IRRRB approves Sweetwater Energy financing deal
EVELETH — Sweetwater Energy will get $26 million in public financing to build a plant in Mountain Iron that will turn northern Minnesota trees into industrial alcohols.
The Iron Range Resources and Rehabilitation Board voted unanimously Friday to give the Rochester, N.Y., biochemical company an $18 million loan at 3 percent interest to be paid back over 15 years.
The $53 million plant proposed just off U.S. Highway 169 would turn trees, so-called woody biomass, into cellulosic sugars that could become the building blocks for products now made from petroleum or corn.
The project would employ about 35 people to start but would also bolster work for loggers and trucks in the forest products industry hard-hit in recent years by mill and plant closures.
Sweetwater hopes to ramp up quickly to more than 100 jobs as early as 2019, said Arunas Chesonis, the company's CEO. The jobs will pay on average $50,000 and up, he said.
"We want to grow it as quickly as possible," Chesonis said after the IRRRB meeting in Eveleth.
In addition to the $18 million IRRRB loan, the project also includes $6 million from the state Department of Employment and Economic Development's 21st Century Minerals Fund, $1 million from other DEED funds, a $1 million loan through the city of Mountain Iron, $16.2 million in "commercial debt" and another $10.6 million in private equity.
It would be the first full-scale production plant for Sweetwater, founded in 2006 in Rochester. The company has two demonstration-size plants and hopes to build a second production plant in Rochester in coming years, said Jack Baron, the company's president.
Mark Phillips, IRRRB commissioner, said it's the agency's goal to branch into economic development that uses the region's natural resources for new and innovative products that add value to basic raw materials. He noted Sweetwater's end product could be used by myriad other biotech companies who may decide to move to the Iron Range to be close to their source material.
"We were the salespeople in this case. We are trying to sell Northeastern Minnesota to a business in Rochester, N.Y.," he said.
State Rep. Tom Anzelc, DFL-Balsam Township, chairman of the IRRRB board, told Sweetwater that the size of their incentives package, one of the largest in agency history, was "extraordinary," but that the IRRRB was eager to invest in a company that might jump-start the wood products industry in an area starving for good jobs.
Several board members questioned whether the new product would be able to compete with cheap oil and cheap corn-based alcohols. But Chesonis said it could because the price of wood remains not only more stable than commodities like oil and corn, but also remains generally lower.
"This technology is fully baked," he said. "We're ready to go."
The plant would start with about 20 truckloads of wood arriving per day and expand to 100 trucks per day, mostly hardwoods but also softwoods such as pine and balsam.
The proposed Sweetwater project is the second in as many years by the IRRRB aimed at biochemical technology. In 2014, the agency offered the largest share of a $28 million financial package for Golden Valley, Minn.-based Segetis to build a plant in Hoyt Lakes.
Sweetwater will create a more generic building block. Segetis would have used that kind of industrial alcohol to further refine it into more specific products.
But Segetis was unable to raise private money to build the plant and, in fact, appears now to have gone out of business. IRRRB staff and the News Tribune have been unable to reach anyone with the company this week and a county official who visited the company's headquarters Thursday said it was closed with workers packing boxes to move out.
Phillips said Friday his agency has been unable to reach any principals from Segetis, but said he couldn't comment on the company's solvency.
Phillips said the agency did not lose any money on the Segetis deal because it had withheld public funds until private financing was in place. That's the same arrangement Sweetwater will get, he said. Once the loan is made, the IRRRB will hold the mortgage on equipment inside the plant, expected to be worth about $30 million, as collateral.