned plant site in an Arizona State Trust Land auction. (AZBEX; April 25, 2022)
- AZBEX reports contractors’ disclosures that the project has been put on hold. (AZBEX; June 24, 2022)
- LGES confirms the project’s On Hold status, citing increased investment costs due to global inflation and a drop in the value of South Korean currency. (AZBEX; July 8, 2022)
- As late as this January, LGES was still listing the project as On Hold, saying no decision had been made and the company was continuing to evaluate its position. (AZBEX; Jan. 11)
2 Recent Developments Show Progress
Just a couple of weeks after the January status confirmation, however, ES America LLC issued a sworn certification to the Arizona Commerce Authority that it intends to make at least $50M in capital investments to build the facility.
The certification is required under Arizona state law, specifically, A.R. S. § 42-5032.02, which covers definitions for “Distribution of revenues for city, town or county infrastructure improvements related to manufacturing facilities.”
Three days before that certification, LGES disclosed in an earnings call that it was once again pressing for the Queen Creek plant’s construction, citing discussions with Tesla about possibly producing batteries there for the electric vehicle company. A Jan. 30 article in Business Korea, quoted industry insiders as saying Tesla likely requested LGES to supply batteries from Queen Creek based on domestic production requirements to qualify for funds distributed under the federal Inflation Reduction Act. Among multiple other programs, the IRA allocates $13B for electric vehicle incentives and $37B for advanced manufacturing.
The article quoted an unidentified industrial official as saying, “Even at the time of announcing the review, LG Energy Solution was not considering scratching off the investment plan. I understand that the company adjusted the details of its plan, such as the size of the plant and mass production timing, during the review process due to changes in the business environment. It will restart the project sooner or later, I think. With the implementation of the Inflation Reduction Act (IRA), demand for cylindrical products has risen further, and orders keep coming from customers, I heard. The size of LG Energy Solution’s investment may expand further.”
In its Feb. 15 meeting, the Town of Queen Creek approved an Intergovernmental Agreement with the Arizona Department of Revenue to reimburse the Town for $30M of the estimated $80M it expects to spend on road, wastewater and water infrastructure improvements under the initial development agreement for the LGES plant.
Quoting the Queen Creek Town Council agenda:
As per the development agreement, the Town agreed to construct and install regional public improvements including streets, water, and wastewater infrastructure. These infrastructure improvements, which are necessary for the project, will also improve transportation access in this key area and be the catalyst for additional employment development.
One potential funding source for the required public infrastructure improvements includes revenues distributed from the Arizona Department of Revenue under A.R.S. § 42- 5032.02 (Attachment C). Under A.R.S. § 42-5032.02, the Arizona State Treasurer is authorized to direct up to $100M in transaction privilege tax (TPT) revenue collected from contractors engaged in the construction of improvements at a qualified manufacturing facility and related public infrastructure improvements. This revenue can reimburse a city, town or county for up to 80 percent of the cost of the public infrastructure improvements associated to the qualified manufacturing facility.
The LGES facility meets these qualifications. Additionally, pursuant to A.R.S. § 42-5032.02, LGES has submitted a sworn certification to the Arizona Commerce Authority stating it will exceed the minimum statutory requirement for $50M in capital investments at its new manufacturing campus in Queen Creek, in order to qualify the Town for the reimbursement program (Attachment D).
The complete list of infrastructure improvements is available here.
Also, according to the agenda report:
By entering into this IGA the Town will have the ability to receive money for public infrastructure improvements that would eventually have been completed anyway, but the Town and the residents will see the benefit of the improvements sooner and with reimbursement due to this program for qualified manufacturing facilities.
The term of the IGA is limited by the statute to either the date which the total maximum reimbursement of $100M is reached for all qualifying manufacturing facilities in the state, or September 30, 2033, whichever occurs first.
The Arizona State Treasurer can reimburse a total of $100M in sales tax revenues collected from contractors for infrastructure improvements for all local governments across the state. The total payout to Queen Creek will depend on how many other qualified reimbursements are issued first.
Regardless of the eventual outcome or possible changes to the scale of the LGES plant, Queen Creek will be able to make an entire range of infrastructure improvements that will serve its economic development goals across an entire area it has long sought to build up as a home for future industrial uses.
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