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PROJECT WATCH
A Site Selection Web Exclusive, October 2010
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WEB Exclusive story

Super Summer

Three major projects show Louisiana's mojo
working across a diverse mix of industries.

by Adam Bruns
Project Watch
Following its acquisition of a Louisiana company, Globalstar chose to consolidate its own headquarters in Covington, relocating from California in the process.
photo courtesy of Louisiana Economic Development
E

ven as the state can't forget the BP oil leak disaster and deepwater drilling moratorium that vacuumed up the world's attention, a trio of projects circling Lake Ponchartrain has made this a summer to remember for Louisiana and Greater New Orleans. Together the three projects could create nearly 2,400 direct jobs once all phases are complete. But their attraction may say just as much about the phased-in diversity of the Louisiana economy.

In July, Silicon Valley-based commercial and consumer mobile satellite voice and data services provider Globalstar, Inc., announced it would move its corporate headquarters to Covington, north of the lake, creating close to 150 high-value jobs by the end of 2011, increasing to 200 jobs by 2013 and a total of more than 490 by 2018. The move includes the relocation of the company's product development center, international customer care operations, call center and other global business functions including finance, accounting, sales, marketing and corporate communications.

"This is exactly the kind of company that we positioned Louisiana to secure when we created Louisiana FastStart in 2008 and enhanced our digital media incentive program in 2009," said Louisiana Gov. Bobby Jindal. "With our nation still enduring tough economic times and our state facing thousands of job losses associated with the federal deepwater drilling moratorium, our efforts to retain and attract jobs are more important than ever."

The move comes as the company is in the final stages before launching (literally) its new satellite constellation.

"Relocating to Covington will help dramatically reduce our operating costs as we execute our next generation strategic initiatives," said Jay Monroe, executive chairman of Globalstar, Inc., noting the assistance from Louisiana Economic Development (LED). "We are positioning Globalstar for long-term success by lowering our cost of operations, improving revenue growth and speed to market for new products through vertical integration and through the introduction of new and innovative products developed in Louisiana. Thanks to LED's progressive digital interactive media incentives and tax credits, Globalstar can expect to benefit immediately and on an annual basis well into the future. I know the Gulf region quite well and we also have many customers in the area. It boasts much lower taxes and employee cost of living compared with our former home in Silicon Valley. Combined with the work ethic and resourcefulness of the state's work force, you have an extremely attractive environment for innovative global companies such as ours."

"Louisiana's leading universities including Loyola, LSU, Tulane and The University of New Orleans plus the state's reputation as a recreational sporting enthusiast's paradise provide an ideal environment for recruiting highly skilled employees," added Globalstar CEO Peter Dalton. "This move also maximizes the benefits of our recent acquisition of Covington-based satellite asset tracking and messaging products manufacturer Axonn and creates in Globalstar the first and only vertically integrated mobile satellite company. Physically relocating our product team to work directly with the former Axonn engineers not only decreases our pre-production costs but it also will shorten the time to market for our company's integrated wireless and satellite based products. We considered relocating our headquarters to numerous states but the overall advantages of moving here were simply too compelling to ignore."

In addition to FastStart and the new digital media incentives, the company will benefit from the state's reimbursement of relocation costs plus a commercial lease subsidy for its new corporate headquarters and future tax credits associated with a host of state programs. The Company plans to maintain its network operations including its satellite and ground operations control centers in California.

Michoud Welcomes Blade Dynamics

Mention a green wave in New Orleans, and most folks think of Tulane University's sports teams. But a new generation of clean technology projects in the region is attracting its own fan base. In August a superstar burst from the pack, when U.K. firm Blade Dynamics announced it would create 600 jobs manufacturing wind turbine blades and components at Building 303 at the NASA Michoud Assembly Facility (MAF). Adding in indirect jobs could take the total jobs created to nearly 1,600. And the $13-million project should reap approximately $60 million in new tax revenue over the next decade.

Ironically, just as Globalstar prepares to launch its next "constellation" of satellites, MAF is looking for new purposes as NASA's Constellation program faces elimination from the federal budget.

