LITTLE ROCK — The Arkansas Teacher Retirement System’s chief executive said Wednesday that he wants the system to invest $60 million in a proposed steel mill project near Osceola and have a 20 percent equity stake in the project.
Executive Director George Hopkins said the system’s board of trustees will consider the proposal during its meeting Monday before he joins Gov. Mike Beebe and other officials to answer state senators’ questions about the project that afternoon.
“This mill justifies a $60 million investment, which is less than one-half percent of our total investment fund,” said Hopkins, who estimated that the system’s total investments are valued at about $12.2 billion.
“We see this as a quality, long-term investment,” he said in an interview late Wednesday afternoon in his office northeast of the state Capitol.
“It has nothing to do with the politics of it, but it has everything to do with the return,” said Hopkins, a lawyer and former Democratic state senator who has been the system’s executive director since December 2008.
He said he expects the system to reap an annual return of at least 20 percent to 30 percent from its $60 million investment in the project.
Hopkins said the Arkansas Economic Development Commission hired Delta Trust & Bank of Little Rock to conduct a detailed review of the proposed investment for the system, and Delta Trust & Bank’s report projects a similar investment return.
Beebe on Tuesday announced that Big River Steel LLC, a company led by steel magnate John Correnti of Blytheville, plans to build a $1.1 billion steel mill near Osceola that will employ 525 people.
Beebe plans to ask the Legislature to authorize $125 million worth of bonds for the project. Of that, $50 million would be a loan to the company. The company wouldn’t have to pay back the rest.
Big River Steel LLC would trigger Amendment 82 of the Arkansas Constitution, which allows the Legislature to authorize general-obligation bonds to finance infrastructure or other needs to attract large economic-development projects.
On the basis of current interest rates of about 3.7 percent, the $125 million in bonds would cost the state $9.1 million per year and take 20 year to pay off, according to Arkansas Economic Development Commission Executive Director Grant Tennille. Big River Steel would pay about $4 million per year on its loan after constructing themill, he said.
Senate President Pro Tempore Michael Lamoureux said he’s asked Beebe and Tennille to visit the Senate on Monday afternoon to answer senators’ questions about the project.
Beebe spokesman Matt DeCample said the governor, Tennille and other state officials will answer questions Monday.
Lamoureux, R-Russellville, said senators are asking “very basic questions” about the proposal, such as the expected return on any state investment, the time frame for recouping the state’s funds, and “what’s the danger of the project going bad.”
“I want to make it happen and I want to do what I can to make it happen,” he said of the proposed project. “Butwe have a constitutional obligation to do due diligence. ... More than anything else I want us to do it right and not just say, ‘We are so excited, we are not going to look at it [thoroughly].’”
Tennille said other equity investors in Big River Steelwill be disclosed at the “appropriate time.
“There are still negotiations among the proposed investors on who is going to have what percent of equity,” he said. “The final disclosure will happen before the bonds are ever sold.”
Hopkins, the teacher retirement system head, said, “I think the truth of the matter is most people will look at that group and say they didn’t just fall off the turnip truck and they aren’t new to this and they wouldn’t be in it unless there was money to be made.”
Sen. Robert Thompson, DParagould, co-chairman of the Legislature’s Committee onPublic Retirement and Social Security Programs, said the teacher retirement system’s proposed $60 million investment “initially looks like a perfectly appropriate investment to me.” “But I started learning the details of the proposal within the past 48 hours, so I will have to do a review of it like other legislators,” he said.
“It is not something I would immediately say it is not a good thing,” Thompson said.
Sen. Johnny Key, R-Mountain Home and a former retirement committee co-chairman, added, “I trust Mr. Hopkins and his team to make a good decision based on their track record, and I have no reason to doubt that they haven’t donethat in this case.”
Hopkins said he asked six months ago, after meeting with Correnti, whether the retirement system could possibly be an equity investor in the project.
He said the meeting came about after Tennille wondered whether the system would be interested in buying bonds for the project.
Hopkins said the proposed agreement with the company gives the system the option to have a 20 percent equity stake in future expansions and plants the company builds elsewhere.
But Hopkins said he’s already been warned that other steel companies may spend thousands of dollars trying to halt this proposed project in the Legislature because the competitors “are scared.”
“When you see all these attacks and you will see more coming about this mill, it just shows this mill scares the people who will have to compete with them,” he said.
Front Section, Pages 1 on 01/31/2013