Gov. Hutchinson signs letter of intent for $1.3 billion Chinese superproject in Arkansas

Gov. Asa Hutchinson (R) has signed a “letter of intent on investment cooperation” with Chinese-based Shandong Sun Paper Industry Joint Stock Co. to pursue a $1.3 billion pulp mill to be located in south Arkansas.

In attendance at the signing ceremony were U.S. Secretary of Commerce Penny Pritzker, Gov. Hutchinson, Chairman and Founder of Sun Paper Co. Hongxin Li, Arkansas Economic Development Director Mike Preston, and U.S. Consulate General Charles Bennett.

The agreement moves forward efforts between Sun Paper and Arkansas economic development officials for a “fluff pulp” factory, which would primarily create materials for baby diapers and other products. If the plant moves forward, it would be Sun Paper’s first North American operation.

“This is a first step in a long process, but the significance of the letter of intent is that Sun Paper commits to looking at Arkansas for a location for a $1.3 billion pulp mill and it sets out a specific timeline for them to make a site selection, hire consultants and do the necessary due diligence to establish the mill,” Hutchinson told Talk Business & Politics in a phone call from China.

The letter of intent sets a May 1, 2016 date to finalize a site for the project, which would create “hundreds of direct jobs” and result in “very significant” indirect jobs in the logging and timber industry in south Arkansas. The governor said specifics beyond those numbers would be difficult to estimate at this point in negotiations.

The agreement states that pre-engineering would begin after May 1 as well as environmental permit activity and an intermodal railroad facility study.

Hutchinson also said it was too early to know which state economic development incentives might be used and how large those incentives might be. Hutchinson also said Sun Paper is interested in regenerating electricity from its operations in Arkansas and is seeking a connectivity study in conjunction with Entergy Arkansas and MISO to gauge the potential impact on the electric grid.

Hutchinson returns from his trip to China and Japan on Tuesday.

Arkansas’ largest economic development project is the $1.3 billion Big River Steel mill in Northeast Arkansas near Osceola. It is expected to open in March 2016.

The state of Arkansas is heavily invested in the superproject. The Arkansas Legislature authorized the state to issue $125 million in general obligation bonds under the authority of Amendment 82, the state’s superproject amendment. That legislation allows the state Legislature to approve up to 5% of the state’s general revenue budget to be used for bonding of large-scale economic development projects.

Sun Paper describes itself on its web site as “one of the most advanced transnational enterprises of paper making and integrator of forest-pulp-paper, one of the biggest private enterprises in China, the biggest high class coated wrapping board production base and the leading enterprise of food wrapping paper board.”

Sun Paper is publicly traded in China and has a market cap of roughly 26 billion Yuan – about $4.16 billion U.S., according to conversion rate as of Nov. 22. It is headquartered in Yanzhou, the hometown of Confucius, and launched in 1982. Sun Paper employs nearly 10,000 worldwide.