When Haley Barbour was governor, he and his appointees at the Mississippi Development Authority were gung-ho on getting the state to invest in risky so-called “green energy” start-ups.
Most of them didn’t pan out. In at least one case, the state is now suing the failed company’s principals, claiming that they hoodwinked Barbour and other Mississippi officials into believing the company’s business plan was more viable than it was.
In an exhaustive examination of the issue published last Sunday, Jerry Mitchell, The Clarion-Ledger’s veteran investigative reporter, lays out how poorly Mississippi did playing venture capitalist during Barbour’s tenure.
The Republican former governor, Mitchell reports, convinced lawmakers to provide seven green companies more than $400 million in taxpayer-backed loans on the promise that they would hire nearly 5,000 Mississippians.
Seven years after that first deal was struck, the numbers are anything but impressive. Just 621 jobs have materialized, and only one of seven projects can be considered a success.
The taxpayers have been stuck so far holding the bag on $174 million, according to Mitchell’s reporting. The biggest chunk of this is the $69 million squandered on KiOR, a biofuel company that promised to build three plants in Mississippi that would convert wood chips into crude oil. While Mississippi officials swallowed this cockamamie idea, as did the federal government which indicated it would loan the company up to $1 billion for the venture, apparently few in the energy sector did. After the company couldn’t find anyone willing to take the crude and refine it, the company changed its business plan and said it would do its own refining. In the meantime, with the plant in Columbus in production, it was learned that the amount of crude it could get out of a ton of wood chips and other biomass was less than a third of what it had projected. Within a year, the plant stopped production and in 2014 defaulted on its loan from the state.
Attorney General Jim Hood is now trying to get most of that money back, filing a lawsuit that accuses officials with KiOR and a related company of committing a “massive fraud” to get the $75 million loan.
A court will render a verdict on that dispute.
But there’s a judgment that can already be made: The state has no business in bankrolling start-up companies, most of which are likely to fail. Discerning the few pearls among all the oysters pitching their latest and greatest idea is best left to the investment bankers, whose livelihood depends on being able to distinguish the doable from the doo-doo.
Barbour’s successor, Phil Bryant, has said he prefers investing the state’s money in established companies, such as the Continental Tire plant under construction in Hinds County. The payoff, though, on those hundreds of millions of dollars in corporate giveaways is dubious as well.
Nor is Bryant completely off the hook on the start-up failures of KiOR and others like it. He was, after all, the lieutenant governor when these deals were made. If he thought they were too risky, he could have exercised his authority over the Senate to stop them.