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Management Side
Tranlin's $2 billion paper mill misses early targets

CHESTERFIELD, Va. (From the Chesterfield Observer) -- The biggest economic development deal in Chesterfield's history appears to have fallen off schedule - so much so that the company, Tranlin Inc., the U.S. subsidiary of China-based Shandong Tranlin Paper Co., has deferred accepting millions in state grants tied to the project.

Tranlin, which announced plans in 2014 to build a $2 billion paper manufacturing facility in eastern Chesterfield, has yet to acquire the largest parcel of land for the paper mill. Tranlin officials have also asked the state to delay payment of $2 million in state funds for the project.

The money, part of a $20 million state performance grant to lure the company to Chesterfield, was scheduled to be paid to Tranlin on or after July 1. But earlier this year, company officials realized that they would not be able to meet performance goals outlined in an agreement with the Virginia Economic Development Partnership and asked that the payment be delayed until fiscal year 2018, according to state and county officials.

Two years ago, Tranlin officials said the paper mill, expected to bring 2,000 jobs to the county, would be fully operational by 2020.

A series of complications are dogging progress at the facility, explained Garrett Hart, director of the Chesterfield County Economic Development Authority.

"They are in the middle of hiring a national general contractor to build it, and the permits needed are quite extensive," Hart told the Observer last week.

One major hurdle has been Tranlin's inability to close on the purchase of a 650-acre tract of land needed for the project, which will use farm waste instead of trees to make paper products while generating less pollution, Hart said.

Because of delays, Tranlin has put $3 million in escrow to extend closing dates with the Reynolds family trust, which owns the 650 acres, Hart said. "They did so to do more due diligence," he explained.

Currently, Tranlin owns only one parcel of the approximately 850-acre site where it plans to build in eastern Chesterfield, near the James River. In April of last year, the company purchased 57.9 acres along Willis Road for $3.18 million. According to Tranlin's performance agreement with the Chesterfield Economic Development Authority, approved by the Board of Supervisors on Oct. 8, 2014, Tranlin is expected to spend approximately $17.9 million acquiring land for the project.

As a result of the permitting delays and the inability to close on the remaining property, Tranlin asked the state to delay the $2 million payment, according to Hart and Turner Widgen, a spokeswoman for Virginia Economic Development Partnership. "The first installment of the custom performance grant has not been dispersed," Widgen said in an emailed statement. "It has been deferred until 2018 pending completion of project milestones outlined in the agreement with the company."

According to Tranlin's agreement with the state for the $20 million performance grant, Tranlin is required to submit annual applications to the state secretary of commerce and trade detailing the company's capital investment and the number of jobs created. Per the agreement, Tranlin needed to show the state that it had invested $20 million in capital, and created 25 jobs, by the end of the 2015 calendar year in order to qualify for the first $2 million installment. The company opted to defer the payment instead. It's allowed to defer payments and apply for reduced payments over the duration of the agreement with the state.

"The project is well within its performance period and [the Virginia Economic Development Partnership] is in regular dialogue with the company and continuing to monitor the project," Suzanne Clark, communications manager for the partnership, said via email. "We fully expect the company to meet its performance measures within the required timeline."

The $20 million state performance grant is just one piece of the incentive package state and county officials put together to lure Tranlin to Chesterfield in 2014. All told, Tranlin is scheduled to receive nearly $60 million in public assistance, including grants, tax deferrals and other incentives.

Among the other grants, a $500,000 Port Economic and Infrastructure Development

Grant administered by the Virginia Port Authority has been set aside for Tranlin. Jay Stecher, vice president of marketing and communications for the port authority, told the Observer that Tranlin has not yet applied for the funds.

Russell Held, vice president for economic development at the port authority, said that according to the terms of the grant, Tranlin would need to create 167 jobs before it could start applying for the $500,000. The money can be used as Tranlin sees fit, but the jobs must last for three years. If they don't, there is a "claw back" provision, and Tranlin would have to pay back all or some of the money.

At the moment, the port authority is working with Tranlin to import fertilizer made from its paper production in China so American farmers can buy and use it, Stecher said.

To date, the Observer was only able to confirm that $5 million, a Governor's Development Opportunity Fund grant, has been disbursed to the company.

According to the agreement regarding the $20 million performance grant, Tranlin was expected to make significant progress beginning this year. Per the agreement, Tranlin was expected to invest $535 million in capital and create an additional 540 jobs by the end of 2016.

As of early August, Tranlin had hired only about 40 workers, according to John Stacey, a senior vice president in marketing and sales for the company. The employees are split between Tranlin's corporate headquarters in Charlottesville and a construction building near the site near the eastern end of Willis Road.

Hart said that Tranlin passed one hurdle in recent weeks by working out an agreement to dispose of nutrients in its wastewater that will flow into the James River. The Virginia Department of Environmental Quality has a "cap and trade" program whereby polluters along parts of the James River trade nutrient "credits" to lessen the overall impact.

Tranlin also has launched a marketing program in which U.S. farmers can buy rich fertilizer, a byproduct of the company's manufacturing process, from a similar pulp mill in the Shandong province of China. Hart said the plan is for Tranlin to build up a network of farmers who might sell their farm waste to Tranlin as raw material for paper production. They, in turn, might buy the fertilizer byproduct produced during paper-making in Chesterfield.

Stacey told the Observer that Tranlin still expects the Chesterfield paper mill to be in production by 2020. The state, however, has seen other promising Chinese manufacturing projects fall short.

In April, Chinese-owned New Ridge Home Goods repaid $800,000 in government grants after acknowledging it couldn't finish a furniture factory in Smyth County on time, according to the Roanoke Times. Plans called for a factory employing 125 people by fall of this year.

Last year, Lindenburg Industry, another firm affiliated with Chinese owners, defaulted on a deal to convert a furniture factory near Lynchburg into one that would make industrial ceramics. According to the Roanoke Times, the state is trying to retrieve $1.4 million in public money given to Lindenburg.

After the Lindenburg story published, Secretary of Commerce and Trade Maurice Jones ordered that state officials toughen their review procedures before offering public industrial grants.


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