Louisiana issuing $50m of bonds for Norfolk firm’s power play
The state of Louisiana is on the verge of finalising a $50 million (£28.6m) bond deal with one of Norfolk’s oldest companies to help it establish its first US base and create dozens of urgently needed jobs for an area that was devastated four months ago by Hurricane Rita.The state of Louisiana is on the verge of finalising a $50 million (£28.6m) bond deal with one of Norfolk’s oldest companies to help it establish its first US base and create dozens of urgently needed jobs for an area that was devastated four months ago by Hurricane Rita.
Laurence Scott & Electromotors Ltd (LSE) of Norwich expects the tax-free bonds – currently with the underwriters – to be issued within the next three months.
They will then be used to finance the acquisition of a 100-acre site at the Lake Charles industrial airpark, Chennault International Airport Authority (CIAA).
Once the site is purchased LSE will build a state-of-the-art facility and begin to assemble and distribute its high voltage industrial grade electrical motors to a US market it believes is in the ascendancy and which it is eager to crack.
LSE has a large number of US clients who use its motors for power and petrochemical plants. However, the machinery they buy is destined for the UK, Middle Eastern and African markets. LSE chief executive and chairman, George Clair, believes the firm’s high quality produce can break into the massive US marketplace, justifying the huge bond issue.
Clair said: "There are 3,000 power plants in the US and each is spending an average of $50m a year on new motors and servicing motors, yet last year we only did £400k of business within the US and that was in the food processing sector.
"There exists a 20 per cent shortfall in UK and US electricity and how are they going to make that up? New power plants.
"LSE is the only UK manufacturer still capable of manufacturing Class 1E motors; these are motors capable of use in nuclear power plants. There exists a tremendous opportunity for us."
This opportunity to expand and grow LSE in the US based on the quality of its product – "nobody can touch us at what we do," says Clair – was the principal rationale behind Clair’s £4.1m purchase of the 120 year-old company in April last year following 14 months of negotiations.
Clair then met with representatives from Louisiana on a US trip that was followed by a visit to Norwich in December 2005 by the Louisiana secretary of state for economic development, Michael J Olivier.
Here Olivier expounded the CIAA’s accessibility and the area’s skilled labour pool while LSE offered skilled job opportunities.
Following a Louisiana meeting last week, CIAA received state approval and authorisation for the issue of the bonds, which have now gone to the bond underwriters.
As soon as the issue is actually made, most probably within the next three months, building of the new state-of-the-art facility will begin.
CIAA is a former military airbase, which became an industrial airpark dedicated to the economic development of Southwestern Louisiana region by State decree in 1986 after the collapse of the region’s oil industry.
Clair said: "The bond will basically work as a low interest loan, payable over a 30 year period, allowing the company to have enough time to get the business here started.
"We will help revitalise the area, which was hit by Hurricane Rita, an area that needs this kind of business."
Clair expects to be utilising a workforce of between 50 and 75 people at the US facility over the next 18 months.
Once operational, he is targeting a 20 per cent year on year growth for LSE worldwide.
The new site will not be used for pure manufacturing and Clair says it will not impact the Norwich operation, which employs 215 staff; instead it will be mainly skilled assembly work.
Components will come from either Norwich or a new overseas manufacturing facility depending on the required motor.
Clair said: "Motors destined for the oil and gas industry and petrochemical markets will be made here in Norwich to the standard and quality these industries have come to expect.
"Those manufactured elsewhere will be for industries such as water treatment and food processing, motors not currently built here and which we couldn’t build and sell at prices US firms would buy.
"We will not relocate the UK facility because we could never relocate the employees. We are the best for high voltage motors with a low starting current and it is this workforce that delivers it. It is one of LSE’s biggest assets."
LSE began life over 120 years ago when William Harding Scott supplied Colman’s, the famous mustard producer, with a dynamo. The firm is still based at the Hardy Road site it first occupied in 1896.