Tag Archives: Globalfoundries

The GlobalFoundries Deal Is Bad, But Maybe Not Quite Terrible

Had a polite conversation (well, it was testy at first) with someone in the Scott administration who’s involved in the talks with GlobalFoundries over its desire to create its own utility exempt from laws and regulations that apply to all other utilities. As a reminder, the Scott administration and GF have signed a Letter of Intent en route to a formal agreement that would allow GF to have its way.

I came away from the chat with a bit more perspective, but my fundamental belief remains: This is a case of government bowing to the demands of an employer that’s too big to deny.

I’m not naming the official because our chat was off the record, and also because this post reflects my own view of the situation and not theirs.

First, a significant correction. I wrote that the Global Warming Solutions Act set a greenhouse gas emission baseline of 1990 while the LOI uses 2005, when emissions were at their peak. In fact, the GWSA also uses 2005 as its baseline for the 2025 target. 1990 applies for other, later targets.

So in the LOI, GF is agreeing to abide by the 2025 emissions target in the Global Warming Solutions Act. But three things are still true: First, GF’s current emissions are only a tick higher than the 2025 target so the company won’t have to do much at all. Second, the letter is riddled with exceptions and exemptions that would allow GF to exceed the target. Third, the LOI would allow GF to exceed its target under a variety of circumstances.

But there is one line in the LOI that leaves the door open for further state action.

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That GlobalFoundries Deal is All Kinds of Terrible

Working on the Memorandum of Understanding (Not Exactly As Illustrated)

A few days ago, I wrote about GlobalFoundries’ bid to break away from Green Mountain Power and establish its own boutique utility. Well, it’s far worse than I thought. I’ve gotten a look at the Letter of Intent between GF and the Scott administration — no scoops, it’s a public document — and maaaaan, is it bad. Like, historically, unprecedentedly bad.

I won’t say the administration is acting as GF’s procurer, but I will say it’s told Vermont to put on a sequined microskirt and show the corporation a good time.

Really, I’m kinda shocked that there’s been no media coverage of this. It’s definitely newsworthy. Utility regulation is one of those boring, complicated matters chock full of legalese that tends to scare away reporters and editors. And readers, for that matter.

But compared to the usual thickets of legal and regulatory matters, this is an easy story to tell. It’s a story of a government bowing and scraping before a big business, sacrificing principle and sound policy in the process.

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Is GlobalFoundries Too Big To Deny?

They probably call this a campus”

It may not be “an offer you can’t refuse,” but GlobalFoundries has done its best to put state government over a barrel on electricity costs. Vermont’s largest private-sector employer wants to cut ties with Green Mountain Power and form its own utility. It would buy its power on the regional wholesale market.

If it gets its way, the utility would not be subject to Vermont’s renewable energy standards or a variety of other laws and regulations. This isn’t a little thing; GF accounts for 8% of Vermont’s electricity consumption. If GF gets its way, we’d have a harder time reaching our greenhouse gas reduction targets.

Unless, ha ha ha, it voluntarily complies. Ha.

The case was filed last spring before the Public Utilities Commission and got a flurry of media attention at the time. Since then, it has followed the PUC’s customarily meandering process with filing after memo after legal brief after rejoinder. But things are about to heat up. And there are any number of indications that the Scott administration is in the bag for the GF petition.

Which is no surprise, since underlying all of this is GF’s persistent, non-specific rumblings about competitiveness and costs and well, wouldn’t it be a shame if something happened to your big shiny employer?

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When Republicans Attack!

Hey, how’s everybody doin’? Been out in California for the last several days, which explains the relative lack of blogging.

Thanks to the Internet, however, I was able to enjoy the sad spectacle of our two Republican candidates for governor tossing insults back and forth.

Starting with Bruce Lisman’s latest missive that, once again, ties Phil Scott to the Shumlin administration. Quite accurately, it must be said. After all, Phil did spend roughly four years as a member of the Shumlin cabinet — a gesture of cross-partisan generosity on Shumlin’s part that cost him a fair amount of criticism. From me, among others; I thought it was a bad idea to help burnish Scott’s moderate, unpartisan credentials.

Guess I was wrong, not only is Our Lite Gov not using his credential, he’d prefer we all forgot about it. In fact, he’d slip it into a Vermont Yankee storage cask if he could.

