Gay & Robinson Inc. and Pacific West Energy LLC yesterday announced plans to spend $80 million to develop an ethanol and electricity plant fueled by sugar cane.

The plant, at Kaumakani, Kaua'i, would produce 12 million gallons of the alcohol-based fuel annually using sugar-cane juice and molasses as feedstock. That's 30 percent of what is needed to satisfy demand for ethanol created by a state mandate that most gasoline sold contain 10 percent ethanol.

This summer, the Kaua'i facility is expected to be the first local ethanol plant to break ground.

The newly created partnership, Gay & Robinson Ag-Energy LLC, will help preserve the sugar-cane operation and about 230 jobs.

"Protecting the livelihood and lifestyle of our workers and pensioners, and keeping the west side of Kaua'i in agriculture, are of paramount importance to us," said Warren Robinson, chairman of Gay & Robinson, in a news release.

Pacific West said it recently completed a round of equity funding for the project led by Officers Row Capital LLC, a venture capital firm based in Vancouver, Wash.

The initial $80 million phase of investment will include installation of a new biomass boiler and turbine generator to produce electricity. Future plans call for additional stages of energy production, including biodiesel production, a methane recovery system, the processing of municipal solid waste, hydro power, the conversion of biomass into liquid fuels and solar energy production, according to the companies.

These investments could qualify for a 100 percent state tax credit for plant construction costs. That allows companies to write off all or most of their construction costs against state taxes owed or to be reimbursed by the state if costs exceed what they owe in state taxes.

Initial plans were to break ground on a planned facility in January or February at Kaumakani, about four miles west of Hanapepe. However, delays in obtaining needed state and county permits has delayed the project.

Reach Sean Hao at shao@honoluluadvertiser.com.