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Idaho city burned by solar panel firm with Hawaii ties

By Kirk Johnson
New York Times

POSTED: 01:30 a.m. HST, Nov 11, 2013

POCATELLO, Idaho » With great fanfare, a polysilicon factory spearheaded by a Hawaii company broke ground on 67 acres here starting in 2007. Then, as the rest of the nation tumbled into recession, the plant rose up in shimmering promise, leaving this tough-edged railroad town — blue-collar and union in a sea of southeastern Idaho potato farms — feeling pretty good about the future.

So what if Hoku Corp. wanted breaks and concessions? The city's decision to buy the land and lease it almost free seemed like a bargain at $1.4 million, given the potential payoff.

Subcontractors and suppliers from around the nation and world were also arriving to build the $700 million plant and discovering — so residents and business leaders hoped — Poca­tello's small-city charm. And the hundreds of production jobs in the end would be a big step toward the dream of a high-technology future, picking up where railroad and manufacturing jobs had faded.

Now, 18 months after shutting completely, the factory, which was to produce materials used in solar panels, stands ghostly and silent. It never went into full operation, and in the global collapse of silica prices, it probably never will, solar industry experts said.

Wooden crates of equipment, some never opened, sit stacked where they were left, like time capsules from a lost world. Instead of being discovered by entrepreneurs and venture capitalists, Poca­tello's name — linked to a bankrupt company accused by its biggest U.S. creditor of fraud and racketeering in a federal lawsuit — has now rippled in all the wrong ways, residents said.

"It makes me sick thinking about the waste," said Brian C. Blad, mayor of this city of 54,000 people.

At the downtown federal courthouse where the bankruptcy of Hoku is unfolding, lawyers for unpaid creditors — looking to collect, not spend — have descended in force. Hoku, which in 2009 became majority-owned by Chinese-based Tian­wei New Energy Holdings Co., collapsed with about $1 billion in debt and a list of unpaid creditors in more than a half-dozen states and countries. They include big names like Oracle and KPMG, the accounting firm, and small contractors like Industrial Piping Inc. of Pineville, N.C., which has about 300 employees and a $13.6 million unpaid Hoku invoice.

"The debacle in Poca­tello was a very large hit," said T.J. Buc­holz, a spokes­man for Industrial Piping, which is mostly owned by an equity capital company in Grand Rapids, Mich. "We're not General Motors."

Booming areas within driving distance, such as the energy drilling areas in North Dakota and the strong economy of Salt Lake City, two hours to the south, have kept the local unemployment rate lower than the national average. But that only masks the trouble, residents said.

"It's one of Idaho's greatest failures," said Roger Chase, Poca­tello's former mayor, talking about jobs and low pay scales.

In addition to the local land deal, Hoku also got $2.2 million in federal grants for solar development, according to federal officials, and a promise of job-training money from the state.

Another economic rescue with Hoku's glamour and promise is not on the horizon. Blad said a big employer recently expressed interest in coming here, bringing perhaps 1,000 jobs. But the company, which he declined to name — a warehouse distributor that does most of its sales by the Internet — has said it will offer $10 an hour, only a few dollars above the minimum wage.

The company even had the audacity to ask for financial incentives, which the city has politely declined.

"We would welcome them and we would value them," Blad said. "But I can't justify taxpayer dollars for a $10-an-hour job."

The Hoku pain is not over yet. In August the former general contractor at the plant, JH Kelly, based in Longview, Wash., and owed $24 million, sued Tian­wei New Energy. The federal suit accuses the company of fraud and racketeering in promising that bills would be paid.

Lawyers representing Tian­wei did not respond to email and phone requests for comment.

Meanwhile, JH Kelly offered $5.27 million for the Hoku plant at an auction last month to beat another bid of $4.78 million. A federal trustee handling the Hoku bankruptcy case recommended the court accept the bid by JH Kelly. A decision is expected Tuesday, though other bidders can submit bids through that date.

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