Lisman did stretch the truth in depicting Scott as “support[ing] Governor Shumlin’s failed health care exchange.” As far as I can recall, Scott never actually supported Vermont Health Connect; leader that he is, he didn’t actually take a stand on the idea. That is, until he started thinking seriously about running for governor himself.

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The sun sets on the Vermont Enterprise Fund

Hey, remember in January, when the state Emergency Board approved two grants from the Vermont Enterprise Fund? GlobalFoundries was given $1 million, and $200,000 went to BHS Composites. Well, turns out those will be the last VEF grants ever awarded. During its recently concluded session, the Legislature rejected Governor Shumlin’s bid to add new money to the Fund — and decided not to extend the program.

The Fund is empty, and in the absence of legislative action, the program will sunset at the end of the fiscal year.

“It’s disappointing,” says Shumlin spox Scott Coriell*. “The Enterprise Fund has been a useful tool, but we do have other tools at our disposal.”

*Say that five times fast.

There was some funny business around those January grants that may have sealed the fate of the two-year-old program.

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GlobalFoundries: Too big to fail?

Chittenden County is blessed — and a little bit cursed — by the presence of a large high-tech employer: GlobalFoundries, formerly d.b.a. IBM. The Essex facility is a major driver of the area’s economy, and the entire state’s economy for that matter.

And GlobalFoundries knows this, and they seem to know they have us over a barrel.

This is my inference based on a new report by the Associated Press’ master gardener Dave Gram, who has used public-records requests to discover the extent of GF’s demands on the state.

We already knew about the questionable $1 million from the Enterprise Fund. Gram now brings us tidings of a $17 million highway project that GF wants fast-tracked. It would involve improvements on Route 22A, which happens to be the most direct route from the Burlington area to New York State. (22A goes straight through downtown Vergennes. Hope you like your new highway, Vergennians!)

But otherwise it’s of little utility to intra-state traffic. For general transportation, trade and tourism puposes, improvements to US-7 would be more efficacious. But I have a feeling that what GlobalFoundries wants, GlobalFoundries will get.

(Now, if GF can convince New York State to build a decent highway from the Vermont border west of Rutland to I-87, then that would be a great benefit to the western Vermont economy as a whole. If they can do that, then our investment in 22A would be a worthwhile tradeoff.)

GlobalFoundries also wants state backing for “payments to GlobalFoundries from the Regional Greenhouse Gas Initiative, a multi-state pact that spins off money to states with a low carbon footprint.” Gram’s report doesn’t go into the reasoning behind GF’s request; in the absence of more information, I have a feeling that there are more pertinent uses for the money.

But hey, GlobalFoundries is a yoooge employer, and its loss would cripple Vermont’s economy. We may not have much choice.

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The million-dollar greeting card

Okay, here’s my promised post about the Vermont Enterprise Incentive Fund.

It’s garbage. It stinks. It’s an insult to everyone, liberal or conservative, who believes in good government.

It needs to die. Or at the very least, it needs a complete overhaul. Strong words, but I can back ’em up.

The Enterprise Fund, for those just joining us, is a program of state grants for businesses moving to, or making significant investments in, Vermont. It is meant to be used in “unforeseen or extraordinary circumstances.” Those are Governor Peter Shumlin’s own words, quoted from his own press release.

The Fund was most recently deployed last Friday with a $1 million grant to GlobalFoundries, in support of a $72 million investment in its Essex Junction facility. In a number of ways, this grant seems at odds with the Fund’s stated purpose. Let’s start with this: GlobalFoundries announced the investment in October. By November, it had already invested $55 million of the money.

So, absent a time machine, how could an investment made in October be contingent on a state grant approved three months later?

Even if you ignore that anomaly, if the investment is already well underway, how in the world can you classify it as “unforeseen or extraordinary”?

Well, you can’t. In the words of State Auditor Doug Hoffer, this grant was “basically a thank-you note.”

A million-dollar thank-you note. Next time, maybe just go to Capitol Stationers. They have a very nice selection.

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Is there a fight brewing over the Enterprise Fund?

Earlier today, VTDigger broke the news that the state Emergency Board (four top lawmakers plus the Governor) had met on very (VERY) short notice to approve two state grants from the Enterprise Fund: $1 million to GlobalFoundries and $200,000 to BHS Composites. And I commented that this is the kind of thing that makes some see the Governor as a slippery dealmaker.

Well, here’s something you didn’t know. TheVPO has learned, as they say, that 50 state lawmakers wrote a letter to the Emergency Board asking it to postpone action on the grants.

