An ambitious plan to open a wood pellet stove business has hit a snag with the developer having trouble pulling the trigger on a lease agreement to occupy a building in the Airport Business Park.

Kent Belden, owner of the 14,000-square-foot building, said Tuesday that Vermont Wood Energy Corp. founder Luis Algarin has yet to move into the building. Belden also said when Algarin backed out of a separate agreement to buy the existing wood pallet business, he was forced to close the business last Friday, throwing 11 people out of work.

Algarin intended to take over the pallet business as a source of scrap to make wood pellets for his proposed stove manufacturing business in Minnesota.

Algarin said Tuesday that he was forced to reconsider buying the pallet business when several key employees left the company.

"There was really no one way that we would want to start up without those key employees," he said.

When told of Algarin's reason, Belden said he assumed Algarin didn't go through with the deal to buy the pallet business for financial reasons.

While acknowledging today's tight credit market, Algarin said, coming up with the financing to buy the business was not the reason the deal fell through.

He said leasing the building strictly as a wood pellet mill remains an option.

Algarin signed a lease for the building in August. Belden said Algarin agreed to move into the building by Sept. 1, but the deadline was pushed back until Oct. 1. When Vermont Wood Energy failed to take over the building on that date, Belden said he closed the pallet business on Friday. He said it was not profitable for him to keep the business operating.

He said he'll likely put the manufacturing equipment up for sale and keep his options open to either lease or sell the building. He also said he's still willing to work with Algarin on the lease.

Belden took control of the building this year when the owner of North Country Forest Products, the pallet company, filed for bankruptcy.

Belden continued to operate the business in hopes of finding a buyer or someone to lease the building. "It just wasn't financially feasible to keep it going," said Belden, who owns Belden Co., a local construction business.

Belden said he found jobs for two of the 11 laid-off employees and is attempting to find employment for the others.

Algarin said he's still looking at locations for relocating the pellet stove manufacturing end of the business. On Thursday, he'll have another discussion with the owner of the former Vermont Tubbs furniture plant in Brandon.

Brown Street Furniture purchased Vermont Tubbs earlier this year and moved the operation to northern New Hampshire. The building is owned by another company.

Algarin has said if his plan to build a pellet stove plant comes to fruition, it could employ as many as 500 workers within five years. But on Tuesday, he said he continues to weigh the possibility of keeping the Maxfire pellet stove plant in Minnesota or moving it to Pennsylvania where there's an existing wood pellet facility.

Jamie Stewart, the new executive director of the Rutland Economic Development Corp., said REDC has not had any contact with Algarin since two REDC employees left and went to work for Vermont Wood Energy this summer. One employee, Mary Kay Skaza, has since returned to REDC.

Stewart said REDC's initial role was limited to helping Vermont Wood Energy apply for financial incentives through the Vermont Economic Progress Council.

"Those incentives were all contingent on meeting certain thresholds, employment and other pieces," Stewart said.

In July, Vermont Wood Energy received preliminary approval for a $1.97 million Vermont Employment Growth Incentive.

"Without things like that, we definitely would not consider bringing anything here," Algarin said.

Vermont Economic Progress Council Director Fred Kenney said the approval is contingent on the company submitting a final application. Kenney also said funds are not disbursed until the promised jobs are created. He said the money would be distributed over several years.

Even after payment of job incentives, VEPC said the state would show a net gain in revenues from the company of $541,617.