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Dayton to steel company: Pay vendors in full or pay back state loan

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Gov. Mark Dayton has issued a deadline to Essar Steel, which is building a new $1.9 billion taconite plant on Minnesota's Iron Range, to start paying what it owes to Minnesota vendors and contractors or immediately repay a $66 million loan it was granted from the state.

Dayton is giving the company until the end of the day on Wednesday to pay its Minnesota vendors in full, according to a statement released by the governor's office Monday.

Dayton spoke to Madhu Vuppuluri, president and CEO of Essar Steel Minnesota, last week and issued his ultimatum. If the company doesn't get current with its outstanding bills, Dayton said he will call the state’s $66 million loan and demand Essar repay it immediately.

He also said Essar must remain current on its payments to Minnesota vendors going forward or the same threat applies, MPR News reports.

Dayton met with company officials in mid-October to discuss the same issue, and he said Essar promised at that time to pay its vendors by Oct. 31.

"Those assurances were not fulfilled," said Dayton in the news release.

The Star Tribune reports that Essar owes millions of dollars to a number of different contractors, some of whom have pulled their workers from the project because of the late payments.

Essar is building the taconite plant in Nashwauk, and the loan it received from the state paid for infrastructure improvements at the site, according to MPR News.

Essar under scrutiny

Essar’s plant has been in the works for nearly nine years. It was originally meant to be a combination taconite mine and steel plant – the first steel mill on the Iron Range.

But then Essar dropped the steel mill portion of the project, and it's been having trouble finding enough financing to finish the taconite plant, the Star Tribune reports.

Essar Steel is part of the India-based Essar Group, and the Hibbing Daily Tribune wrote last month that the taconite plant is on track for a mid-2016 opening.

Some critics have said that Essar should pay back the public money it received because the scope of the project has changed.

State Rep. Jason Metsa, DFL-Virginia, says he isn’t keen on showing leniency to a foreign-owned company that’s getting incentives from the state for a project that wasn’t completed – while at the same time, they’re building a new plant that puts them in direct competition with local taconite companies.

The taconite industry is in poor shape right now, and employees across the Iron Range have faced layoffs and idling in recent months.

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