$1.5 billion Sun Paper project near Arkadelphia officially terminated

by Roby Brock ([email protected]) 6,158 views 

Representatives of Sun Paper Co., the $1.5 billion paper mill project slated for Clark County near Arkadelphia, have said the deal is officially terminated.

In a letter dated March 15, Andrzej Bednarski, International Project Director for Shandong Sun Paper Co., Ltd. notified Gov. Asa Hutchinson and AEDC officials that the project would not move forward, citing trade tensions, economic uncertainty, and the coronavirus outbreak as reasons for pulling the plug.

“It is with great regret that we inform you that our Sun Bio mill project in Arkadelphia, Arkansas will be terminated,” the letter reads. “The current situation related to the coronavirus outbreak and continued political friction and economic instability make it impossible for us to proceed with the project within the timelines set forth in the environmental permit. With the likelihood of the project uncertain, it is also fair to allow the State of Arkansas to use its resources for other ventures that have less uncertainty in the medium term. At this moment, the collective uncertainties make it a better choice for both of us to abandon the project.”

The project was to be located southwest of the intersection of Highway 26 and U.S. Highway 67 in Clark County near Arkadelphia. The pulp mill proposed to handle nominal linerboard production capacity of 4,400 machine dry tons per day at varying base weights. It could make boxes used for deliveries by companies like Amazon and FedEx and was considered a boon for Arkansas’ regional timber industry.

The termination letter compliments the efforts made by all parties in the project and expresses regret for having to make the decision to end the Arkansas super project. When announced in 2016, it was one of the first major trade deals Gov. Asa Hutchinson landed from his efforts to recruit Chinese manufacturing to the state.

“We remain committed to the friendships we have made over the years with the State of Arkansas, and we are willing to cooperate in finding other suitable industrial partners for the project or the site. On behalf of our Chairman Li, Mr. Ying and the entire Sun Paper team, please accept our sincerest gratitude for your support, and our door is always open to our friends from Arkansas,” Bednarski writes.

Mike Preston, Secretary of the Arkansas Department of Commerce and executive director of the Arkansas Economic Development Commission, said he was obviously disappointed in the news, which has been foreshadowed in recent weeks by the disclosure that local and state officials were marketing the site near Arkadelphia to other potential suitors.

“It’s disappointing to get the news that they’re terminating the project. I guess given the circumstances surrounding the ongoing trade war certainly slowed things down, but we still remained optimistic that a resolution would work out,” Preston told Talk Business & Politics.

Preston said the coronavirus outbreak, which started in China, was a final obstacle that couldn’t be overcome.

“Too many circumstances around what’s happening with the coronavirus and it having spread to the U.S. and the prolonged economic impact of it. Certainly, what’s happened in China – Sun Paper’s [parent] company has been shut down for a number of months and that’s impacted their bottom line and their cash flow,” he said.

Preston said although international travel expenses by the state have been utilized to recruit Sun Paper, there have been other projects that emerged from the Arkansas’ Chinese recruiting trips, such as Hefei Risever in Jonesboro and Tianyuan Garments in Little Rock. No incentives nor the $12.5 million of Community Development Block Grant (CDBG) funding that had been set aside for Sun Paper has been spent, Preston said. It will now be available for other prospects for the site or other projects.

“Obviously whenever we make a trip to China it wasn’t solely focused on Sun Paper. Because of those trips and the fruitful nature of them, they wouldn’t be a loss or a complete loss,” Preston said.

“We’ll be able to de-obligate those funds and hopefully use that for new projects. We’ll be looking at options and ways that businesses have been impacted by the ongoing situation related to the coronavirus,” Preston said.

The AEDC and Commerce chief said there are a lot prospects that have expressed interest in the Arkadelphia site thanks to the worldwide attention Sun Paper initially garnered. He said his agency will work with city and county officials to more aggressively market the Clark County site.

On a broader note, Preston said his department is just a day or two away from putting out guidance related to the economic impact beginning to take effect from the COVID-19 outbreak in the U.S. He said there is an expectation that with quarantines, altered work and lifestyle habits, and economic hesitation there will be businesses and industries impacted by the restrictions the virus will bring.

“We’re obviously paying very close attention to it,” Preston said. “What we’re trying to do right now is evaluate what all is available, and in certain circumstances, there’s not a lot available. We’re trying to see what Congress is going to pass in terms of relief, the SBA [Small Business Administration] making loans more readily available, and we’ve already got some indication from HUD [Housing and Urban Development] that CDBG funds are going to be made available through existing funds on the COVID-19 recovery as well as some additional funds coming in through the Unemployment Insurance trust fund.”

“We’re evaluating all those options right now. We hope to have something prepared in the next day or so that people are going to have a one-stop shop to understand what all is available to the state if their business has been impacted. They’ll know who to call and as we fully understand the depth and breadth of what this impact is going to have on businesses, we’ll do what we can as a Department of Commerce in the state of Arkansas to help assist those in need,” he added.