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Hoku: Taxpayers, investors took a financial bath on failed Pocatello manufacturing plant

Hoku: Taxpayers, investors took a financial bath on failed Pocatello manufacturing plant

Dustin Hurst
August 19, 2013
Dustin Hurst
Author Image
August 19, 2013
[post_thumbnail] The failed Hoku plant in Pocatello has left a trail of public and private investment for naught.

The multi-million dollar Hoku Corp. manufacturing facility in eastern Idaho was supposed to be so many things for so many people.

Jobs for the jobless. An economic engine in a tough economy. A leader in clean energy. A sure bet for bureaucrats gambling with taxpayer money.

Turns out it is none of those things. Instead, the plant is shuttered and Idaho taxpayers are out hundreds of thousands of dollars.

The plan was ambitious: Hoku, a Hawaii-based manufacturing company, wanted to build a massive facility in Pocatello to capitalize on a red-hot polysilicon market. Polysilicon is an extremely pure form of silicon. It is the Earth’s second most abundant element and is a vital material in most solar energy applications.

The city, eager to create some stimulus in the region, in 2007 leased the company a 67-acre plot of land for 99 years at a rate of $1 per year. The state, too, jumped in with its own incentives.

Elected officials jumped for joy. “Hoku is bringing an entirely new industry to Pocatello and we are pleased to support their efforts,” said then Mayor Roger Chase. “This is a great opportunity for our community.”

Hoku, purchased by the Chinese firm Tianwei New Energy Holdings in early 2009, spent more than $600 million to build the plant, a huge increase from the original $410 million budget. The company expected to bring 250 good-paying jobs to the region.

Just a few years later, it all came crashing down. Polysilicon prices plunged and the company failed multiple times to meet supply agreement deadlines.

The company laid off its final engineer in June.

A few weeks later, Hoku declared bankruptcy, announcing its total debt obligations exceeded $1 billion. Now a trustee must figure out what to do with the plant, which is about 80 percent complete. Officials say the plant will either be sold for scrap, which could generate as much as $25 million in revenue, or sold to another company that might be able to finish or repurpose it.

Idaho taxpayers are out a considerable amount no matter what happens with the unfinished facility.
According to Megan Ronk with the Idaho Department of Commerce, taxpayers gave Hoku more than $870,000 in corporate subsidies.

The state invested $203,277 from the Business and Jobs Development Fund into public infrastructure during the construction phase, Ronk told IdahoReporter.com. Improvements funded with this cash included a water line relocation, fencing along a road and for right-of-way acquisition.

Another $651,266 funded workforce training for Hoku employees, money that came from the Workforce Development Fund. That account reimburses employers for worker training costs, with certain strings attached—companies must pay $12 an hour or more, provide some health benefits and hire new employees or retrain other workers to avoid layoffs.

According to the Idaho Department of Labor, Hoku received training reimbursement funds for 160 workers. The tally could have been more; the state committed more than $950,000 in workforce training dollars to Hoku.

At least once official defends the taxpayer investment into Hoku.

John Regetz, executive director of the Bannock Development Corporation, told IdahoReporter.com that the training funds improved at least a few lives.

“You still have the investment into your workforce,” he said. “That doesn’t go away.”

Regetz, who’s working with multiple parties to carve the facility’s path forward, added that the state and the region benefitted from the hundreds of jobs the construction added on a temporary basis.

Contractor JH Kelly, the Washington-based firm tapped to lead the project, said it hired more than 500 workers during the construction phase. Kelly also employed 104 subcontractors.

Pocatello city will retain ownership of the property where the plant sits. According to records, the city paid $900,000 for the land.

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