The plea fell mostly on deaf ears, as the Board approved the grant on a 3-1 vote.

One of the letter’s signatories was Rep. Chris Pearson (P-Burlington). Via email, he explained the reasoning:

It was my hope that we could consider using the money to help fill the [FY 2017] budget gap or, more urgently, the [FY 2016] budget adjustment challenge.

The letter was written before the EB’s agenda had been publicly warned — which happened only yesterday afternoon. Pearson adds:

Now that it’s clear the money was for Global Foundries it’s puzzling how a company that was given $1.4 billion to take over the plant could find $1 million much of a game changer.

You and me both, but more on that in a moment. First, the political ramifications of this letter.

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This is the kind of thing that makes people mistrust the Governor

Yesterday, State of the State Address: Governor Shumlin introduces a variety of people whose stories illustrate the impact of his policies. They include two executives from GlobalFoundries and two from BHS Composites. The latter was a surprise entry; Shumlin sprang the news that BHS had decided to open a facility in the Northeast Kingdom, creating an estimated 70 jobs.

Today, the state’s Emergency Board met on very short notice to approve state grants to both companies: $1 million for GF and $200,000 for BHS. VTDigger has the deets:

The Emergency Board, which includes the four chairs of the Legislature’s money committees and Gov. Peter Shumlin as the chair, voted at a largely hush-hush meeting that started at 8:30 a.m.

The Shumlin administration did not formally announce the morning meeting until Thursday afternoon, following his State of the State address.

The information in the meeting’s agenda packet, which was printed on Dec. 29, was considered confidential.

Hm. The agenda packet was printed eleven days ago, and the meeting wasn’t warned until yesterday afternoon — less than 24 hours beforehand.

Okay, so the administration sat on the news so the Governor could make a splash. Great. But if Shumlin ever wonders why he has a reputation as a slippery dealmaker, well, here it is.

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Here we go again

When IBM paid GlobalFoundries $1.5 billion to take its chip-making operations off its hands, including the Essex Junction facility, Vermont breathed a sigh of relief. All the drama, all the domestic cutbacks by IBM, the rumors, the questions… we could put all that to bed.

Right?

Not so much.

Multiple media reports say a state-owned Chinese chip manufacturer has been sniffing around. The Albany Times Union:

Anxious to grow its semiconductor industry and secure a stable supply of microchips for its high-tech economy, the Chinese government is reportedly looking into buying GlobalFoundries…

Mubadala Development Co., the Abu Dhabi government investment fund that owns GlobalFoundries, may be under increasing pressure to consider any offers for its chip-making unit as the plunge of global oil prices has put enormous pressure on the oil-rich emirate’s finances.

Hoo boy. Out of the frying pan.

Makes me wonder two things. First, was GF’s “purchase” of the IBM operation merely a cash grab? A large-scale industrial version of “Flip This House”? Second, all of GF’s assurances to Vermont officials are worth exactly the paper they were written on. Assuming they were ever written down in the first place.

If the GF transaction turned Essex Junction into a pawn in a global game, a Chinese takeover would turn Essex Junction into a zit on a mega-corporation’s ass. I mean, if you think the Chinese wouldn’t close Essex Junction in a heartbeat if they could save a nickel by moving the whole shebang to Shanghai, I’ve got a bridge in Brooklyn you might be interested in.

And it’d have nothing to do with Vermont. In the face of Chinese strategic considerations, our policies and “business climate” are insignificant. That wouldn’t stop Republicans and business types from slamming the Democrats, but it’d be pure substance-free political posturing.

This is far from a done deal. The Times Union says that even if a sale is agreed to, it’s certain to face opposition in Washington. Specifically, powerful New York Sen. Chuck Schumer “has vowed to block the sale of any U.S. technology companies to state-owned companies in China until the government opens up its markets to U.S. firms and stops stealing U.S. intellectual property.”

Which raises an interesting philosophical point. Since IBM dumped its chip business onto GlobalFoundries, is it a “U.S. technology company” anymore?

Well, that wouldn’t keep the politicians from making their hay with some juicy election-year China-bashing. They might even succeed in blocking a sale, or sufficiently fouling the waters that China decides it’s not worth the trouble.

But here’s the larger point. Even if China doesn’t buy, this certainly shines a new and unflattering light on GlobalFoundries as a “partner” to Vermont. To paraphrase the Psalmist, “Put not your trust in global corporations…”