Essar Steel Late On $10 Million Reimbursement To The State
6 April 2016
Essar Steel Minnesota has reneged on another promise to the state of Minnesota, this time failing to make a $10 million payment that was due late last week.
The company, building an Iron Range taconite operation, made a deal with Gov. Mark Dayton in December to pay back the $66 million in economic incentives it had received for its Nashwauk project because it failed to meet several of the project deadlines, even when renegotiated.
The first payment of $10 million was due on March 31.
"I have not seen it," said Jeff Walker, the Itasca County auditor and treasurer charged with receiving and turning over the payments to the state.
Minnesota state Rep. Tom Anzelc, who chairs the Legislature's Iron Range Delegation, also confirmed the company has not made the payment. Essar and Dayton administration officials declined to comment Tuesday.
Essar Steel Minnesota is owned by Essar Global, which is based in Mumbai, India. The Iron Range operation is not its only North American asset in trouble.
Essar Steel Algoma, based in Sault Ste. Marie, Ontario, is in bankruptcy restructuring, and recently completed a bidding process required by Canadian law. The Globe and Mail in Toronto reported that more than one bidder was interested in buying Essar Algoma and US Steel Canada and combining them to make North America's fifth-largest steel producer.
Anzelc said he believes the troubled Essar Steel Minnesota also must consider bankruptcy. The other two options include the foreclosure of Essar's real estate assets and its half-completed Nashwauk facility or the turning over of the Minnesota project to new investors.
Essar Steel is not the only iron ore company having troubles in Minnesota. Taconite tailings producer Magnetation filed for bankruptcy last year and joined United Taconite, Northshore Mining, MinnTac, KeeTac and Steel Dynamics in idling taconite plants and laying off workers last year. In all, about 2,000 Minnesota iron miners and workers were hit by the global downturn in the industry. U.S. producers have been hurt by underpriced steel imports and historically low iron-ore pricing across the globe.
It is in this environment that Essar has struggled to build a new taconite plant. State officials estimate that the Nashwauk project is less than 60 percent completed after eight years of trying.
Essar Steel Minnesota broke ground in 2008, promising a $1.8 billion mine, iron ore processing plant and steel mill that would be completed in 2011. The project quickly faltered.
It sputtered on and off for years and downsized its vision because of significant monetary woes, supply problems and the collapse in the global steel market.
Final plans now call for just a taconite-pellet facility without the ability to make steel. Supply issues caused further time overruns, according to Essar and the state. Yet the company failed to meet a renegotiated deadline last fall to have the downsized project completed.
Today, Minnesota's contractors are still owed $35 million to $40 million, said Mark Phillips, commissioner of the Iron Range Resources and Rehabilitation Board.
"Those guys call me periodically and ask for an update," Phillips said. Between the Magnetation bankruptcy and Essar's unpaid bills, these contractors "are hurting badly. I am hoping they can survive."
Other companies have also been hurt by Essar's financial woes.
In addition, Komatsu and Ziegler are owed $25 million to $28 million for equipment, Anzelc said. Great Lakes Gas Transmission Co. sued Essar and won a $32 million judgment for nonpayment.
Anzelc said he has felt more optimistic since he learned last week that Essar had hired investment bank Guggenheim Partners LLC and law firm White & Case LLP as debt restructuring advisers.
He was equally pleased when representatives from Ducera, an investment banking company, met with him and asked for meetings with other legislators and Essar's contractors. Ducera had invested in the Essar project, and the company representatives wanted to know what it would take to not only complete the construction but also create a higher grade of iron ore that could be produced in a highly coveted electric arc furnace operation that Minnesota lacks.
"Electric arc furnaces are the way of the future" and represent how two-thirds of the U.S. market now converts iron ore into steel, Anzelc said. The current iron ore pellets produced in Minnesota are processed using old blast furnace technology.
For the first time in a very long time, "I am cautiously optimistic because of the renewed commitment from existing investors that there is an interest — without Essar's participation — in bringing this construction project to completion, and in bringing pellet production to a start," Anzelc said.
Source : startribune.com