"This is the next chapter in this storied facility that has done so much for NASA and this nation," said Marshall Space Flight Center Director Robert Lightfoot at the announcement. Blade Dynamics co-founder Theo Botha said the state, NASA and the team at Jacobs Engineering, which manages the Michoud site, were vital in bringing the project to Michoud.

The 828-acre (335-hectare) Michoud site is unique in that it contains one of the largest production buildings in the nation, which includes a vertical assembly building for stacking external tank components for the space shuttle program. The final tank for that mission was assembled earlier this year as the shuttle program winds down. And MAF's work on Constellation projects such as the Ares rockets and Orion crew exploration vehicle has also gone up in the air. Meanwhile, Marshall Space Flight Center, which manages MA, has been partnering with the state and the University of New Orleans in support of the National Center for Advanced Manufacturing, as it works to develop new opportunities for Michoud's manufacturing, testing and laboratory capabilities, and its underused green space and real property. More than 1 million square feet (93,000 sq. m.) of MAF currently is available for additional high-tech, private-sector tenants.

In a blog to MAF employees posted after the Blade Dynamics announcement, MAF COO and acting transition manager Steve Doering wrote, "For MAF, yesterday represented a milestone in the transfomation of the facility that you have all been working so diligently on for the last year. The agreement between NASA and Blade Dynamics is the first in what I hope to be a long list of successful ventures to bring commercial companies into MAF to make use of the excess capacity of this wonderful facility. These types of arrangements, in scope and scale, are new to MAF and in many respects, new to NASA. We are pushing the edge of the envelope within NASA and that is a difficult thing to do. But you have all helped make this happen. The future of MAF depends upon our collective ability to reduce the cost to NASA for the operation of the facility. Bringing in commercial tenants like Blade Dynamics is one of the ways to do that."

Taking stakes in the Blade Dynamics project are Dow Chemical Co. and American Superconductor Corp.

Greater New Orleans, Inc. claimed some credit for the project, the first victory of its "GreenN.O." program, a collaborative effort to establish Greater New Orleans as the nation's center for sustainable businesses.

"Amidst the impact of the Deepwater Horizon oil spill, it is clear, now more than ever, that the market for renewable energy will continue to grow," said Paul Hayden, chief technology officer of Blade Dynamics. "New Orleans was a logical choice for our business, given the attractive tax incentives, versatility of the manufacturing facilities, and state focus on building strengths in sustainable industry."

In addition to providing information, resources, and technical guidance, GNO, Inc. brought Blade Dynamics together with executives to discuss higher education and the region's ability to provide a continuous supply of skilled workers. To meet demand, GNO, Inc. is collaborating with two- and four-year universities to establish "green" curriculums and ensure a supply of skilled workers. Their first program, "Growing a Green Workforce," was launched in partnership with Southeastern Louisiana University and the Northshore Community Foundation, strategic relationships, as many workers at MAF live in St. Tammany Parish. In addition, the Building Block — an incubator for "green" entrepreneurs — is under construction.

Innovative Tech, Novel Teamwork

The 600 jobs at Blade Dynamics will pay an average salary of $48,000. Among the factors attractive to the company was the availability of specialized equipment previously funded by LED for the benefit of NASA, a customized training solution from Louisiana FastStart, and an incentive package that includes performance-based financial assistance of $5.4 million to offset lease costs at MAF, performance-based financial assistance of $6 million to offset equipment purchases and performance-based financial assistance of $0.5 million to reimburse projected relocation costs.

Founded by experts in boatbuilding, Blade Dynamics expects its designs to break industry barriers by enabling blades greater than 80 meters (264 feet) in length for wind turbines with power ratings of 10 megawatts or more that are currently under development.

"The design and manufacturing processes for wind turbine blades have remained fundamentally unchanged for 20 years," said AMSC Founder, Chairman and CEO Gregory Yurek. "Today, however, the market is migrating to higher wind turbine power ratings. Onshore wind turbines now exceed two megawatts in many locations and offshore wind farm developers are increasingly seeking wind turbines with power ratings exceeding five megawatts. Blade Dynamics presents us — and the entire wind industry — with a game-changing wind turbine blade technology that enhances performance and reduces weight and cost for high-power wind turbines."

