IRRRB board approves loan to Segetis Inc.
A Twin Cities biochemical company promising to turn trees from Minnesota forests into valuable chemicals will get $28.2 million in public financing after action Tuesday by the Iron Range Resources and Rehabilitation Board.
The IRRRB unanimously approved its share of the public loans and grants for Segetis Inc. to build a $105 million project in the Laskin Energy Center industrial park in Hoyt Lakes.
The plant would start small, using corn-based feedstock to derive sugars that would be made into levulinic acid, a key building block used to make plastics and cleaning compounds.
The company plans to expand and use biomass from forest products to get the same results by about 2018, eventually using up to 400,000 cords of wood per year.
Segetis, founded in 2006, is pushing its proprietary process as an environmentally friendly alternative to chemical building blocks that are made from fossil fuels. It’s a little like making ethanol from plants, but instead of producing fuel, the end product is used to make valuable chemicals.
“We’re talking about replacing petro-oil in everyday products with sugar-based chemicals,” Tony Sertich, IRRRB commissioner, said during Tuesday’s meeting.
Sertich said the Segetis project, when fully phased in, will be among the IRRRB’s largest-ever investments, just shy of various incentives provided to the Mesabi Nugget iron plant a decade ago.
Atul Thakrar, Segetis president and CEO, told IRRRB board members that they were investing in the ground floor of what will become a major industry, as more manufacturers move from petroleum-based chemicals to biomass-based chemicals.
“Wood is the future oil for us,” Thakrar told the IRRRB board. “We believe we’re going to be the catalyst to get this industry going. … It’s a pretty significant global opportunity.”
Thakrar said he expects groundbreaking this fall or in the early spring of 2015.
Board members received samples of already available consumer products such as dish and laundry soaps that, instead of using petroleum-based surfactants — compounds that act as detergents, wetting and foaming agents, and dispersants — used Segetis biochemicals.
“Our juice is in there to make it happen … better and in a more sustainable way,” Thakrar said.
It remains unclear exactly what type of wood would best suit the company’s needs, Thakrar said, noting that technology to convert wood biomass to cellulosic sugar is still evolving. He added that Segetis will buy their biomass sugars from some other company. Sertich said negotiations are underway to bring a biomass conversion company to the area as part of the project.
Segetis, based in Golden Valley just west of Minneapolis, would employ about 50 people at first in Hoyt Lakes, and then expand to 70 people once at full capacity. The project is expected to create more than 200 spin-off supply and support jobs at other businesses and have a $50 million annual economic impact on Northeastern Minnesota.
The project’s funding includes:
* A $7 million grant from the state’s 21st Century Grant Fund administered by the state Department of Employment and Economic Development.
* A $20 million direct loan from the IRRRB’s Douglas J. Johnson economic development fund to Segetis, to be paid back over 20 years.
* A $1.2 million loan from the IRRRB to the city of Hoyt Lakes.
* $3 million from Allete, the Duluth-based parent company of Minnesota Power, which co-manages the industrial park with the city, for steam generation for Segetis.
* $37 million in commercial debt Segetis would secure from business lenders.
* $36.8 million company investment by Segetis.
The IRRRB will have a lien on equipment as collateral initially, and then will receive stock warrants — which differ from stock options in that they are issued and guaranteed by the company — at a later date.
According to IRRRB documents, Segetis currently has 30 employees and has raised $60 million in capital from outside investors as it develops its technology, product development and market development. While Segetis has a process, the Hoyt Lakes facility would be the company’s first commercial-scale production plant. Last October, the company announced the successful startup of its small-scale pilot plant in Golden Valley. The company claims to have more than 50 patents and another 200 patents pending worldwide.
Minnesota Power officials told the News Tribune last week that they will build a support facility at the Laskin Energy Center to provide utilities to the Segetis operation and any other manufacturers that build at the site.
Segetis has said the Hoyt Lakes plant will have a $3.1 million payroll, averaging more than $44,000 for each of the 70 positions. Those prospects are good news for the eastern Mesabi Range, still feeling the loss of 1,400 jobs when LTV Steel Mining closed in 2001.
The IRRRB, which is composed of state lawmakers from Northeastern Minnesota, met Tuesday at the State Office Building in St. Paul. The agency allocates a portion of the state’s per-ton tax on taconite iron ore produced and shipped and uses the money to promote economic development across the taconite tax relief area.
Segetis is a Latin word roughly meaning “from the earth.”
In other action the IRRRB approved:
* A $250,00 grant to the city of Gilbert for expansion of Mesabi Bituminous.
* A $90,000 grant to Lake County for expansion of water and sewer lines for business development
* A $250,000 to the city of Mountain Iron for reconstruction of Mountain Iron Drive.