Essar makes payment, averting showdown with Dayton

Essar Steel Minnesota paid its delinquent contractor bills Friday, prompting Gov. Mark Dayton to stand down from his threat to immediately call due the company's $66 million state loan.

In a statement, Dayton's office said Friday that state officials "confirmed with the company, its vendors, and its CEO, Madhu Vuppuluri, that Essar Steel Minnesota had paid, in full, $20 million in outstanding obligations to its vendors, meeting the governor's Oct. 12 demands."

On Monday, Dayton issued a public ultimatum to the company that it either pay all its Minnesota contractors by Wednesday or he would call its loan due immediately and sue for reimbursement. The state package had helped pay for power, rail and other infrastructure costs at the massive $1.9 billion taconite construction project in Nashwauk.

Several contractors said they were not paid and some pulled an estimated 200 to 300 workers from the job site.

A Dayton spokesman said Friday that Essar Steel told state officials that an international bank is now at the project site in Nashwauk performing due diligence.

The bankers' goal is to provide additional capital to bring current any outstanding obligations to Essar's vendors by the end of the month, the governor's office said in a statement. "That additional capital would also help assure the completion of the project, with timely payment of its contractors and vendors moving forward."

Dayton's spokesman Matt Swenson said the governor is "satisfied with the company's actions and assurances, and will not call for the immediate repayment of the state's loan."

He added that Dayton is also sympathetic to the concerns of several vendors, who worried that more strident demands on Essar at this time could jeopardize the future of the project, and limit Essar's ability to make timely payments on any outstanding and future obligations.

In a statement, Essar officials said, "We appreciate the work and support of the governor and the state agencies as we here at Essar continue to focus our efforts on this massive project along with the support of contractors to keep construction activities progressing on the project."

Some of the firms affected by Essar's run of late and partial payments this year include Hammerlund Construction and Northern Industrial Erectors, both of Grand Rapids; Jamar Co. in Duluth; Rice Lake Construction in Deerwood; Amptek Electrical in Aurora; Champion Steel in Keewatin, and Seppi Brothers Concrete in Virginia, Minn.

If international loans are secured for the project as expected, it could usher the much ballyhooed but much delayed project across the finish line.

Construction began in 2008 but sputtered on and off amid financing woes, material problems, and the downturn in the global iron and steel industries.

The project, originally slated to become the only fully integrated iron-ore to steel mill operation in the state, was downgraded by Essar into a taconite only facility. The change irked legislators and other state officials who complained that another taconite plant was not needed. The state wanted a steel mill.

Essar's scrapping of the highly anticipated steel mill plus its missed construction deadlines violated the terms of the state's infrastructure grants, prompting state officials to pursue repayment.

Officials from the Minnesota Department of Employment and Economic Development had been negotiating a repayment time table when Dayton issued his ­ultimatum.

While the pressure of the ultimatum is gone, Mitch Brunfelt, Essar's assistant general counsel, said Friday that Essar still "hope[s] to finalize a payment agreement with the governor's administration soon to reimburse the state for the $65.9 million grant utilized to construct the publicly owned infrastructure servicing the Essar Steel Minnesota site."

Dee DePass • 612-673-7725