Hanshaw pushes a new W.Va.-led investment fund to reopen door to China deal and more

CHARLESTON, W.Va. — House Speaker Roger Hanshaw traveled to China last spring and heard a lot about the holdup on roughly $84 billion in proposed investments in West Virginia by China Energy.

“One of the first things we learned on that trip to China was the reason we haven’t seen the kind of $84 billion investment that was promised in West Virginia was that there is uncertainty among the potential investors about how safe their investment would be here,” Hanshaw, R-Clay, said during an interview in his House of Delegates office earlier this week.

“They were hungry for a vehicle that would make their investment in West Virginia safe.”

So the first bill Hanshaw plans to introduce for the annual legislative session that kicks off next week is one — House Bill 4001 — aimed at renewing confidence in the China deal while also, potentially, kickstarting additional capital investment in West Virginia.

The bill would establish a Mountaineer Impact Fund, using state financial assets that have been allocated already, so West Virginia could serve as an official partner in investment deals.

In most cases, as Hanshaw envisions it, West Virginia’s state government would be a minor investor but could be the controlling partner, essentially the sponsor of the projects. In other words, West Virginia would be endorsing the investment with the state’s name.

“The benefit to the state is we have some small presence. It will indeed be small,” Hanshaw said. “The honest to goodness upside is the downstream effects of investment in our state.”

But, he acknowledged, “The criticism will come from people who say the state should not be picking winners and losers.”

He said that won’t be the case, though.

“What we are talking about is a vehicle to facilitate private investment in the state of West Virginia under our banner,” he said. He added, “The investors themselves will decide who wins and who does not, just as private capital always should.”

China Energy and CFIUS

Although the investment structure allowed under the bill would apply to a range of possible investments, its impetus was the enormous but dormant China deal.

When the China investment opportunity was announced in late 2017 in Beijing, officials hinted at money flowing toward an Appalachian natural gas storage hub, ethane crackers, natural gas-fired power plants and more.

But, a couple of years later, with no tangible results, people started asking why.

National news outlets like CNBC, for example, declared last summer “West Virginia still waiting on $84 billion investment from China.”

One of the factors CNBC hit on was the Committee on Foreign Investments in the United States.

In case that entity, commonly called CFIUS, isn’t the subject of your conversations around the family dinner table or office coffee pot, what you need to know is that CFIUS can intervene in foreign investment deals if it believes they affect national security.

Members include the secretaries of Justice, Homeland Security, Commerce, Defense, State, and Energy, along with the U.S. Trade Representative and the head of the White House’s Office of Science and Technology Policy.

As China has risen as a “strategic competitor,” the concern is that planned investments could be unraveled. And that has happened.

The CNBC look at what happened to the China deal hit on CFIUS as a factor, quoting both Congressman David McKinley, R-W.Va., and former state Commerce Secretary Woody Thrasher.

“We didn’t realize that there may be concerns from CFIUS,” Thrasher, now a candidate for governor, told CNBC. “We thought that would be acceptable. Later on, there were questions about it.”

Hanshaw, speaking in his office this week, agreed that CFIUS has chilled the investment.

“Everybody talked about the inability to make the $84 billion investment happen because of CFIUS compliance,” Hanshaw said.

So after Hanshaw flew back, he started talking with lawyers and bankers. The result was the bill now primed for legislative consideration.

Mountaineer Impact Fund 

Although the bill is receiving top priority from Hanshaw, it’s pretty wonky. He knows it’s unlikely to get the attention that a battle over guns or abortion would.

“This is not an easy topic to hold a rally on,” Hanshaw said.

But as he described the bill from behind his wooden desk at the Capitol, he grabbed a long, green plastic back scratcher and used it to point excitedly. At first he seemed unaware he was doing it.

“I am convinced this is how we drive economic development in our state,” said Hanshaw, a Ph.D. chemist and a lawyer whose work often focuses on energy sectors such as oil and gas.

The bill would establish what Hanshaw is calling a Mountaineer Impact Fund that could invest state assets. An executive director with expertise would need to be hired. An investment committee including the governor and five appointees confirmed by the Senate would also be established.

West Virginia’s investment dollars, which Hanshaw emphasized as money allocated already rather than a new expense, might come from the already-existing West Virginia Economic Development Authority. The WVEDA provides loans and direct financing but doesn’t lead investments.

Under the newly-established structure, West Virginia could be the top line investor in a variety of projects. The initial draft of the bill described potential projects as valued at no less than $100 million.

As Hanshaw spelled it out, an investment structure could include the state’s name at the top of a group of investors in an ethane cracker plant. The other investors might be major petrochemical companies.

“The operational control decisions are still made by something that doesn’t trigger a CFIUS problem,” Hanshaw said, referring to the state’s role as a lead investor rather than, say, China.

That investment structure could involve China Energy but it could just as likely be U.S. companies or international corporations that would not receive a challenge under CFIUS.

For example, Odebrecht, the company based in Brazil that explored building a cracker in Wood County a few years ago, might have been able to structure a deal that way with additional partners. Or Shell, which is building a Pennsylvania cracker, is the kind of investor that might be involved.

Sovereign wealth funds from other nations are also possibilities as investment partners.

“This is not China Energy-specific,” Hanshaw said. “It could be capital from any source.”

Another project example might be a large fertilizer plant making use of West Virginia natural gas, again with West Virginia as the lead partner in a group of big investors.

Yet another possibility could mean leading investment in troubled manufacturing assets that still have potential. Or another might focus on investments in West Virginia-based entrepreneurial projects, not unlike a small cap fund.

Each of those examples — likely investments in the hundreds of millions of dollars — would involve big finance companies lining up the capital. Think Goldman Sachs or Morgan Stanley. The smaller projects could involve banks with West Virginia roots.

Some of those financial firms have already reached out to the state, Hanshaw said.

“We’re going to use people who know how to do this,” he said.

Hanshaw has talked with the Governor’s Office and Senate leadership about the plan. Next up is helping West Virginia residents understand how public dollars may be used for capital partnerships.

Next week, the idea will start its legislative journey as the first bill to be introduced in the House.

“To me it indicates that it’s the most important thing that I intend to advance this legislative session,” Hanshaw said. “I intend to be the lead sponsor on this bill. I intend to get it through the House as quickly as possible, and I hope with the help of our Senate colleagues and the governor we can have a major announcement to the world that we are indeed open for business.”

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