Pulaski County site was mill nominee

LITTLE ROCK — Big River Steel LLC, which plans to build a $1.1 billion steel mill near Osceola, considered a site in Pulaski County for the plant, an executive with one of the largest investment groups in the project said Monday.

The two Arkansas locations were among the three finalists for the proposed mill,along with a site near Vicksburg, Miss., said George Hopkins, executive director for the Arkansas Teacher Retirement System, which agreed on Monday to invest $60 million in Big River Steel.

The Pulaski County site is near Wrightsville on the Arkansas River, Hopkins said.

“It had some logistics issues” that kept it from being chosen, Hopkins said.

Big River Steel, led by John Correnti, its chief executive officer, decided on Osceola because of the quality of the amenities - high voltage electric transmission lines and a natural gas pipeline, a rail line, access to Interstate 55 and the Mississippi River, Hopkins said.

But another determining factor was that “the levee near Osceola has never been breached since 1929,” Hopkins said. “A lot of the [extra incentives] in Mississippi would need to be used to reinforce the levee [near Vicksburg] before they built a plant there. So the quality of the levee was one of the reasons that Arkansas won.”

Grant Tennille, executive director of the Arkansas Economic Development Commission, told an Arkansas Senate committee Monday that Mississippi offered Big River Steel more incentives than did Arkansas.

Koch Industries of Wichita, Kan., would be the single largest investor in the Osceola project, putting up $120 million, Hopkins said at a meeting of the system’s investment committee.

“Koch Minerals LLC is a potential minority shareholder in the Big River Steel mill project near Osceola,” said Paul Baltzer, a spokesman for Koch. Koch Minerals LLC is a subsidiary of Koch Industries.

The retirement system’s plan to invest $60 million represents 20 percent of the $300 million in equity that Correnti said he is gathering before construction begins.

In addition to Koch’s $120 million and the retirement system’s $60 million, Correnti’s developer group will put up $90 million and an investment fund will invest $30 million, according to a report prepared by Delta Trust Investments Inc. of Little Rock.

Correnti, a former chief executive officer at Nucor Corp., said last week that the Osceola mill would employ 525 workers who will earn an estimated average annual salary and bonus of $75,000.

If built, Big River Steel expects to manufacture 1.5 million tons of steel a year at the plant, Hopkins said.

A similar plant that Correnti developed in Columbus, Miss., in 2005 was profitable after three years, Hopkins said. Nucor plants that Correnti oversaw in Crawfordsville, Ind., and near Blytheville were profitable after four years, according to the Delta Trust report.

Delta Trust, which was paid $15,000 by the Arkansas Economic Development Commission for the report, said there are at least six major risks that could affect an investment in the project.

The risks include:

A permanent reduction in the difference in prices paid to Big River Steel for steel it produces and the cost to Big River Steel for scrap metal.

Long periods of below-capacity operation.

Failure to find buyers for high-end steel products or a longer ramp-up time than expected before production begins.

Cost overruns that could make the deal less attractive. (Each investor has promised 10 percent extra to cover these unexpected costs, Delta Trust said.) The Big River Steel development group and the construction company have indicated confidence that the cost projections can be met.

Unforeseen environmental risks (although smaller steel mills such as the one planned in Osceola are less environmentally damaging than integrated mills, Delta Trust said).

Business interruption, which could be harmful. Big River Steel does not have other mills to pick up the slack and will be reliant on insurance coverage, Delta Trust said.

Delta Trust recommended that the retirement system invest $60 million in the plant.

The contractor chosen for the project is SMS Siemag of Dusseldorf, Germany, which has developed, designed and built steel mills in the United States since 1921.

There is a plan for a second phase of the Osceola steel mill, Hopkins said. That phase would cost $580 million, Hopkins said.