Uncertainty surrounding the renewal of a federal tax credit crucial to the wind-power industry has led to erratic employment and business for LM Wind Power in the past few years.
That unpredictability has now cost the company $3.4 million.
That's how much LM Wind Power, one of the industry's leading wind-turbine blade manufacturers, has repaid the state after a review found that the Denmark-based company has not met the employment terms of the state incentives package it was offered in 2007 to locate its plant in Little Rock.
The Arkansas Economic Development Commission and LM Wind Power "entered into an agreement [on Nov. 18] by which a total of $3.4 million will be recaptured from the company," Scott Hardin, spokesman for the commission, said in an email statement.
"Due to a volatile wind market (specifically the uncertainty regarding the federal Wind Power Production Tax Credit), the company is not currently at the 1,100 expected employees but does employ approximately 520 people at its Little Rock facility," he said.
When asked about the future of LM Wind Power's facility, spokesman Dorte Kampersaid, "We have a lot of orders; we are very busy in Little Rock."
She said the company remains concerned about the future of the tax credit.
The federal Production Tax Credit of 2.2 cents per kilowatt hour of renewable power was extended in January 2013 after a 2012 delay by Congress. The credit expired at the end of 2013, and so far there has been no action by Congress regarding another renewal.
In 2007, LM Wind Power received $6.9 million from the Governor's Quick Action Closing Fund, which is tied to the number of employees at the Little Rock plant.
The company also received $8 million from the Economic Infrastructure Fund and qualified for the corporate income tax exemption for wind-power manufacturers, a refund of sales taxes paid during construction and a cash rebate of a percentage of overall payroll.
The cash rebate is still active because it is a 10-year agreement, Hardin said.
LM Wind Power is the second wind manufacturer to return funds to the state amid the annual uncertainty over the tax credit.
Nordex USA Inc. halted production at its wind-turbine facility in Jonesboro in 2013 and laid off about 40 employees reportedly because of the unpredictability of the tax credit.
The company moved its production operations to Germany, which it said would allow it to better respond to the market, and returned more than $2.5 million to the state and to Jonesboro for grants it received to build its plant there.
At the end of 2012, Congress allowed the tax credit to expire, slowing production of wind-power manufacturers.
That summer, LM Wind Power, which employed 391 workers in Little Rock, cut 94 full-time employees and 140 temporary positions.
By 2013, LM Wind Power had only 137 employees at the Little Rock plant.
Business picked up for wind energy manufacturers when Congress extended the tax credit and allowed companies to qualify for the credit if construction on their projects started in 2013.
With an uptick in business, LM Wind Power added about 400 employees last year at its Little Rock facility. The hires were part of more than 850 jobs added nationwide to handle increased orders, the company said at the time.
However, the absence of the federal Production Tax Credit this year hangs over LM Wind Power and other wind manufacturers as they move closer to completing projects that qualified for incentives.
Uncertainty over the renewal of the tax credit makes it hard for companies to plan projects and throws into question the stability of jobs in the industry, executives for LM Wind Power said during a tour of the company's plant in July.
And the expiration of the credit at the end of 2013 resulted in a 92 percent decline in new projects, according to the American Wind Energy Association.
The association, which is pushing Congress to renew the tax credit as part of the tax extensions it is considering, said the incentive helps the wind industry compete with other energy sources.
"The issue has remained unresolved in 2014," said Steve Patterson, executive director of the Arkansas Advanced Energy Association, adding that the prolonged uncertainty about the tax credit discourages investment in the industry.
"And here we are closing out the year trying to rush to the finish line to get something adopted," he said.
Business on 12/04/2014