by Max Brantley
The buzz was right. The super project is a new steel mill in Mississippi County. The state will pay $125 million of the construction cost ($50 million in a loan and the rest in a direct grant that means a greater cost because the bonds will have interest charges.) News release:
Big River Steel, LLC today announced plans to build a more than $1 billion steel mill in Mississippi County, Arkansas that will directly employ more than 500 people with annual average compensation of $75,000 a year.
The plans are contingent on approval by the legislature authorizing the state to issue $125 million in general obligation bonds under the authority of Amendment 82 and all necessary regulatory approvals. As required by the Amendment, Governor Mike Beebe will be referring the project to the legislature for its consideration.
This is the first time Amendment 82 has been triggered since its adoption during the November 2004 general election. It allows the state legislature to approve up to 5 percent of the state’s general revenue budget to be used for bonding of super economic development projects.
John Correnti is Big River Steel’s chief executive officer and heads a group of investors backing the project.
“Having lived in Arkansas for over 20 years and having been involved in building and operating two other world class steel mills in the state, I know first-hand that the quality of the work force in Arkansas is outstanding and well suited for the high-paying jobs we intend to create,” said Correnti. “Arkansas’s geographic location in the heart of the markets we intend to serve, the state’s well-developed transportation infrastructure as well as the availability of reliable electrical power and the ‘can do attitude’ of the government officials in Little Rock, Mississippi County and Osceola make Arkansas a great place for Big River Steel to make its investment.”
“A project of this scope will be a catalyst for job creation, investment and economic development beyond this one facility,” Governor Beebe said. “Building Big River Steel will mean up to 2,000 construction jobs, and it will help us recruit more supplier businesses and steel consumers to Northeast Arkansas.”
Big River will produce steel for the automotive, oil and gas and electrical energy industries. Construction of the mill will take approximately 20 months from ground breaking which is expected later this year.
“The Big River Steel project will change the demographics of Mississippi County and Osceola in particular, now, and for generations to come,” said Osceola Mayor Dickie Kennemore. “It will continue to improve our economy and will positively impact all our citizens and every aspect of their lives, and every entity in our community.”
The $125 million generated by the sale of the bonds will be used as follows:
· $50 million loan to Big River Steel
· $50 million for site preparation
· $20 million for costs associated with piling — subsurface stabilization
· $5 million bond issuance cost
Once Beebe refers the project to the Speaker of the House and President Pro Tempore of the Senate, the legislature will have 20 working days to conduct its own independent economic impact study. The legislation will then work its way through the committee process after which a vote of both houses of the legislature will be taken.
A project of this magnitude involved many entities, public and private, to negotiate terms that make this announcement possible. Among the agencies and companies that worked to bring Big River Steel, LLC to Arkansas include: Governor’s Office, Arkansas Economic Development Commission, Arkansas Department of Finance and Administration, Arkansas Development Finance Authority, Arkansas Department of Environmental Quality, Attorney General’s Office, Arkansas Department of Workforce Services, Arkansas Capital Corporation and its affiliates, Mississippi County Economic Development, the City of Osceola, Entergy Arkansas, Inc., and BNSF Railway.
All employment inquiries should be made to the Blytheville Office of the Arkansas Department of Workforce Services, P.O. Box 1409, Blytheville, Arkansas 72316. Phone 870-762-2035.
UPDATE: A quick couple of points from David Ramsey, who covered the news conference.
* Correnti, who once worked for Nucor, the steelmaker already in operation in Mississippi County, said the new mill wouldn't be competition for that operation. He said:
Nucor Yamato there's no overlap at all, that's all structural steel. Nucor Hickman makes flat roll. We'll overlap about 20 percent. We can make more sophisticated steels, we can go wider, we can go thicker, and they don't have the equipment to do that.
David also provides the following additional details on the cost of financing the state's contribution through bonds and some comments from Beebe and John Correnti, leader of the new venture:
Re: your question about the interest rates ... Cost of bond financing for the full $125 million, including both $75 million in grants and $50 million in loans: approx $9 or 9.1 million.
They expect revenue to come in from loan payments from the company, (interest and principal on the $50 million loan) to offset some of that cost.
There is an early payoff option that would discount what the steel company pays back. Also potential discounts from performance incentives. State would eat cost of the discount if company does that. (But this isn't really a new cost on top of $125 million, it just cuts into the offset of company paying the $50 million back. Sounds like company could save around $4 million via early repayment and incentives).
Caveat: "we're looking at it in today's interest rate environment so you have to take that into consideration."
Gov. Mike Beebe said he expected the plant to create 525 jobs at an average pay of $75,000, plus 2,000 temporary construction jobs. He said the plant likely would attract additional suppliers and perhaps customers for the steel.
"This site if you go see it, it's steel mill heaven. On the east side of the property you've got...the Mississippi River, on the west side of the property you've got the BN railroad, class 1 railroad, take our product all over the country. Adjacent to them you got Entergy again with reliability, lines directly on the property. 3 miles to the west you've got I-55. From a logistics standpoint it's great."
"The reason we're coming to Arkansas is the can-do attitude of the governmental agencies plus the Arkansas farm boys and farm girls...I say that with all due respect and admiration. I've seen it happen 28 years. You give those farm boys the right tools, the right equipment, you train them properly, you keep management the heck out of the way...they're not making $75,000 they'll be pushing $100,000. I've seen it happen again and again and again."