October 31, 2014
GRI pledges $41M to build Amarillo wind energy parts plant
The Spanish company hoping to build its first U.S. wind energy parts manufacturing plant in Amarillo operates 10 such factories in six countries around the world.
GRI Renewable Industries has pledged to invest $41 million to build an Amarillo plant that would employ at least 300 people and make about 400 wind towers a year.
Formed in 2008, GRI will use the “experience and know-how” gained from its plants in Spain, Brazil, China, Turkey, India and South America to launch the new factory here, spokesman Juan Llovet said.
The subsidiary of multinational conglomerate Corporacion Gestamp expects to be turning out wind towers in Amarillo by late 2016, its information said.
“They’re talking a $13 million (annual) payroll,” Amarillo Economic Development Corp. Board Chairman John Kritser said. “It just doesn’t get any better than that.”
In return, GRI has asked for economic development incentives from the state of Texas and Amarillo Economic Development Corp. and property tax abatements from the city of Amarillo, Potter County, Amarillo College and Panhandle Groundwater Conservation District.
AEDC and the state are on board for $5.5 million and $1.85 million respectively, although the local economic development incentives package is yet to be approved by the Amarillo City Council.
AEDC’s offer includes $3.3 million in job incentives — $10,000 per job created — plus a $1.9 million, 48-acre site at CenterPort Business Park.
The agenda for Tuesday’s Amarillo City Council meeting includes potential votes on both the AEDC incentives package and GRI’s property tax abatement request. The council meeting is set for 3 p.m. in the Council Chamber at Amarillo City Hall, 509 S.E. Seventh Ave., with a work session starting at 1:30 p.m., in Room 303.
Amarillo College is set to consider an abatement at its meeting at 7 p.m. in the Palo Duro Room on the second floor of the College Union Building on the Washington Street Campus.
The $3.3 million the AEDC pledged will go into the site, not something GRI could take with it if it left Amarillo, said Board Chairman John Kritser.
“Basically, we’re giving them the land and we’re bringing the rail spur in. Their investment is going to be $41 million — $23 million on the new facility and $18 million in machinery and equipment.”
Further securing the incentives agreement are a deed of trust AEDC will have on the new facility and site and a corporate guaranty from GRI, Kritser said.
AEDC staff “did our best work putting guarantees in place in case of a default,” President and CEO Buzz David said. “You don’t do that thinking it’s going to happen. You do that in case it happens.”
GRI has customer relationships with large wind players, such as Siemens, GE and Nordex, its website said.
“GRI’s not entering (the U.S.) looking for customers,” he said.
GRI closed 2014 with sales of $504 million and 3,000 employees, a news release said.
Gestamp finished last year with revenue of more than $7 billion, an increase of $4.5 billion from 2013. according to an earnings announcement. Earlier this year, Japanese company Mitsui announced it would pay $128 million for a 25 percent stake in Gestamp’s wind equipment manufacturing unit, news reports said.
Gestamp almost entered the U.S. wind components market years earlier.
Then-Gestamp Renewable formed a joint venture with Ohio-based Worthington Industries for a 300-tower-a-year plant near Cheyenne, Wyo.
But the partnership was later dissolved and the plant was never built.
David and Kritser were unaware of the terminated Wyoming venture.
But Kritser said, “I’m not sure it makes any difference, actually. It freed up some capital for them to get ready to do
what they’re doing here in Amarillo.”
GRI postponed its U.S. entry so it could pursue growth in other locations, launching four plants in four different countries since 2012, Llovet said.
Overall, its plants now have the capacity to produce 1,500 wind towers annually, he said.
GRI also strengthened its relationship with other components makers in the interim, Llovet said.
“This strength, and the fact that the U.S. wind market has clearly recovered in 2014, showing very good perspectives for the coming years, has been key for our decision making,” he said.
Gestamp made a good partner, said Cathy Lyttle, Worthington vice president of corporate communications, but both companies scratched the joint venture because, “at the end of the day, the (industry) landscape was not a good one for us.”
On-again, off-again federal production tax credits for wind energy projects made for “a lot of uncertainty,” Lyttle said.
Several U.S. tower manufacturing facilities across the country did not survive 2012 because of tough competition from Chinese imports and the “untimely extension” of the federal PTC, Amy Grace said.
“The subsidy was eventually extended the day after it expired,” said Grace, North American wind industry analyst for Bloomberg New Energy Finance. “But the delay in its extension caused new wind build to drop from close to 14 gigawatts in 2012 to under 1 gigawatt in 2013.”
One gigawatt is 1,000 megawatts. And a megawatt is enough electricity to supply about 350 average Texas homes, according to industry sources.
Zarges Aluminum Systems, a wind energy component maker AEDC lured to Amarillo in 2010, ceased operations in 2012, and another, Alstom Power, has struggled.
Zarges failed to meet its employment goals and wound up paying nearly $542,000 for leasing from January 2011 through April 2012 the $4.75 million facility AEDC built for it and paid the property taxes it owed during that time period, David said.
David said France-based Alstom’s Amarillo factory for producing nacelles — the box at the top of a wind tower that holds the turbine gears — is currently idle due to General Electric’s offer to acquire the company pending European regulatory approval, according to news reports.
Alstom is in compliance with its incentives agreement with the AEDC, however, because it made a payment to the economic development group for the first year of the deal in the amount of $1,212,140, David said. The company banked $38,760 in payroll credits, he said.
“Alstom produced less than a dozen nacelles in Amarillo, as far as we know,” David said. “The payroll credits they received were for payroll in 2014, and they now only have a couple of employees on site to oversee the building.”
The proposed GE acquisition could be positive for Amarillo, Kritser said.
“We can’t control (how a company performs),” Kritser said. “They’re paid (up with AEDC), and we’ve got a nice facility there. That building is a very desirable building if they wanted to market it (for sale). But I would love to see (the acquisition) happen and see GE here.”
BNEF expects “two relatively good years for new wind build in 2015 and 2016, with approximately 9 gigawatts of wind each,” Grace said.
Production could fall below 2 gigawatts in 2017, if the federal subsidy for wind is not renewed, Grace said.
Most of the wind energy installations being built in 2015 and 16 are in Texas, Grace said.
“The cheapest wind in the world is located in Texas,” she said. “However, without the PTC, it will still be difficult for wind to compete with the low wholesale power prices in the market.”
Grace said many producers “are becoming more comfortable with the idea of a yoyo (PTC) system, or more confident that the PTC will come back eventually, because it always has since 1992.”
GRI expects to have its Amarillo facility up and running by the end of 2016. But the proposed incentives agreement with AEDC gives the company three years, once operations have begun, to ramp up employment.
“There’s plenty of tower demand in 2016 in Texas,” Grace said, but the drop-off in demand will affect the following years. “The picture looks much better after 2020.”