A $92 million loan to PEPCON Production Inc. for construction of a rocket fuel plant near Cedar City is expected to close this week, officials said.
"Officials of our subsidiary have reached final agreement with Security Pacific Bank Washington N.A. on the terms of the financing," said Fred D. Gibson, chairman of PEPCON's parent company, American Pacific Corp.In a statement issued from American Pacific's headquarters in Las Vegas, Nev., Gibson said loan documents have been executed and the deal should be final before March 10.
The closing will come more than seven months after PEPCON announced plans to relocate its ammonium perchlorate plant in Iron County, employing some 70 workers. Construction of the new plant, located 15 miles west of Cedar City, is on schedule with initial production planned sometime this spring, Gibson said.
Its former plant in Henderson, Nev., was destroyed in an explosion last year that claimed two people. The explosion seriously reduced the amount of ammonium perchlorate available because PEPCON is only one of only two facilities in the nation making the chemical.
Ammonium perchlorate is an oxidizing agent used in virtually every solid-fuel rocket in the nation's inventory. Military and civilian agencies, including Utah operations of Hercules and Morton Thiokol, need more than 60 million pounds of it a year. Each space shuttle launch, for example, uses about 1.7 million pounds.
Despite the critical demand for the chemical, construction financing for the plant was difficult to come by because lenders wanted federal government guarantees on the loan, a recent report from the General Accounting Office said.
While declaring the government doesn't guarantee private loans, the GAO said the government will allow the companies to recover construction costs through special surcharges.
"The government will allow PEPCON and (competitor) Kerr-McGee to recover their respective capital investment by allowing accelerated amortization charges to be added to the base price of the product," the GAO said.
Gibson said the loan's closing is pending information from "third parties," but he didn't indentify the parties.
The GAO report said PEPCON's capital investments could be fully amortized in seven years, and "any amount not recovered by the end of the seventh year would be fully payable to the government."
But the report said that until such surcharge plans are finally approved and financing is arranged, "it is not clear what the replacement cost will be or what exactly the government's liability will be."