Essar still owes Iron Range contractors millions

Essar Steel Minnesota still owes Iron Range contractors millions of dollars.

"There is a nasty little story going on here," said Rep. Tom Anzelc, DFL chair of the Minnesota Legislature's Iron Range delegation. "The contractors have not been paid in full."

On Nov. 30, Gov. Mark Dayton gave Essar an ultimatum to finally pay its vendors by Dec. 2 or he would call due the $66 million in state loans and grants Essar received seven years ago.

The company had missed construction deadlines on the $1.9 billion taconite project it is building in Nashwauk and was late paying vendors. Last week, Essar scrambled to make payments to comply with Dayton's demands.

On Dec. 4, Dayton spokesman Matt Swenson said the governor was "satisfied" that the company had paid $20 million in delinquent debt and was securing financing from an overseas bank to pay additional debt by month's end. As a result, Dayton backed off his threat to call Essar's loan and to sue for repayment.

Essar put out a statement thanking the governor.

"Once Essar put out their press release, then everyone breathed a sigh a relief and claimed a victory," Anzelc said. "But it was not a victory."

More than a half-dozen Minnesota vendors are still owed more than $18 million for work done this year at Essar's Nashwauk site. The project is basically stalled because contractors pulled their workers. Darrell Godbout, a representative of Iron Workers Local 512, said 200 to 300 of his union's members were pulled off the site because their employers were not paid.

Even after rush payments received last week, "we were not made whole," said Mike Clark, president of the millwright, ironworkers and crane operating firm Champion Steel in Keewatin. Last week, Essar "did pay us something. But we are working hard with Essar to be made whole by the end of the year so we can go back in there in January and finish building."

Essar owes Champion millions, Clark said, noting that he previously pulled 70 to 80 of his workers from the sprawling job site in Nashwauk because of nonpayment.

Essar could not be reached for comment. But two other contractors said they also were not paid in full during Essar's rush payments last week to vendors.

International bankers that previously partnered with Essar's parent firm, India-based Essar Global, were in Minnesota last week looking over the project and considering making new loans, state officials said.

Essar began construction seven years ago on what was to be the state's only fully integrated, iron ore to steel mill project. But the project sputtered under cash-flow woes that halted construction for parts of 2013 and 2014. Essar secured new financing and restarted construction but scaled back the project to just a taconite plant, not the desired steel mill that prompted the $66 million in state incentive.

In October, the company missed its completion deadline for the scaled-back project. Essar has said the project is about 70 percent completed and will be done next year.

Minnesota Department of Employment and Economic Development officials have said they are still grateful for the 700 construction jobs and the promise of 350 permanent jobs once the plant opens. And the contractors said they hope to get back to work on the project once they are paid for the work they have already done.

Setbacks in the project come amid one of the worst downturns in the iron and steel industries. Minnesota's taconite producers have idled several plants this year and laid off 2,000 workers as global taconite prices sunk to just $39 a ton. Iron ore blast furnaces and pellet plants are closing around the nation. Essar's sister company, Essar Steel Algoma in Ontario, has slowed production and owes vendors $38 million.

Dee DePass • 612-673-7725