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Koch Industries called steel mill’s largest investor
Legislator: It would give ‘validity’
By David Smith
This article was published February 2, 2013 at 3:35 a.m.
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LITTLE ROCK — Koch Industries Inc., a multi-billion dollar company based in Wichita, Kan., will be the largest investor in a $1.1 billion steel mill that is planned for northeast Arkansas, another investor in the project said Friday.
Big River Steel LLC said Tuesday that it wants to build a steel mill near Osceola that will employ 525 workers who will earn, on average, an annual salary and bonuses totaling $75,000.
George Hopkins, executive director of the Arkansas Teacher Retirement System - which plans to invest $60 million in the steel mill - sent an e-mail message to state legislators Friday telling them Koch Industries will be the largest investor in the steel mill project.
Gov. Mike Beebe and other state officials are to meet Monday with state senators and on Wednesday with House members to answer questions about the state’s role in the project.
“Koch is among the best at finding and deploying in areas where they can make returns for their investors as a private company,” said Hopkins, who said that Friday was the first day he could make the Koch investment public. “They are very detail oriented. They leave nothing for granted. They leave no question unanswered that reasonably should be asked about an investment opportunity.”
Hopkins declined to say how much Koch Industries plans to invest in the Big River Steel project, although he said it will exceed the retirement system’s $60 million.
A spokesman for Koch Industries did not respond to an e-mail seeking comment about the investment.
John Correnti, chief executive officer of Big River Steel and a former top executive with Nucor Corp., declined to comment about potential investors.
“When [the investors] want their names released, I guess they can do it,” Correnti said.
Koch Industries is led by brothers Charles Koch and David Koch, who are each worth $40.9 billion, according to a Bloomberg News ranking of the world’s richest people.
The Koch brothers’ political fundraising group, Americans for Prosperity, spent millions of dollars on advertising in the recent presidential election and donates millions of dollars to conservative causes.
According to the Koch Industries website, the company began as Wood River Oil and Refining in 1940 and has “grown into one of the largest private companies in America” with annual revenue of about $115 billion.
Koch companies include Flint Hills Resources LLC, a chemical and biofuels company with refineries in Alaska, Minnesota and Texas; Koch Supply and Trading, an operator of crude oil and refined petroleum product pipelines; and Koch Fertilizers, which operates nitrogen fertilizer plants.
Koch Industries owns Georgia Pacific LLC and its facilities in Arkansas, including plants in Crossett, Fordyce, Fort Smith and Gurdon. Georgia Pacific says it employs 2,500 people in Arkansas.
Koch Industries also owns and operates three cattle ranches. Forbes says Koch Industries has about 60,000 employees.
Big River didn’t seek out Koch Industries, but Koch learned of the project, investigated it and wanted to invest in it, Hopkins said.
Rep. Bruce Westerman, R-Hot Springs, said if Koch Industries is investing in Big River Steel “it would give validity to the project.” Westerman said that he hasn’t seen financial information about the project.
Outside the Legislature, Westerman works for Mid-South Engineering Co. in Hot Springs, a consulting engineering firm. Westerman often works on projects in the $50 million to $200 million size.
“I look at this like [the Legislature] almost is in the position of a bank board because of Amendment 82,” Westerman said. “Someone is making a proposal on some financing they’d like to have. I think we have to look at it with a very discerning eye and see if this is a good investment for the state of Arkansas.”
Arkansas is proposing to issue $125 million in bonds under the state’s Amendment 82 to help pay for construction of the steel mill. Amendment 82 allows the state to provide incentives for a super project - defined as a project of more than $500 million investment and more than 500 jobs.
The cost of the proposed project for state taxpayers will be about $132 million, a combination of debt service on the bonds, some interest payments and incentives for training, purchase of land and extension of a natural gas pipeline, according to the Arkansas Economic Development Commission.
None of the proceeds from the state bonds will be spent until Big River has spent $250 million of its own money on mill construction.
The state expects that the bonds will be tax free, said Bryan Scoggins, division director of business finance with the commission. But ultimately it will be up to what the bond counsel on the bond issue says, Scoggins said.
A part of the bond issue - $50 million - will be in the form of a loan from the state to Big River Steel. The interest rate on the loan will be the same as the interest on the bond issue, about 3.5 or 3.6 percent if the bond issue were to be executed now, Scoggins said.
