Fulton County

Johnstown yogurt plant delay gets no clarification

Fage USA Dairy Industry has yet to break ground for two major projects tied to the expansion of its

Fage USA Dairy Industry has yet to break ground for two major projects tied to the expansion of its only Greek yogurt manufacturing facility in the United States.

The company last year had sought fast-track approvals for a $100 million addition to its main plant in the Johnstown Industrial Park and the construction of a $15 million whey pretreatment facility near the Gloversville-Johnstown Wastewater Treatment Facility.

In fact, Gov. Andrew Cuomo interceded on behalf of Fage to break an impasse between the cities of Gloversville and Johnstown regarding the whey pretreatment project. The cities were bickering over selling a two-acre parcel they co-owned near the treatment plant to the company. A call from the governor to both mayors broke the impasse and resulted in a sale agreement and the belief Fage would break ground on its projects this summer.

Fage officials did not return phone calls for comment for this story Tuesday.

Fage wants to nearly double the size of its Johnstown manufacturing site, from 220,000 square feet to 400,000 square feet, which would increase the production capacity to 160,000 tons annually, allowing the international company to meet growing demand in the United States for its Greek-style yogurt.

George Bevington, a consultant with the wastewater treatment facility, said Tuesday the company has given no indication when it will break ground on the pretreatment facility. Fage needs the facility to process the extra wastewater, most of which would be whey byproduct, that would come from the proposed expansion at the industrial park site. “We do not know when they will be starting,” he said. “There was a more aggressive schedule” for the construction, he said, adding, “It was going to be sooner than later.”

Bevington said Fage may still break ground this summer. He said construction of the whey pretreatment facility would take about a year to complete, plus additional time for startup operations at the main plant. He said the board of directors for the wastewater treatment facility did not book revenue from Fage for the whey treatment plant this year anyway.

The company may be waiting for final approvals from the Johnstown Common Council and the city of Johnstown Water Board over future water and sewer use before breaking ground, Bevington said.

However, the Johnstown Water Board’s next scheduled meeting, at which it could take up consideration of any usage agreement, is Aug. 13. Fage is already a customer of the city for use of its water, and some officials said giving the company extra water is not a problem, as the city has plenty.

Another reason for the delay could be the company’s debt exposure in its home country, Greece, which is the midst of a severe economic crisis, according to Moody’s Investors Service and Standard & Poor’s, two bond rating companies.

Moody’s in May downgraded Fage’s rating to negative from stable, reflecting declining sales of its product in Greece and fears that the company’s ability to pay its debt could be affected should Greece default on international loans or exit the eurozone. Moody’s tempered the outlook by saying Fage is expecting strong growth of sales in the U.S. market.

Standard & Poor’s in June put Fage’s “B” long-term corporate credit and issue ratings on CreditWatch negative. “In our view, Greece-based dairy processor Fage Dairy Industry S.A. could suffer from a fall in demand and disruption to its operations if Greece exits the eurozone,” it said. An obligation rated ‘B’ is more vulnerable to nonpayment than obligations rated ‘BB’, according to the company’s website. It said the holder of bonds with a “B” rating has the capacity to meet its financial commitment on the obligation. However, it added, adverse business, financial or economic conditions will likely impair the holder’s capacity or willingness to meet its financial commitment on the obligation.

The agencies have yet to upgrade their outlooks for the company following recent elections in Greece.

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