Michael Hecht, president and CEO of Greater New Orleans, Inc., says he's gratified because the project was won "fair and square" over sites all over the rest of North America. He says the area's historical ability to distribute to all of the Americas was a factor. Being able to distribute via the river was important, as were the innate capabilities of the Michoud complex and its talent base. He says the chairman of Blade Dynamics also said just "wanting to be in New Orleans" was attractive to the company after all the dollars-and-cents requirements were met.

"That was an epiphany to me," says Hecht. "I realized that if we can be competitive on all the objective measures, ultimately what will tip us is the subjective aspect of our culture and our brand. The fact is that Blade Dynamics is a European company, so they like that aspect of the city, and they're also quite serious sailors."

Hecht says the entire courtship lasted about a year, with LED leading the way and GNO helping with quality-of-life, housing and schools aspects, among others. The teamwork was evident to Blade Dynamics.

"Every state talks about redevelopment of this and commitment of that for business, especially today with green energy," said Theo Botha, co-founder and head of sales. "We talked to many of them in the last couple of years. I can tell you from personal experience that Governor Jindal's team are a different breed, and I'm certain that a lot more businesses will follow Blade Dynamics into Louisiana."

Exclamation Mark

About a month later, a really big business did.

On Sept. 17, Charlotte-based steel maker Nucor Corp. followed through on gradual land acquisitions that had taken place over the past couple of years and announced it was moving forward on the first phase of a five-phase project that ultimately could create 1,250 jobs (averaging $75,000 in annual pay) and bring in $3.4 billion in total investment. Nucor runs approximately 200 operating facilities and employs more than 20,400 people. Nucor is also North America's largest recycler and the world's foremost steel recycler.

"This facility will create good jobs for American workers and, at the same time, it will help Nucor achieve our long-term goal of increasing control over our raw materials supply," said Nucor Chairman, President and CEO Daniel R. DiMicco, a vocal proponent of U.S. manufacturing.

The five phases of the project described in an incentive agreement with the state include a direct reduced iron (DRI) facility (150 jobs and $750 million capital investment), which will be the first phase of the project; a second DRI facility (100 jobs and $400 million capital investment); a pellet plant (200 jobs and $500 million capital investment); a blast furnace and coke ovens (300 jobs and $1 billion capital investment); and a steel mill (500 jobs and $750 million capital investment).

The first phase of the project, a 2.5-million-tons-per-year iron making facility, will use direct reduction technology to convert natural gas and iron ore pellets into high-quality DRI used by Nucor's steel mills, along with recycled scrap, in producing numerous steel products, such as sheet, plate and special bar quality steel. Subject to final approval of the proposed state incentive package, Nucor will begin construction of the first DRI facility as soon as possible after completion of related environmental permitting. Nucor estimates phase one will create 500 jobs during peak construction.

The chosen site was once considered by Shintech, which instead chose a project site elsewhere in Louisiana. And it was the famous runner-up in the competition to land a steel making complex from ThyssenKrupp a few years ago, a project that ultimately landed near Mobile, Ala. Almost immediately after the German firm made its choice, Nucor was studying the Louisiana site.

"We were approached by Nucor to sell the property to them," as the company considered Louisiana and Brazil for the project, says Shelley MacNary, director of economic development for Entergy Louisiana, LLC and Entergy Gulf States Louisiana, L.L.C.. "We went through a process to determine market value, and ultimately made a decision to sell it to Nucor." Entergy is currently working with Nucor on fulfilling power requirements, which have changed somewhat since the company made the decision to start with a direct reduced iron (DRI) facility instead of a pig iron facility as the project's first phase. Nucor explained the reasons behind that decision in its announcement:

"The DRI facility was chosen for the first phase of our project, in place of a blast furnace and coke making facility, because it offers a carbon footprint that is one-third of that for the coke oven/blast furnace route for the same volume of product but at less than half the capital cost," said the statement. "While there is some loss/penalty in the 'value in use' that will occur from DRI usage at the steel plant versus pig iron usage, the technology improvements that we have introduced and proven at our Trinidad and Tobago DRI plant [which produces 1.8 million tons a year] have significantly reduced that typical penalty. The long-term uncertainty that currently exists on the carbon tax issues in Washington makes this decision a lower risk option at this time."

