Essar Steel Minnesota is again facing financing woes.
Essar, which is building a $1.8 billion taconite plant on Minnesota’s Iron Range, has asked prospective bondholders for more time so that it can secure $464 million in promised equity and loan financing, according to a report Thursday from Bloomberg News.
As part of an agreement that Essar arranged just last month, the equity and loan money was supposed to have been secured as of Thursday. In exchange, bond investors sold $450 million worth of bonds for Essar, so its plant construction could resume on the Iron Range.
Now the arrangement could be in jeopardy unless investors agree to give Essar more time. If they don’t, Essar will be forced to return the bond money to investors, Bloomberg said.
Essar officials could not be reached for comment.
This week’s funding delay is the latest in a string of difficulties faced by Essar, whose parent company is based in Mumbai.
The Essar Steel Minnesota plant in Naswauk has been cash-strapped for the past two years, causing it to delay payments to several suppliers. Upset, several of them walked off the job in 2012 and 2013 — taking equipment and crews with them.
But on May 9, Essar Steel President Madhu Vuppuluri told the Star Tribune that Essar was pleased that it had successfully arranged to sell $450 million in high-yield bonds. Vuppuluri also said he was delighted that the work on the Iron Range would resume in earnest as soon as the final details were put to bed.
While Essar Steel had the agreement from bond investors, it still has to provide an additional $361 million in equity financing and get a $103 million loan from its parent company in India.
Now it’s uncertain what will happen.
The Essar Steel project broke ground on the taconite plant in Nashwauk in 2008. It was supposed to be finished in 2013 and have 350 full-time workers. As of May, the project had only about 75 workers and the building and equipment were far from finished.
With the new bond agreement reached last month, officials hoped construction might resume this month and be completed in late 2015.
Essar’s new funding dilemma comes at a bad time for the Iron Range. U.S. taconite and steel outfits are battling against illegally imported below-cost steel. Because iron ore pellets called taconite are the raw ingredient to steel, many workers, plant owners and politicians fear that Iron Range jobs will soon be in jeopardy.
Nearly 2,000 miners, taconite and steel workers and politicians rallied on the Iron Range Monday, demanding help from the federal government.