Gov. Dayton issues terms for Essar repayment

Construction at Essar Steel Minnesota near Nashwauk on Oct. 8, 2015. In November, most contractors left the site, some of which haven't been paid yet.  (Aaron J. Brown)

Construction at Essar Steel Minnesota near Nashwauk on Oct. 8, 2015. In November, most contractors left the site, some of which haven’t been paid yet. (Aaron J. Brown)

Today, Minnesota Gov. Mark Dayton’s administration released a letter sent to Madhu Vuppuluri, CEO of Essar Steel Minnesota, demanding the company accept repayment terms for about $66 million in state grants.

Dayton gives the company until Dec. 30 to accept the terms of the repayment agreement in writing.

Essar owes the grant money because it did not complete its original promise of making value-added iron products at its Nashwauk facility. The project was downscaled to be a taconite plant that might have capacity for new products in the future. The Essar plant is still under construction, having experienced numerous starts and stops over its eight year history.

Essar recently repaid a $6 million loan to the Iron Range Resources and Rehabilitation Board. Previously, Essar had also paid vendors which had complained of late payments or non-payment for services. Some contractors, however, were still waiting for payment last week.

The terms outlined by Gov. Dayton’s Senior Policy Advisor Cathy Polasky are as follows:

  • Essar will repay $10 million to the State through Itasca County in two payments as follows: $3.4 million due 45 days from the date of this letter, and $6.6 million by March 31, 2016.
  • Essar will repay the grant balance of approximately $55.9 million in sixteen equal quarterly payments beginning March 31, 2017 and ending December 31, 2020 (with any necessary adjustments to be made in the final payment).
  • All outstanding amounts will be due upon the sale of part or all of Essar’s ownership interest in the MSI Project.
  • Essar Global will execute a confession of judgment or similar instrument in favor of Itasca County in a form to be specified by the State covering the following events of default:
    • Failure by Essar to make a timely payment
    • The sale or transfer of either Essar Global or MSI to any third party.
  • Essar Global and MSI will remain jointly and severally liable under the Agreement and will be jointly and severally liable under the repayment plan to be executed by the parties, memorializing the terms in this letter and additional legal terms.
  • Essar will certify quarterly to the State the status of its payments to contractors and suppliers.

As you see, the state is drawing out repayment of the $66 million over the next five years. It is also protecting itself in the event of a sale (a long rumored possibility for this project). The requirement that Essar report on its payments to contractors is also new, something the company surely won’t like much.

Sometime after the holiday we’ll likely see Essar’s response to these terms.

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