The $50 million loan will be for 20 years, the same length of the bond issue, said Grant Tennille, executive director of the commission. The state will pay the interest on the loan for the first two years, and then the steel company will be responsible for the principal and interest on the loan for the remainder of the life of the loan, Tennille said.
Arkansas will give Big River Steel a $5 million discount if it repays the $50 million loan within the first four years. If the company does repay the loan early, the state will use the $45 million to pay off most of that part of the bond issue. The state will still be responsible for payment on the remaining $5 million in bonds, Tennille said.
The $50 million loan will be secured by whatever Big River buys with that loan money, Scoggins said.
The state will have a first mortgage on the $50 million loan, making it a senior lender and not subordinate to another lender, Scoggins said. Should Big River Steel file for bankruptcy, Scoggins said, the state likely would be on equal footing with other major lenders in a bankruptcy case.
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TimberTopper says... February 2, 2013 at 5:16 a.m.
Be careful doing business with the Koch brothers!
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RBBrittain says... February 2, 2013 at 6:13 a.m.
Well, I guess that's "due diligence" enough for the GOP legislature... :(
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Populist says... February 2, 2013 at 6:50 a.m.
The politicians take Koch money to get elected, and then they want the State of Arkansas to help finance one of their investments. Beebe should think long and hard about this one. This one deal is enough to sink Beebe's reputation forever. The money would be better spent financing computers and computer instruction for all of the students in the state. Let's get those kids ready for the work force.
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JIMBOB47 says... February 2, 2013 at 7:11 a.m.
No matter the source of the investment, the state NEEDS industry and JOBS. You whiny liberals need to take a sideline and let capitolism roll.
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BarichMilhusseinObamaNixonPOTUS says... February 2, 2013 at 7:21 a.m.
What a great way to start a Saturday, an article to infuriate every whiny liberal out there. I wonder how many lies the libs can come up with regarding this story?
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RonalFos says... February 2, 2013 at 8:03 a.m.
The Koch brothers should get no more help in bringing an industry to Arkansas than anyone else. If the are, it should be checked out thoroughly. I have no problem with their business acumen. It's when they think their money gives them the right to run our country that I stand against them.
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Jackabbott says... February 2, 2013 at 8:45 a.m.
Agree with RonalFos, atlhough it makes the Koch brothers look like a bunch of hypocrites. Using public money when they preach somehting else. Harks back to thos e famous words- saying "its free enterprse for the poor and socialism for the rich".
If the project meets all the economic criteria then go for it.
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LevitiCuss says... February 2, 2013 at 9 a.m.
Koch is the best at extracting value from everything...for themselves. Your land/air/water be damned. Their industrial conglomerate destroys more of your earth faster than anybody ever has in the history of man.
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benrose says... February 2, 2013 at 9:05 a.m.
What if Buffett was an investor? Would this make the project more palatable to those who despise the Koch's politics? This project has the potential to be a landmark opportunity for Arkansas and an area that sorely needs investment and is perfectly situated for success. You already have a trained workforce- yes, you will need more employees, but if you build it, they will come. You have superb logistics- river, rail, and interstate. The only political considerations need to be strictly related to the state's 11.5% investment in the project. Private investment (including ATRS) is coming up with 88.5%. Step up Arkansas and show you are willing to play with the big boys and invest in jobs and growth.
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RonalFos says... February 2, 2013 at 9:40 a.m.
I would certainly be more happy if Buffett or anyone else were the investor in this project because they did not spend millions in this state influencing our last election. This should raise a red flag when they now ask for special favors from the legislature. Everyone needs to make sure they read the fine print on everything signed off on.
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BarichMilhusseinObamaNixonPOTUS says... February 2, 2013 at 10 a.m.
benrose it works like this: the lefty liberals are fine when the 1% liberals make money but when the conservatives do they go ballistic.
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Populist says... February 2, 2013 at 10:18 a.m.
