NM on short list for gigantic battery factory — with clawbacks?

By Rob Nikolewski │ New Mexico Watchdog

SANTA FE, N.M. — Albuquerque is on the short list for a proposed $5 billion battery factory for Tesla Motors, Inc., the maker of electric cars that cost more than $70,000 apiece.

Burned by corporations in the past, New Mexico law now requires any potential deal to include “clawback” provisions, if taxpayer money is used to lure the car company to the Land of Enchantment.

According to regulatory filings made late Wednesday afternoon, the California-based carmaker is looking at Albuquerque; Reno, Nev.; and two undisclosed locations in Arizona and Texas for a 500 to 1,000-acre site. The company wants to build a “gigafactory” that could employ 6,500.

The factory is scheduled to launch in 2017 and be fully operational by 2020, turning out up to a half-million cars a year.

“We would covet a project like this,” New Mexico Economic Development Department Secretary Jon Barela told New Mexico Watchdog. “It would be a transformational opportunity for this state … Tesla is a fantastic company, it’s a forward-thinking company that fits into our R&D and technology culture.”

Barela said he did not have a timeline for a decision.

In an email to New Mexico Watchdog, Tesla Director of Global Communications Liz Jarvis-Shean did not give specifics. But in a blog produced by the company, a projected timeline for “zoning, design and build” of the plant is slated for 2014.

“This would be a huge economic benefit for Albuquerque and New Mexico to get us out of the recession,” state Rep. Jason Harper, R-Rio Rancho, told New Mexico Watchdog on Wednesday afternoon. Harper said Intel’s plant in Rio Rancho employs 1,400 — about one-fourth the size of the estimated Tesla plant.

Should Albuquerque land the contract, Harper said, it’s important that clawback provisions are put in place should a deal involve public dollars.

“That way we’re protecting any taxpayer investment,” Harper said.

In the 2013 legislative session, Harper sponsored a bill — it passed the Legislature and signed by Gov. Susana Martinez — attaching provisions to financial deals if companies fail to make good on their promises. Through the measure, municipalities and the state can recoup some of their losses.

The law went into effect after cases involving two high-profile companies:

*Hewlett-Packard received $2.2 million in incentives from the city of Rio Rancho and promised it would hire 1,350 people for a customer support center. HP hired just 860 and later cut 200 of those jobs by Oct. 31. HP was required to repay just $71,000, something Harper called “a slap on the wrist.”

*In 2012, Schott Solar declared bankruptcy after it received $16 million in state taxpayer money to break ground in Albuquerque. According to the terms of the deal OK’d by the administration of then-Gov. Bill Richardson, no claw-back provisions existed, although the New Mexico Finance Authority managed to wrest $3.3 million from Schott.

Barela says he thinks clawbacks won’t scare off Tesla. “That won’t have an impact,” he said.

Harper agrees, saying reliable companies have nothing to fear. “Besides,” Harper said, the New Mexico law “is a proportional clawback. I think it’s very fair.”

According to the filing, Tesla would raise $1.6 billion through a bond issue to help finance the factory. The auto maker said it plans to contribute $2 billion toward the proposed factory and said it was talking with Panasonic about investing, something Panasonic officials confirmed Wednesday.

A story late Wednesday from the Wall Street Journal cited “a person familiar with the discussions in Nevada” saying Tesla is looking at Reno because of a mining and production plant that creates lithium carbonate, a key ingredient in making the lithium-ion batteries Tesla uses.

Barela said he didn’t know whether Reno has the inside track on the deal and instead focused on the fact that Albuquerque is on the short list.

“We’ve been making great strides to make New Mexico more business-friendly and tax competitive,” Barela said. “The key message is that now New Mexico can compete with these kinds of projects. A couple years ago, this could not have happened.”

Contact Rob Nikolewski at rnikolewski@watchdog.org and follow him on Twitter @robnikolewski

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