Construction of a $3.5 billion gas-to-liquid facility is in jeopardy after the company behind it fell in default of a deal with the Economic Development Corp. of Jefferson County (EDCJC).
A Jan. 15 memorandum from Little Rock-based Rose Law Firm, which represents the public economic board, reveals Energy Security Partners missed a financial closing deadline of Dec. 31, under its economic development and ground lease agreement with EDCJC. Energy Security Partners is the parent company of GTL Americas, which is planning to build the first North American gas-to-liquid facility 15 miles northwest of Pine Bluff valued at $3.5 billion.
The Rose Law Firm stated Little Rock-based Energy Security Partners, founded by retired Army Gen. Wesley Clark, was in default for failure to meet reporting requirements for full-time employment and capital investments and sent a notice of default to the private energy company on Jan. 2. Energy Security Partners is leasing land owned by EDCJC near the National Center for Toxicological Research in the Jefferson area.
The contract offers Energy Security Partners a remedy by paying “default rent” until the default is cured, and Rose Law Firm states EDCJC does not have the right to terminate the lease immediately. The firm states it calculated the default rent as of Jan. 1 at $176,216.15 and adds that if Energy Security Partners does not pay it for more than 60 days after the written notice, EDCJC may either terminate the lease or permit Energy Security Partners to purchase the property for an option price plus payment of all closing costs, recording fees, transfer taxes and counsel fees.
Independent reporting for Pine Bluff & Jefferson County since 1879.
Energy Security Partners and GTL Americas leaders attended Tuesday’s EDCJC meeting in downtown Pine Bluff and indicated it plans to purchase the property. EDCJC Chairman Scott McGeorge did not commit to either terminating the deal or granting Energy Security Partners’ request, adding the corporation planned to have its lawyers speak at its February meeting.
EDCJC did not take any action during the meeting because none was listed on the agenda, although board member Joni Alexander Robinson asked if a motion could be made to consider Energy Security Partners’ request to extend the financial closing deadline by six months. Board member Chuck Morgan suggested Energy Security Partners reach out to the lawyers to address the matter.
As part of their request, Energy Security Partners leaders said it would take them four to six weeks to secure the funding that has remained in offshore banks.
Leon Codron, president and chief development officer for GTL Americas, told EDCJC about $320 million was sitting in offshore banks and he couldn’t access it for reasons including recent bank holidays. In one case he mentioned, a Swiss banker who previously committed to the project left work Dec. 18 and did not come back until Jan. 6, six days after the financial closing deadline. In another case Codron mentioned, $50 million was sent to the wrong account, but Codron said GTL Americas has since accessed that funding.
More than $100 million has been put into the project, $20 million of which is dedicated to the site itself, Energy Security Partners leaders told EDCJC.
The lease was originally signed March 30, 2016, with a closing deadline of Dec. 31, 2025, as amended in June 2022. The purchase price was set at $2.875 million, with EDCJC having the option to apply up to $3.925 million in credits.
EDCJC offered a fifth amendment to Energy Security Partners, to take effect last Dec. 1, that would have extended the lease agreement from Jan. 1 of this year to Jan. 1, 2028. Under the amendment, Energy Security Partners would have been required to offer quarterly progress updates.
Roger Williams, CEO of GTL Americas, said his leadership team believed it had a February financial closing deadline; hence Energy Security Partners did not sign the offered amendment.
“We didn’t pay attention to what you wanted. That’s probably my fault,” Clark said, adding his leadership team thought the February deadline was an alternative.
Clark said GTL Americas executives have not accepted a salary while trying to meet financial benchmarks.
“If you want to terminate this deal because you believe we have been bad businessmen, we understand,” Clark told the corporation.
Clark said Energy Security Partners struggled to find willing financiers in Arkansas when the project began. The company has since secured a collection of lenders, possible syndicate banks and potential export credit agencies from across the globe to finance up to 70% of project funding needs, according to a September 2023 prospectus.
The Arkansas Teacher Retirement System, Hanwha and Energy Security Partners were listed as lead project sponsors.
“We fought a pretty hard fight in the state,” Clark said. “We fought it because of a need for this technology in the state.”
This version clarifies the reason for default and the effective date of the offered fifth amendment to the original contract.