In May 2009, the company acquired nearly 890 acres (360 hectares) of sugarcane land for $16.3 million from the Schexnaydre family. By September 2009, Nucor had acquired 172 acres (70 hectares) from the Port of South Louisiana and 2,778 acres (1,124 hectares) from Entergy. Combined, those three sites were purchased for over $50 million.

The port's jurisdiction stretches across three parishes and 54 miles (87 km.) of riverfront. Joel Chaisoon, executive director of the Port of South Louisiana, says, "The mighty Mississipi River is one of the reasons this project is coming to Louisiana."

Chaisson says a huge expansion at Marathon's refinery complex — one of four refineries in the port district — was just completed, more than doubling that refinery's output.

"They had close to 4,000 construction workers," he says. "They've just completed that, so it's a good time to get workers to move over to another megaproject."

He says all the refineries have growth plans. Like Nucor, however, most are waiting to see if cap-and-trade policies may come to pass, which might cause those expansions not to.

Meantime, the port, which is the largest tonnage port in the western hemisphere, figures to see its ranking go up a bit once the steel starts moving. And it's working with Entergy, LED and the parishes of St. Charles, St. John the Baptist and St. James to certify more major industrial sites along the river.

Sweeter than 'Cane

To secure the project, LED offered a customized incentive package to Nucor, including $160 million in performance-based financial assistance over approximately six years provided that all five project phases are initiated as scheduled in the company's cooperative endeavor agreement (CEA) with LED. Last week the Louisiana State Bond Commission gave Nucor preliminary approval to issue $600 million in special tax-exempt bonds via the Gulf Opportunity Zone program.

"An extended local property tax exemption of approximately 20 years will be made available to the company through the local government; however, Nucor will make an annual payment in lieu of taxes to support the local school system, parish and sheriff," stated an LED release. "These payments will begin at $850,000 per year and eventually will increase to $4.5 million per year provided all project phases are completed according to the timelines required for Nucor to receive all the incentives detailed in its CEA with LED.

"The CEA between the state and Nucor allows the company to select the order of execution of the remaining four phases of the project; however, all four phases must be initiated by 2015 for the company to receive the full value of the incentive package proposed by LED," said the LED statement. "If all phases are executed according to Nucor's CEA with LED, peak employment of approximately 1,250 direct jobs is expected by 2019."

An economic impact analysis developed by Louisiana State University indicates the project, if executed as scheduled in the CEA, will generate approximately $563.5 million in new, state tax revenues, as well as $122.6 million in new, local tax revenues over the life of the CEA, which is structured to run through 2033.

"In terms of capital investment, jobs, tax revenues and the overall signal it sends about Louisiana's economic momentum, Nucor's decision is one of the most significant wins in our state's history," said Stephen Moret, Louisiana's secretary of economic development.

Greater New Orleans, Inc.'s Michael Hecht says there are a few reasons why all of this good project news is breaking now.

"Business conditions are actually attractive," he says. "It's less expensive to do business, and we've been able to remove some of the more perverse tax laws. Incentive programs are becoming more powerful and effective, for example the digital media incentive for Globalstar, and the FastStart program. Then you have the brand aspect of New Orleans. If we can mitigate the classic negatives against us — issues of corruption, flood protection, crime and education — then the culture and New Orleans brand people love begins to shine through."

But the shiniest jewel in the box may be the sheer teamwork, from Moret to new New Orleans Mayor Mitch Landrieu.

"The site selectors are telling me that there is no state in the country right now where there is such an alignment of economic development leaders, with common focus and energy and confidence," says Hecht. "Companies come and find that everybody is singing from the same hymn book, acting as peers and not bureaucrats. We have a team put together the likes of which we've never seen in New Orleans, at least not for decades — and with every announcement, that makes the others that much easier. We've been legitimated. And the concept of onshoring to Louisiana begins to gain some currency."


Story in Pictures

Gov. Jindal, Mayor Landrieu and NASA welcome Blade Dynamics to Michoud.
Image courtesy of Jacobs Technology
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