Ain't nobody got time for Dat,
I've always had a problem with taxpayer support for deals the benefit private investors more than the public. The question is what is our rate of return from this investment? The problem is that we now cannot trust the opinion of those legislators who have taken Koch money. This is what is wrong with government today. The Democrats are as guilty as the Republicans of taking care of their supporters at the expense of the public. Arkansas government is full of loyal Democrats who have fed at the public trough their entire careers. The Democrats and Republicans both seem to be in bed on this deal. The Republicans support it because the Kochs will get even richer. The Democrats probably support it because their buddies also are getting rich off of it. Who are the lawyers getting the legal business and the bond salesmen getting the bond business? As always, this is being sold as a way to provide jobs for the poor. In my opinion, an investment in education would help more people who need the help the most. The Arkansas schools are doing a poor job of preparing people for future jobs. America is having to import people from India and China for computer work and medical technology work because we do not adequately educate our children. What a shame! The taxpayers also will be stuck with the bill for the dirty river left by the Kochs. It's not that I don't like them because they are "conservative." I dislike them because they are evil. People who dump carcinogens into rivers are evil. See if the Arkansas state legislators want to drink some of the water from near their paper mills. The Kochs are the worst polluters in America. Shame on the politicians who are selling their souls to the devils!
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BillSmith says... February 2, 2013 at 10:43 a.m.
They have bought a legislature, why not a steel mill?
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Jackabbott says... February 2, 2013 at 11:55 a.m.
Populist makes some great points.
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fredcage says... February 2, 2013 at 12:13 p.m.
Someone should also look into the large investment included in this deal from the ATRS. It might be a case of the state using leverage over teacher retirement funds to support this investment.
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BarichMilhusseinObamaNixonPOTUS says... February 2, 2013 at 1:37 p.m.
Bill you are so right. Unions have bought tons of elections over the years so this is called karma and she's a mean bi***
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mkm157 says... February 2, 2013 at 2:29 p.m.
There's a bill in the Leg that requires government projects to buy steel "made in the USA" even if it drives up the cost by 25%! KOCH doesn't want any tax increase but he wants to waste taxpayer money so he can get rich!
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BarichMilhusseinObamaNixonPOTUS says... February 2, 2013 at 2:50 p.m.
If they can import steel 25% cheaper than domestic steel mills can produce it the Koch Bros. should be the least of our worries.
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djigoo says... February 2, 2013 at 3:06 p.m.
If the Koch brothers are involved, it's bad news. What a horrific week for Arkansas and its image. Rapert, this...sad.
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inquire says... February 2, 2013 at 3:14 p.m.
This is disturbing. Not only the financial entanglements with the legislature, but the Kock record on environmental mayhem. If this deal goes through, the environmentalists in that part of the state will need to be extremely vigilant tracking what is going on.
I know from personal experience how hard it is to fight pollution once an irresponsible business gets a foot hold in a community.
This is standard operating procedure. Find an economically disadvantaged place with few good paying jobs. Build your industry there because most of the poor people won't ask too many questions. Get them hooked on the money before the illness from the pollution starts becoming evident. By the time the pollution is evident, the workers will have built their lives around the source of money, and any attempt to stop the pollution will have the workers and the environmentalists at each others throats. The workers will stand up at public meetings and government hearings defending the polluter that is poisoning them and their home.
That is how Kerr-McGee got a foot hold in a poor community while contaminating the soil,air and water with radioactive waste and other dangerous elements. They also dumped this waste into the Arkansas River at it's confluence with the Illinois River.
This business will surely have to publish an Environmental Impact Statement before it can get started. Local people need to get one and go over it thoroughly.
Much of the proof of Kerr-McGee's wrongdoing was right in their EIS before they even got a license. It's just that companies count on few people actually reading the EIS to see what they are up to.
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BarichMilhusseinObamaNixonPOTUS says... February 2, 2013 at 3:58 p.m.
inquire you realize there are already 2 steel mills and a company that paints steel coils in Mississippi County? Also John Correnti started a steel mill in Columbus, MS; you should check out their environment record. Koch Bros will not be running this mill if it comes to fruition; however feel free to throw crap on the wall and see what sticks for your liberal minions. Heck the Kennedy's have killed and raped more people than the Koch's. Stuff that one in your pipe and smoke it
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HotSpringsLawyer says... February 2, 2013 at 4:06 p.m.
Seems to me that being the Natural State is much more valuable long-term than being a cheap polluted site for industry. Is the Legislature or Governor getting professional advice re the appropriate return on an investment like this?
We should be getting a big upside equity kicker for an investment like this. Being a secured creditor in the hypothetical bankruptcy of a closed plant is not somethng to look forward to.
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inquire says... February 2, 2013 at 4:43 p.m.
Existing pollution is no reason to allow more. It should be an impetus to do better. There is no down side to the local citizens checking out the EIS, and it might let them know things they need to know.
