Mega deals require incentives and ‘shovel-ready’ sites
Sunday, Dec 13, 2009
Farlow recently spoke to members of the Cookeville-Putnam County Chamber of Commerce about how his community was able to attract an investment by Wacker Chemie AG to build a $1 billion polysilicon manufacturing facility in Cleveland. Wacker is one of three global giants to choose Tennessee sites for billion-dollar facilities during a seven-month period from July 2008 to February 2009.
German-based Wacker, which is the world’s second largest producer of polysilicon used in semiconductors, announced its deal in February. This was just one month after news broke that the number one polysilicon producer, Hemlock Semiconductor, would build a $1.2 billion facility in Clarksville, and seven months after Chattanooga reported it had sealed a $1 billion deal with German automaker Volkswagen.
Four factors that were very much under the control of Cleveland/Bradley County leaders were instrumental in securing the Wacker facility.
First was a significant incentives package offered by Cleveland/Bradley County that was matched by state and federal assistance.
“It is a very, very corporate world. These are big deals,” said Farlow, “and the search is worldwide. They absolutely expect incentives that are in line with the benefits these companies are expected to generate for the region.”
Bradley County is providing $5 million in infrastructure cost in the form of a grant and 25 years in tax abatements. The state of Tennessee brought an incentives package to the table worth $75 million in infrastructure and training funding and $100 million in new job tax credits.
Second, Cleveland officials kept the door open and maintained cordial relations with Wacker even after initially being turned down. Wacker first considered Cleveland for expansion into North America in 2005, then chose to locate a new facility near its corporate headquarters in Germany. Three years later, company executives called again when they were ready to build another plant, in part because the first experience was a good one.
“We parted on good terms, even though they didn’t choose us the first time,” said Farlow. “In the four years between the two meetings, the company built four other plants. This is a company that is expanding rapidly, and we wanted to be included in any future plans they might have.”
Third, when the project was initially being considered, the city already had ownership of a suitable mega site that was listed on the TVA online site inventory. This was also true of the Hemlock plant in Clarksville.
“Community preparedness was key,” said Farlow. “We already had ownership of 550 acres that was part of a planned expansion of the Hiwassee Industrial Park. We had the site work completed, utility information and topography data.”
Wacker will develop 100 acres in phase one, but wanted to purchase the additional acreage for anticipated future expansion.
At one point, two separate companies were bidding to option the property – Wacker and another group with a proposed $8 million to $9 million project.
Fourth, nobody talked about the project outside of closed meetings during the four years that negotiations were taking place.
“If the client says don’t talk, then you don’t talk,” said Farlow. “We were able to keep the deal under wraps until the night before the announcement even though hundreds of people worked thousands of hours to make it happen.”
Farlow offered several other factors that he believed were significant in Wacker’s decision to choose Cleveland.
“Another key factor was nearby access to Olin Chlor Alkali, with its availability of the large amounts of chlorine that Wacker will need,” said Farlow. “And, the presence of a large capacity of quality electricity at reasonable rates through Tennessee Valley Authority.”
Polysilicon manufacturing uses 20 to 25 percent the amount used by a nuclear power plant. According to Wacker officials, TVA rates are about half the cost of electrical rates in Germany.
Accessibility to educational resources was key. Many of the 500-plus initial workers that will be hired by Wacker will need education and training in the highly skilled and highly technical field of polysilicon production.
The direct jobs are expected to result in a $20 million payoff in the form of annual payroll for workers. In addition, an estimated 475 indirect jobs are anticipated at an annual payroll of $14 million.
Also, accessibility to a good transportation network provided by Interstate 75 was a requirement. The company has a four-hour turnaround time for orders sent to Olin, which is the first tier-one supplier to be announced. That is why most tier-one manufacturers are expected to be located on or near the Wacker complex. However, tier-two suppliers will be able to operate from greater distances, opening up many counties in the Upper Cumberland areas for possible business.
Farlow commented that Cleveland and Cookeville are very similar in population size and other features. Both communities are located near good transportation resources – Cleveland is near I-75 while Cookeville is near I-40 and state Highway 111. The membership size and structure of both chambers of commerce is similar, and each has a strong focus on business development. Also, the local economy in both areas has not suffered as much as other parts of the country.
“Tennessee was just named by Site Selection magazine as one of the top five states in the nation for best business climates,” said George Halford,
president/CEO of the Cookeville Chamber. “The location of Wacker Chemie and Volkswagen within a short distance of our area offers tremendous potential for our community. We want to be ready to capture our share of those benefits.”