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Proposal for ZAP car plant idled

FRANKFORT — Highly ballyhooed plans to build ZAP electric vehicles in Kentucky have stalled.

A key investor has pulled out of the project and backers now say they need $150 million to $200 million in federal assistance.

If additional funding for the $84 million factory — which Gov. Steve Beshear said in August would employ 4,000 workers — cannot be found, it may have to move to another state willing to provide richer incentives, one of its key partners said Wednesday.

"But I'm as confident as ever that we will build in Kentucky," said Randall Waldman, chief executive officer of Shepherdsville-based Integrity Manufacturing.

Integrity is partnering with the Santa Rosa, Calif.-based ZAP to build its first American manufacturing plant in Kentucky.

Waldman said the future of a proposed factory in Simpson County to build the low-speed, three-wheeled ZAP vehicles is contingent upon securing federal assistance or new investors.

If that doesn't happen, Waldman said he'd consider offers from several states, which he would not identify, to fully finance the plant or provide a free facility. In comparison, Kentucky has pledged $48 million in tax incentives.

Waldman said he understands that Kentucky can't provide a free facility, "but I've got to build the plant or find one reasonably cheap or a state that is willing to give one to us.

"I hope I'm able to stay in Kentucky," he said. "Going to another state is not our goal."

Waldman blamed the sour economy for the project's financial woes.

He said one of its primary investors, General Electric Capital, has pulled its $125 million commitment from the project.

GE Capital was supposed to buy bonds to build the project, Waldman said. A GE spokesman had no immediate comment.

Waldman said he is keeping his fingers crossed that the project will receive a federal grant from a $200 billion fund for energy projects. He said he is working with U.S. Sen. Mitch McConnell's office to land federal dollars.

"We should know something in January," Waldman said.

McConnell's office said in a statement that it has put ZAP/Integrity officials in touch with the Department of Energy, the agency that would be able to help them identify which federal grants or loan guarantees they might be eligible to receive.

In August, Beshear took a victory lap around the Capitol in a ZAP electric car after announcing the state would provide tax incentive for the Simpson County project.

In contrast to Beshear's excitement, Global Insight auto analyst Aaron Bragman told the Herald-Leader at the time that ZAP has a reputation of "overpromising and underdelivering."

At the time, Waldman dismissed Bragman as "a naysayer."

The state's incentives are contingent upon the company fulfilling its commitment to create 4,000 full-time jobs within four years of completing its 1 million-square-foot plant.

ZAP chief executive officer Steve Schneider appeared in a video at Beshear's news conference to pledge his commitment to build ZAP vehicles in Kentucky. They now are made in China.

Schneider did not return phone calls Wednesday about the Kentucky project's latest money problems.

In a statement Wednesday, Beshear spokesman Jay Blanton acknowledged that challenging economic conditions have caused projects like the Zap plant to struggle with financing.

"We hope that won't delay this project and we are certainly willing to talk through with them how the state can help," Blanton said. "But, at the same time, our commitment is to protect taxpayers, which we've done by making our incentives completely contingent on performance through the creation of jobs."

Another option, Waldman said, is to alter plans to construct a 1-million-square-foot building by mid-2009 to three 330,000-square-foot structures built over a longer period of time.

"We could finish the first building and have cars up and running by mid-2009 while building the other structures," he said.

The company held a ceremonial ground breaking in September on 225 acres in the Franklin Industrial Park that the local industrial authority provided at a reduced rate.

The city and county governments have pledged $84 million of tax-exempt industrial revenue bonds for the plant, but Waldman acknowledged that little has been done at the site, which sits a few miles north of the Tennessee border along I-65.

The Bowling Green Daily News, in a Nov. 15 report about the plant's money problems, said Simpson County residents are concerned.

"Everybody got ramped up thinking it would happen overnight ... right now it does concern the people of Simpson County if the ZAP project will be viable," said Franklin Mayor Jim Brown.

"We're still cautiously optimistic," Simpson County Judge-Executive Jim Henderson told the newspaper. "Obviously folks are anxious about the project because it hasn't yet moved into the construction phase."