Kennedys have nothing to do with this discussion, except they provide a straw to clutch at to try to change the subject. I must have hit a nerve.
There are a lot of leaking "containment" ponds right now near the AR/OK border that have been waiting to be decommissioned since the eighties. I was at the NRC hearings when the company executives claimed they would never leak. The damage they are doing to the environment will never be corrected in the lifetime of anyone now alive. This is what happens when people don't pay attention to what businesses want to do.
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Packman says... February 2, 2013 at 5:01 p.m.
Horror of horrors! The mean old Kock brothers helping fund an endeavor that will provide countless jobs in one of the most economically depressed areas of the country. How dare they!!!!!!
Idiot liberals hate the idea because it promotes work over a government handout. Only an idiot liberal would see fault in efforts to bring jobs to America. Unbelievable.
Hey Populist - Beebe seemed real concernced about his reputation at that press conference, didn't he - NOT. And stop with your incessent lies about the state of education in Arkansas. A study by Education Weekly published last week had Arkansas public schools among the top five in the nation. Let me say that again, an independent study on education ranked Arkansas in the top five in the countrty. Stop with the lies. Enough already.
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HotSpringsLawyer says... February 2, 2013 at 5:12 p.m.
Reference for study?
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inquire says... February 2, 2013 at 8:36 p.m.
We are not against good jobs. My family has benefited from good jobs----NOT FROM HANDOUTS! You conservatives just can't stop with the false welfare smears. We were cautiously in favor of this when the news first broke. Unfortunately, by today there are indications that it is crony capitalism at work.
It is a long standing trick in the playbook of industries that pollute to cynically go into a poor community with jobs, hoping that the people are desperate enough and uneducated enough to accept the jobs at face value without questioning what kind of pollution there will be and what the final horrible price will be.
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DontDrinkDatKoolAid says... February 2, 2013 at 10:59 p.m.
HotSpringsLawyer Try "study by Education Weekly"
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DontDrinkDatKoolAid says... February 3, 2013 at 12:27 a.m.
ww w.edweek.o rg/ew/qc/2013/state_report_cards.html?intc=EW-QC13-EWH
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Populist says... February 3, 2013 at 7:09 a.m.
Packman,
You just can't get your facts straight, now can you? On that report (which has been much criticized) Arkansas ranked 5th ONLY on Education POLICY--not the quality of the schools. Even that study gave Arkansas low marks on student achievement and the chance of a successful career with an Arkansas education.
If you look at studies on where Arkansas schools rank, the more correct figure is about 45. See wwwdotthearkansasprojectdotcom/report-arkansas-45-in-education-but-gov-beebe-said-we-were-5/ and wwwdotalecdotorg/publications/report-card-on-american-education/
If you want to see how individual schools are ranked, greatschoolsdotorg is a good site with school by school reviews.
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HotSpringsLawyer says... February 3, 2013 at 7:27 a.m.
Nice to see you recognize the validity of the "liberal" educational organization, but you really might want to read beyond the press release headline. For instance, in Student Achievement, a "D" ranking for Arkansas (to no one's surprise).
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BarichMilhusseinObamaNixonPOTUS says... February 3, 2013 at 9:28 a.m.
inquire the liberal playbook is easy to figure out. Claim there will be major pollution and stop jobs from being created so you can blame the Republican majority for unemployment. Everyone has an excuse if they are weak enough to use it; that should be every liberals mantra. Biggest bunch of weak wussies I have ever seen
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Populist says... February 3, 2013 at 9:30 a.m.
This whole project was planned before the last set of elections. The Koch brothers targeted Arkansas as the one place that is so desperate for jobs that they will allow a steel mill to dump its noxious sludge into the Mississippi River. The East Coast and the Great Lakes have been so polluted that the environmentalists would fight any such project. In Arkansas, however, the politicians of both parties can be bought cheaply. If you have any property on the Mississippi River to the south of Osceola, you better sell now. The Kochs and the other hos are all out to make oodles of money polluting the river. The Kochs are turning Arkansas into the New Jersey of the south.
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BarichMilhusseinObamaNixonPOTUS says... February 3, 2013 at 10:07 a.m.
Populist why don't you tell us how much steel is recycled in the world? Since you know how to spell google I am sure you can figure it out
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BarichMilhusseinObamaNixonPOTUS says... February 3, 2013 at 10:12 a.m.
