CHICAGO — Indiana Gov. Mike Pence is expected to make a decision in the next few weeks on whether to give the go-ahead to a $2 billion bond-financed fertilizer plant project that was put on hold in January amid allegations that the Pakistan-based firm that would build the plant is tied to explosives used against Americans in Afghanistan.
The Indiana Finance Authority in December sold $1.26 billion of tax-free Midwest Disaster Area Bonds to finance the first stage of the deal. But Pence put the project on hold within days of his January inauguration after U.S. military officials said they were investigating the company due to the use of its fertilizer in explosives used against U.S. troops.
The Indiana project is one of several fertilizer plants expected to come on line in the Midwest and across the country due to a surge in domestic production driven by a drop in natural gas prices. Iowa on Tuesday sold $1.2 billion of long-term debt for a similar project by an Egyptian firm in one of the week's most closely watched deals.
A decision about the stalled Indiana plant is expected soon, according to officials in southwest Indiana, where the project — one of the largest in the state — would be located.
"We're anticipating a decision in the next couple weeks at most," said Greg Wathen, president of the Economic Development Coalition of Southwest Indiana. "With the level of meetings being held and the intensity of the discussions, it appears we're getting closer to a decision."
Wathen said he was optimistic that the project would be given the green light. "When this was announced, who would have thought we would have found ourselves in this geopolitical situation," he said. "But I am optimistic. We feel very comfortable the company is doing everything they said they would and has addressed the concerns the governor has."
A spokesman for Pence said only that the governor continues to review the project. She declined to give a timeline for an announcement, only that it would be before the July mandatory tender date of the $1.26 billion of notes sold in December. The Indiana Finance Authority also declined to comment.
Both Iowa and Indiana came to market in late December with their MDAB fertilizer plant deals. The Indiana Finance Authority issued the bonds on behalf of Midwest Fertilizer Corp., which is owned by Fatima Group, one of Pakistan's largest conglomerates.
Both borrowers crafted short-term deals with mandatory tenders that allowed them to qualify for the disaster bond program, which expired in December, while giving time to finalize project details. Proceeds from the Indiana deal remain in escrow and expire in July, when the company is expected to roll them into long-term debt — if Pence approves the project.
The bond-financed Iowa fertilizer plant is expected to break ground soon.