LITTLE ROCK — Management strength and a competitive market were key reasons why the Arkansas Teacher Retirement System decided to invest $60 million in a proposed $1.1 billion steel mill project in Mississippi County, members of the state House heard Wednesday.
Gov. Mike Beebe and other officials briefed the House on the proposed superproject, which is contingent upon the Legislature’s approval of a $125 million bond issue under authority of Amendment 82. The group briefed the Senate on Monday.
“If you’re going to start any kind of a new business or a new endeavor you want to look at the strength and the depth of management first,” French Hill, chairman of Delta Trust, which analyzed the steel mill for ATRS before the decision to invest was made, told the House.
The project Beebe and officials of Big River Steel announced last week is expected to create 525 jobs with average annal pay of $75,000.
On Wednesday, the group that included the director of the Arkansas Economic Development Commission and representatives of ATRS and Delta Trust, spent more than two hours on the House floor discussing specifics of the project with House members.
AEDC Director Grant Tennille said when the final details are completed, the bond proposal would be submitted to the Legislature, which will have 20 days to conduct its own analysis of the project.
Several House members asked when the state would begin to see a return on its investment.
Tennille said the state would begin benefiting from the project almost immediately with 2,000 construction jobs at the peak of construction and possibly an additional 2,000 jobs from suppliers and customers locating close to the mill.
Tennille acknowledged the project has some risk but that there are a number of safeguards in place to protect taxpayers money.
“We think we have done everything we can to mitigate risk,” he said.
He noted that Big River Steel must put $300 million in equity from its investors, and commitments from other lenders must be deposited into an escrow account before any general obligation bonds are sold. He said the company also must spend $250 million of its own funds before any bond proceeds can be spent on the project.
In response to a question, Tennille said there was no guarantee that all the employees would be from Arkansas because of the plant’s proximity to Missouri and Tennessee. He added that AEDC tried to get the plant located in Central Arkansas so most of the jobs likely would go to Arkansans, but the location in Mississippi County was a better for the project.
Hill said John Correnti, CEO of Big River Steel, “has been in this industry 40 years” and the team working with him to build the steel mill outside Osceola has been involved in the construction and expansion of more than 15 different mills.
Correnti “has been the chief executive officer with a number of companies in the steel business and he has been the start up chief executive officer in a number of individual (projects),” Hill said.
“He’s a committed individual, he’s a doer and he’s a producer,” Hill said, noting that Correnti was instrumental in bringing Nucor Steel to Mississippi County in the 1990s. “His track record speaks for itself, and when the financing is available and when the shovel has turned the dirt John knows how to bring the most competitive mills out of the ground.”
Hill also said the proposed mill would target three specialized steel markets:
—Pipe and tubing for the oil and gas industry.
—The thin steel needed for automobile bodies.
—Transformers and electric motors in the electrical industry.
Hill said Correnti “looked at the future need for steel, the expanding niches in the industry and tried to fill them.”
Corennti said last week construction of the mill would take about 20 months from ground breaking, which could occur late this year if the project and bond financing are approved by the Legislature.
House Speaker Davy Carter, R-Cabot, told reporters after Wednesday’s briefing that he had walked around the chamber talking to members and sensed “a lot of comfort” with the project at this stage.
Carter said he and Senate President Pro Tem Michael Lamoureux, R-Russellville, will select a consultant to review the project, as required by law. He said he did not know how much the consultant would charge, but he said the cost is likely to be “tens of thousands, not thousands.”