Pop you also prove the liberal way. Raise taxes on the job creators to pay unemployment for those who can't get a job because your ilk claim there could be some pollution. Remember how Ted Kennedy put a stop to a wind farm in Massachusetts because it was going to be visible from their vacation home? Typical liberal
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inquire says... February 3, 2013 at 10:32 a.m.
Ain'tNobody, your thought process on this is so convoluted as to be laughable. I don't know anyone who prefers that there be no jobs. That does not mean that intelligent people want any jobs at any cost. Some of us believe in seeing the bigger picture and preserving the environment for future generations, rather than permanently destroying it for temporary gain.
Actually, the recent Republican playbook had top Republicans trying to force all legislators in their party to obstruct everything President Obama wanted to do, even if it was something they voted for when Bush was president. That included even things that would have created more jobs. Republicans have a Machiavellian way of accusing others of what they are doing.
You forget I am genuine working class and come from a long line of people who have always worked and never been on welfare, so your continual snotty smears about being weak and dependent will not stick.
When I was growing up my Dad constantly pulled extra duty. My Mother often worked sixty hours a week. They still raised a huge garden, looked after the old relatives, and took food to the unfortunate and helped out at the church. Toughness is bred in me. Your continual insults cannot drive me away from speaking my opinion on here. That IS your little game, isn't it? You think you can insult and bully people until they go away. Nice try.
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Populist says... February 3, 2013 at 10:53 a.m.
AintNobody,
I actually do not favor welfare and would prefer a form of workfare. While jobs are being "created" in the form of dumping wastes in the river, how many jobs downstream are being lost due to the pollution? The wastes dumped into the Gulf of Mexico already are horrific and are being brought to you by the same group of pollution peddlers bringing us this deal. Having done a fair amount of business transaction work in my life, I know that when a deal smells a little too sweet, beware. The judgments of these politicians are corrupted by the money that they have taken from these businesses. The polluters simply have more money than the fishermen, farmers, and tourism business people who live downstream.
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inquire says... February 3, 2013 at 1:41 p.m.
There was a book published by some clean water activists from Eureka Springs in the eighties called "We All Live Downstream", and that is true.
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RonalFos says... February 3, 2013 at 1:49 p.m.
They will earn on average $75,000? Lets see, the CEO will get $10 million and the average worker will earn $18,000. Yep, that will work out to $75,000 per person.
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Packman says... February 3, 2013 at 4:24 p.m.
Hey Populist - The study used various measures to reach the conclusion that Arkansas ranked in the top 5. Not perfect in all measures, but good enough to kick other's arses and to prove you WRONG with your constant harping about bad education in Arkansas.
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Populist says... February 3, 2013 at 8:25 p.m.
Packman,
No. That one study only said that Arkansas was 5th in POLICY. The schools are rated around 45.
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DontDrinkDatKoolAid says... February 3, 2013 at 10:17 p.m.
You've do it now, inquire and her daddy growing up ... vomitus.
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inquire says... February 3, 2013 at 10:47 p.m.
Is the above supposed to be an example of the clear headed thinking of the heavily armed right wing? Shudder.
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Populist says... February 4, 2013 at 5:25 a.m.
It will be interesting to see what happens on this. It probably is a fait accompli. I'm not holding my breath that there is some Republican or Democratic state legislator who will take up the fight for a cleaner Arkansas. However, there is an opportunity for an unknown young legislator to make a name for himself or herself by fighting the good old boy corruption that dominates Arkansas political life. It is difficult if your work is at all dependent upon some of the good old boy businesses. My pocketbook suffered tremendously the year I decided to fight NAFTA. I do think that the time is ripe for a Dale Bumpers or Winthrop Rockefeller to come along. Arkansas surely needs one.
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DontDrinkDatKoolAid says... February 4, 2013 at 8:36 p.m.
There you go again inquire (vomitus).
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inquire says... February 4, 2013 at 10:18 p.m.
According to Bloomberg Business Week, the state would be borrowing 125 million dollars for this endeavor. Borrowing money to help fabulously wealthy people start their next business is already like having to bribe someone to do something they can afford to do on their own. This is especially questionable when the state has already had to sue these same people for ignoring federal environmental regulations and polluting this state.
Also according to Bloomberg, several nearby states have a bid in if Arkansas turns them down. It's basically a hold up. They will either pollute us directly, or they will go upstream and pollute us from that direction. The Natural State is in danger of becoming another cancer alley like Louisiana.
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