Dayton warns Essar Steel: Pay construction firms or the state loan will come due

Gov. Mark Dayton issued a stern warning today to Essar Steel Minnesota, which is building a taconite plant in Nashwauk: pay the construction companies millions of dollars that they’re owed, or the state will call in its $67 million loan.

The company got the state loan in 2007 and is building the plant but has not fulfilled its job-creation agreement. That means the company is in default, so Dayton is using that leverage to force the company to make payments to the construction companies, which were supposed to be paid in full by the end of October, says the Duluth News Tribune.

The paper says:

Dayton said he spoke by phone with Madhu Vuppuluri, president and CEO of Essar Steel Minnesota, last Wednesday. Dayton said he informed Vuppuluri that if the company does not pay its Minnesota vendors, in full, by close of business on Wednesday, Dayton will “call the state’s loan and demand its immediate repayment.”

Dayton went further and said that if the company pays vendors now but falls behind again, he will “call the state’s loan and demand its immediate repayment.”

A brief history of the state loan, according to the paper:

The $67 million from the state was awarded from the Minnesota Department of Employment and Economic Development, through Itasca County, to pay for roads and railroad track as well as gas, water, sewer and electrical lines to the sprawling plant site.

But years of delays, in part spurred by the 2008 recession, delayed construction of the taconite facility and shelved plans to make steel at the site.

Essar Steel Minnesota is a subsidiary of Essar, based in Mumbai, India.

Comments (2)

  1. Submitted by joe smith on 12/01/2015 - 12:40 pm.

    Another boondoggle with Minnesotans tax dollars. They were begging Essar a few months ago to pay vendors and now that they haven’t, Dayton is threatening a cash call on the loan. Essar didn’t respond 2 months ago to the threat of “pay vendors or else”, doubt they will do much with this latest threat. The States vetting process to give out our tax dollars is flawed. Politicians have no idea how to negotiate contracts that protect the State’s money. As usual spending other folks money is much easier than your own. No big deal though, just raise taxes.

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