Laurentian Aerospace Corp. is seeking financing alternatives for the facility long proposed at Plattsburgh International Airport.
This week, Laurentian Senior Vice President for Finance and Chief Financial Officer Andrew Edwards updated the Press-Republican on what has happened since his company announced, almost two years ago, that Verdant Capital Group LLC was bankrolling the project.
While that possibility remains open, he said, “to date, Verdant has provided no financing to the company.”
‘NEVER OFF RADAR’
Laurentian first announced plans in June 2006 to build a 273,000-square-foot, two-bay hangar for maintenance, repair and overhaul of wide-body jets in Plattsburgh. The facility billed as providing jobs to between 200 and 300 workers upon completion, with as many as 900 mentioned as possible over the course of the two years that followed.
Financing issues have dogged the project, and local excitement has dimmed over time, but Edwards says it has never been off company radar.
‘NO INTERIM FUNDS’
At the time of a March 1, 2011, press conference, Edwards said, Laurentian had entered into a series of agreements with Verdant.
That company, he said, had agreed to provide all of the equity financing to complete the project.
Verdant was on hand at the news conference to confirm it had provided to Laurentian that day an interim financing package that would allow the company to complete certain engineering work before the formal closing of the financing and the start of construction.
However, the transfer of the interim financing from Verdant to Laurentian that was to have occurred that morning did not take place, Edwards says now.
Then, shortly after that date, Verdant officials indicated there was going to be a delay in their provision of the financing but said they expected to be in a position to complete it in a relatively short period of time.
Edwards said Laurentian officials don’t want to comment about Verdant’s operations and its inability to follow through on the agreements. They have told Verdant that they would still welcome completion of the financing as planned.
“However, absent any certainty that Verdant is ready to proceed, the company has initiated discussions with other potential investors,” he told the Press-Republican this week.
A phone message left with Verdant CEO Eric Jergensen was not returned.
The Laurentian project was first delayed when potential investors pulled back during the international financial crisis.
That was followed by the 2011 announcement, after which testing work began at the site. But, that was halted after financing again didn’t materialize.
The other members of the project consortium, including project engineer Robson Woese, project contractor Cianbro, Empire State Development, the County of Clinton Industrial Development Agency and Clinton County, remain committed, Edwards said.
“That is a big asset,” he said.
County of Clinton Industrial Development Agency Executive Director Erin Hynes said its agreement to act as a conduit for tax-exempt, low-interest airport-facility bonds remains in place. The IDA approved a resolution for up to $122.5 million in such bonds in 2007 and reauthorized that in February 2011.
Clinton County Administrator Michael Zurlo said that while there is no signed lease for property at Plattsburgh International Airport, the county still has that agreement ready to be dusted off and finalized.
“The terms and conditions for the lease of property at Plattsburgh International Airport remain in place, subject to the company’s closing (on financing),” he said.
‘MORE FAVORABLE MARKET’
While there is no question Verdant’s failure to comply with the financing agreements has been harmful, Edwards said this week, the market for such a project is now even more favorable than when the announcement was made in March 2011.
That is based on three reasons, he said.
About 40 percent of wide-body aircraft operated by North American-based air carriers now have required heavy-maintenance checks done in the Far East, Edwards said. One reason for that, he said, is a lack of sufficient facilities to perform that work in North America.
In a September 2012 report, the International Air Transport Association stated that fuel prices had risen 8.5 percent in the past year and were expected to increase costs in the global airline industry by $32 billion. That could lead North American airlines to seek to have heavy maintenance performed in this part of the world, but would require new facilities, Edwards said.
Another reason carriers turned to getting maintenance done in the Far East was lower wages among those who do such work. Edwards said the minimum wage in that region is increasing.
He said the Wall Street Journal reported on March 31, 2012, that the City of Beijing increased its minimum wage by 8.5 percent in January 2012, the City of Shenzhen did so by 14 percent in February 2012 and the City of Tianjin was slated to up its minimum pay by 13 percent that April.
That combination of factors has eroded some of the economic advantages that airlines found by having work done overseas.
‘ACTIVELY SEEKS FUNDS’
Laurentian officials now regret releasing the news that financing was in place, Edwards said.
“In making the announcement in March 2011, we relied on agreements that had been entered into, and we had no way of knowing at the time that the terms of those agreements would not be lived up to,” he said.
He said they are thankful their partners have remained supportive.
“As for the future of the project, we can say that we are actively working on alternative financing options, that we don’t expect that process to continue for an extended period of time and that we will make future announcements about the project when we have definitive progress that we can report.”
Email Dan Heath: firstname.lastname@example.org