Tata Steel Ltd. has proposed that the U.K. government invest more than £900 million for a stake in its British operations and protect the Port Talbot steelworks from closing in Wales, according to Sky News.
The Indian steel major is seeking £900 million from the UK government’s Project Birch fund, which was set up to provide state support for strategically important businesses crippled by the pandemic. Sky News reported,
“A source close to Tata Steel said the proposal – which is just one of the options the company is examining – would involve its parent company writing off an equivalent quantity of debt owed to it by the UK business.
“The talks are at a tentative, rather than concrete, stage, and the structure of any deal, as well as the size of any financial contributions, remain far from being finalised.”
The latest proposal appears after reports suggested last week that Tata Steel was exploring the closure of the plant’s two blast furnaces and replacing them with electric arc furnaces. This can result in job losses for as many as 3,500 workers employed by the company in Port Talbot off the 8,000 it employs across the country. Reports suggested that the Unions were concerned about the switch and some indicated that they were not taken into consideration for the proposed transition. Blast furnaces use iron ore and coal to make molten iron and steel, whereas electric arc furnaces typically melt scrap metal.
Now, the new proposal, is one of the many options that the company is considering in its restructure following the economic damage ensued by Coronavirus. The company is also exploring the prospects of the Indian counterpart writing off a similar amount of debt it’s owed by the U.K. business. The proposal for the government to take an equity stake and in effect part nationalise the plant is said to be one of the options under discussion.
Analysts say it is unlikely that the government would want to inject new capital into any company applying for emergency aid unless its shareholders were also willing to do so. Heavy restrictions have been placed on the funding under Project Birch, including stipulations that investments support the government in achieving its target of zero emissions by 2050.
Earlier, the local member of parliament, Stephen Kinnock, last month said it was urgent that the government acts to save the jobs. U.K. Chancellor of the Exchequer Rishi Sunak has said he will set an “exceptionally high" bar for companies seeking taxpayer-funded bailouts during the coronavirus pandemic.