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Continued: Schafer: Nashwauk taconite plant left hanging by money woes

  • Article by: LEE SCHAFER , Star Tribune
  • Last update: March 19, 2014 - 9:26 AM

From the groundbreaking in 2008, construction didn’t really get moving briskly until 2011. By fall 2012 it had slowed, leading a superintendent of Hammerlund Construction of Grand Rapids to tell a local reporter about the disappointment of seeing a lot of good workers laid off.

Hammerlund has “come and gone a couple of times,” said Local 49’s Kingsley. “This last time they were promised that they would be kept up on a couple-of-week payment schedule, and it didn’t happen. After they went about a month, or maybe a little more, without being paid, this time they pulled out for good.”

Essar provided no update other than the same brief statement it has offered in response to other media inquiries the past few weeks. It said Essar expects the closing of new financing “to occur relatively soon.”

No money available yet

Essar has said it had obtained $1.1 billion in financing in 2010, and only when it expanded the plant’s scope from 4 million to 7 million tons of annual production was more capital needed.

How the heavy debt load of the parent in India has affected the ability to borrow more money for the Minnesota project isn’t clear. Project lenders typically will extend loans based on the economic value of a plant rather than just being tied directly to the corporate balance sheet.

But having Indian bankers fretting about Essar Group clearly can’t help.

The only thing Minnesota contractors have been told is that it is going to be at least eight to 10 weeks before more money is available.

Even supporters of the project, optimistic about its eventual completion, note that the whole process has been characterized by fits and starts due to a shortage of funds.

It “seems to be an annual story,” said Pat Mullen, a vice president at Duluth-based Minnesota Power. But the big electric utility remains highly confident it’s going to get a major new electricity consumer. It got Essar to put funds in an escrow account for Minnesota Power’s investment in new transmission lines to the site.

“It has been a little bit of a cultural issue between India and the United States,” Mullen said, “in how we do things and how we pay for things.”

It may be true that Indian companies are more comfortable with risk and more willing to operate closer to the edge of a financial abyss.

On the other hand, there’s no reason to think big contractors in India are willing to keep working without getting paid.

Insisting on being paid for your work, I hope, is universal.

 

lee.schafer@startribune.com • 612-673-4302

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  • Construction work at the Essar Steel taconite plant in Nashwauk has stopped again as the India-based works through financing issues.

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