Arkansas Teacher Retirement System's $30M for $3.5 billion fuels project OK'd

The Arkansas Teacher Retirement System's investment committee voted Wednesday to approve investing up to $30 million in a company that plans to build a $3.5 billion plant near Pine Bluff to convert natural gas into liquid.

The system recommended providing an initial $20 million for an equity investment in GTLA Holdings Limited Partnership, which owns GTL Americas LP. The natural gas to liquids -- or GTL -- plant will convert natural gas to refined fuels such as diesel. That process is expected to account for 70 percent of the plant's output, according to an agenda for Wednesday's meeting.

Other products that will be produced from the natural gas conversion process include naphtha, which is used for chemical and plastic manufacturing; and electricity, which is generated from steam created when equipment housing the chemical reactions is cooled.

The committee, meeting by phone, agreed to keep another $10 million in reserve for potential add-on investments.

An investment of $30 million is small compared with the total cost of $3.5 billion for the project. If the plant is built, it will be the largest project ever in the state. Big River Steel, a steel plant near Osceola, is the largest project at $1.3 billion.

George Hopkins, executive director of the retirement system, expects that guarantees raised from the European Union and Asian governments should be between $600 million and $900 million.

"This project, based on its position, the companies behind it, the technology behind it, the general contractor behind it, means this debt probably will be oversubscribed," Hopkins told the committee Wednesday. "The technology works. It's already working."

At the height of construction there will be about 2,500 workers at the plant site, Hopkins said. Construction should take 30-36 months, Hopkins said.

There should be about 250 full-time employees when the plant is operational, with an average annual salary of about $75,000, Hopkins said.

The retirement system has followed the project for several years, the agenda for the meeting said. It has worked for the past several months to analyze a possible investment in the project.

Simmons Bank was hired to perform due diligence on GTLA Holdings. Simmons and the retirement system's staff together recommended the investments.

The project was first recognized in February 2016 when a firm known as Energy Security Partners LLC said that Pine Bluff was a potential location for the plant.

In September that year, Energy Security Partners announced that it would invest at least $3.5 billion to build a plant near Pine Bluff to convert natural gas into liquid.

Energy Security Partners said the mill would create about 1,300 jobs but acknowledged the openings wouldn't be filled until late 2021 or 2022.

"It's a great looking project, the rate of return and everything," Sean Barron of Simmons Bank and who helped with the research, said after the meeting. "It's just a matter of raising the financing and keeping the oil to natural gas spread hot."

The reason the project has moved so slowly, Barron said, is because oil prices had dropped.

"Now they're back up to where the spread is more attractive," he said.

Business on 08/23/2018

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