SHINE plan would involve more city tax incentives
JANESVILLE—SHINE Medical Technologies isn't raising money as quickly as planned and is negotiating with the city for financial help it could use down the road, company and city officials said.
SHINE says it is taking steps toward commercialization, and plans to break ground on its project later this year.
But talks are underway for a city incentive package that would help SHINE offset the costs a prototype facility that SHINE says it now needs to build in Janesville--a facility that would need to be relocated once before all is said and done, said Gale Price, city economic development director.
SHINE's radioisotope production testing would first start in a prototype facility SHINE would build in Janesville on land that's just outside of the city parcel where SHINE intends someday to build a full-scale production plant.
"It (the prototype facility) wasn't part of the original plan,” SHINE Vice President Katrina Pitas said. “The (prototype) building is new, and, frankly, the reason we're breaking ground on that facility instead of the manufacturing facility is that we have raised money slower than we'd intended.”
SHINE's path to commercial production of molybdenum-99 could be delayed several months. Mo-99 might not be produced commercially and shipped out of SHINE's planned 57,000-square-foot Janesville production facility until sometime in 2020.
That could be three to six months later than SHINE's most recent target for commercialization, which the company has said had been mid-to-late 2019, Pitas said.
In an interview with The Gazette, Pitas said SHINE needs more private investment before it can begin to build its $100 million commercial production facility in Janesville.
A NEW DEAL
SHINE is in talks with the city on a potential city incentive package that might help SHINE pay for construction of the prototype facility.
SHINE in 2012 inked a $9 million tax-increment financing agreement with the city to build a Mo-99 production facility. SHINE's prototype facility plan could be rolled into that TIF agreement under an emerging deal.
Price confirmed the city is working on a potential financial incentive package for the project.
Price said the city council in June could consider annexing a small parcel just south of SHINE's main project area where the prototype facility would be built.
Price said a proposed amendment to SHINE's TIF deal would include the city agreeing to pay extra incentives that could go toward a prototype facility SHINE would eventually build on the city parcel earmarked for SHINE's project. The parcel would replace the prototype building SHINE plans to build this year using its own financing.
“We recognize there is capital expense they'll need to recover on the (prototype) building. The city is working to facilitate the construction project,” he said.
Price said the city believes such a deal is necessary because SHINE's full-scale project might not be able to move forward without the prototype facility being built now. He said a TIF amendment that could add to the city's investment in SHINE is feasible because SHINE's is guaranteeing its added value to the tax base eventually would be much larger than was estimated in the original, 2012 TIF agreement.
By the end of the day Friday, the city had not responded to an open records request filed by The Gazette May 17 seeking SHINE's original TIF agreement and any proposed amendments.
'SIMPLIFY THE STORY'
Under plans approved last year by the federal Nuclear Regulatory Commission, SHINE's full production facility would house several particle accelerators for production of Mo-99 for use in medical bone and heart scans.
Pitas said that before SHINE moves ahead on the full-scale production facility, the company plans first to build an 11,500-square-foot prototype and testing facility on land just south of the parcel where SHINE would eventually build its much larger production facility.
Pitas said SHINE raised about $18 million in private financing last year in a push to meet its goal to fully fund building the new full-scale facility. Overall, SHINE has raised millions from private and federal government sources, helping it forge ahead with planning, technology development and federal permitting.
Yet, so far, it has not been enough to float the project's full cost, Pitas said.
A smaller, prototype facility would allow SHINE to test a prototype particle accelerator and low-enriched uranium target similar to the equipment that would power its full-scale facility. Later, as SHINE builds out the full production facility, the prototype building would be used to stage and test its production accelerators and other equipment, Pitas said.
The prototype facility could show potential investors concrete evidence that the technology SHINE has spent years developing actually works. That could help the project register with potential investors as more real, and less of a concept on paper, Pitas said.
“Ultimately, what it allows us to do is to simplify the story that we tell people. We don't have to convince them that if we put this piece plus this piece together, we'll have a great way to produce moly 99,” Pitas said.
“We'll say, 'We've already produced moly 99. Here's the technology. All we have to do is build eight more accelerators.' Also, at the same time, we're really moving toward production. It's a path that helps us serve multiple purposes, but really, it helps us get closer to that (Mo-99 production) commercialization," Pitas said.
Under a tentative timeline, SHINE could break ground on the first prototype building as early as fall and begin to run testing in early 2018, she said.
Pitas said she could not discuss overall costs tied to the prototype facility, and she would not say what the total price tag now is for SHINE's overall Janesville project. Earlier, SHINE had said a full-scale production facility could cost $100 million, and regulatory, testing and development costs could run upward of another $100 million.
Pitas said SHINE now is shielding such forecasts on its Janesville startup costs “for competitive reasons.”
People shouldn't consider SHINE's planned prototype as a diminished or downgraded production facility, Pitas said, because SHINE doesn't intend to use the facility to commercially produce or ship Mo-99.
“I don't think we'll ever sell moly-99 out of that (prototype) building, but we will be operating and testing at it,” Pitas said. “If we had all the money in the world today, it would be going a lot faster, and we probably still would build the prototype building, but we would be starting the construction on the manufacturing facility in tandem,” Pitas said.
SHINE privately unveiled new plans for the prototype facility earlier this month at an annual meeting with investors, Pitas said. The company had not gone public with those plans until an interview with The Gazette.
Pitas said SHINE now is working with a landowner and the city of Janesville on annexation of the small parcel where the prototype facility would be built.
A map SHINE provided to The Gazette shows the land for the prototype facility just south of the proposed SHINE campus across Highway 51 from the Southern Wisconsin Regional Airport.
That parcel address, 4031 S. Highway 51, is listed to the Hughes Farm, which is owned by Randy Hughes. The Gazette was unable to reach Hughes for comment.
THE LONG ROAD
Over the last several years, SHINE has developed a process that would use multiple particle accelerators instead of nuclear reactors, a process SHINE said would produce far less waste than traditional production of Mo-99. It would put the company in line to serve a major chunk of the medical market through supply agreements as some overseas reactors used to make Mo-99 face decommissioning.
Since the company initially went public, SHINE has amended its timeline on commercial production several times. In 2013, when SHINE was still pending federal approval for its Janesville project, SHINE officials targeted 2016 for opening a commercial production facility.
Since then, the timeline for SHINE's commercialization has slid from 2016 to 2019 and now to sometime in 2020, according to company projections.
Pitas said she couldn't say whether SHINE would break ground later this year or next year on the Janesville full-scale production facility. SHINE's general timeline for test production of Mo-99 in a full-scale facility is sometime in 2019, she said.
She said Mo-99 produced in 2019 would face a series of regulatory validation tests before SHINE could be allowed full commercial production. That would put SHINE on a path to begin selling and shipping Mo-99 by early or mid-2020 if SHINE gets the project financed in time.
Price said SHINE has never given the city a firm timeline on when it would produce Mo-99, and no hard timeline is written into the 2012 TIF agreement.
“It's somewhat ambiguous, and it's not nailed down. That's one of the discussion points now. What's going to be the final date?” Price said. “We've not pinned them down on that, and it's one of the things we've talked about is if we'd have a drop-dead date.”
Meanwhile, SHINE has been ramping up hiring in its corporate offices at Prospect 101 in downtown Janesville, adding engineering staff at a steady pace in recent months. Pitas said the hiring is in part a push to complete detailed design work necessary to build out the prototype and full-scale production facilities.
“We're now up to 47 employees. We had to add desks between cubicles for summer interns,” Pitas said. “I was away on business trips for a month this spring, and I came back, and there were half a dozen people I'd never met. You know, because we're hiring that fast."