KAUMAKANI — Gay & Robinson Inc. announced to workers yesterday morning its plans to exit the sugar industry after more than a century on Kaua‘i, citing the increasing expense of its sugar operation as it pursues a transition to ethanol production.
The company has stopped planting cane, but will continue to harvest what’s in the ground through August 2010, said E. Alan Kennett, Gay & Robinson president and general manager.
The company is continuing negotiations to lease the sugar mill, terminal and other assets to Pacific West Energy LLC, which intends to grow even more sugar than Gay & Robinson for the production of ethanol and electricity, as well as hire all of the existing 227 workers.
“We are now moving forward and intend to be at the forefront of a new era as renewable energy producer and helping to reduce Kaua‘i’s imports of fossil fuels for our energy needs,” Kennett said.
Last year, Gay & Robinson said it planned to invest $80 million to build an ethanol plant that could open as early as this year. The venture, which has yet to get off the ground, has now become the responsibility of Pacific West Energy.
Pacific West Energy President William Maloney said progress depends on two key factors: Concluding revised sugar mill arrangements with Gay & Robinson and acquiring the additional lands it needs to operate.
Gay & Robinson currently has 7,500 acres of sugar, but plans to lease half of that because water will be diverted from certain areas for a hydroelectric project expected to generate 5 to 10 megawatts of renewable energy for Kaua‘i Island Utility Cooperative.
All in all, Maloney said his company needs 15,000 acres to run the ethanol plant, which will likely be accomplished in piecemeal fashion. Without land agreements upfront, the banks and lenders won’t sign on.
“We’re rounding up all the cats and dogs that we can,” Maloney said.
He hopes the negotiations will wrap up in a month or so, at which time Pacific West Energy will have the assurances it needs to finalize land leases or subleases.
Gay & Robinson said it will continue to honor its contractual obligations to both current and retired employees. There are also plans to discuss the transition with the Local 142 of the ILWU, which represents 192 workers.
As for the 300 company homes, 105 of which are occupied by employees and pensioners, Kennett said Gay & Robinson will maintain them into the foreseeable future and no one is being asked to vacate.
Gov. Linda Lingle, responding to the news, said the state will help Gay & Robinson and Pacific West Energy during the transition by “expediting the permits and approvals necessary to transform this kama‘aina company.”
Kaua‘i Mayor Bill “Kaipo” Asing said he is concerned first and foremost about the employees, who have been offered the county’s “full support.”
“It is our hope and belief that Gay & Robinson is doing everything it can to ensure all workers continue to be employed throughout this transition and will eventually be working for Pacific West Energy growing sugar cane for ethanol production,” Asing said.
Both leaders said they were optimistic that the end of one era would usher in the beginning of another.
“The company’s transition from sugar to renewable energy signals a new chapter for Kaua‘i and will help position the island for a more secure, clean energy future that is less dependent on imported oil,” Lingle said.
But that transition has not been smooth to date.
On Tuesday Kennett told Kaua‘i Renewable Energy Conference attendees that the ethanol market is flooded, the debt market is dismal and workers are scarce, particularly truck drivers.
“I hope and pray we’re going to be able to carry on with our project,” he said at the conference.
Clayton Dela Cruz, Kaua‘i division director for Local 142, hopes Pacific West Energy will meet its timeline to take over as Gay & Robinson exits, but there are no guarantees. Cruz said he and the ILWU members are taking a “wait and see” approach.
“They’re still negotiating, so it’s not a done deal,” Cruz said.
Gay & Robinson is one of two sugar companies remaining in Hawai‘i, and the only one on Kaua‘i. It was founded in 1889, and maintained a solid spot at the forefront of the sugar industry, which now appears to be coming to an end as many have known it.
“It’s not a good thing when (Gay & Robinson) has to exit the sugar industry when it has produced for them all these years,” Cruz said.
• Blake Jones, business writer/assistant editor, can be reached at 245-3681 (ext. 251) or email@example.com