Mumbai: Tata Steel Ltd may agree to keep its Port Talbot steel plant open after the UK government offered the Tata group company a multimillion-pound loan to persuade it to remain in the UK, the Financial Times newspaper reported on Friday, citing unnamed sources.
Tata Steel, that has started sale process of its UK assets, turned to the UK government, seeking further financial incentives to stay on in the country after failing to receive assurances that prospective buyers would keep the plant open for more than three years, the newspaper report said.
“Tata is understood to be discussing a state loan of hundreds of millions of pounds on ‘commercial terms’. That could partly replace an existing £900 million loan from Tata’s parent company to Tata Steel UK. The talks follow the opening of a government consultation into potential legal changes to the deficit-hit British Steel Pension Scheme that would reduce its onerous liabilities by several billion pounds,” the news report said.
Those initiatives—led by UK business secretary Sajid Javid—have gone a long way to convincing Tata to abandon the sale process and keep its plant, it said.
“Tata Steel has consistently stated, such as in its release of 25 May, that it is committed to running a thorough and urgent sale process for its UK business. That remains the case today and the sale process, supported by specialist advisors and the governments of the UK and Wales, has involved approaches to around 200 potential investors across the world. In the current phase, the binding bids are under evaluation and some bidders have asked for clarifications which we are in the process of providing,” Tata Steel said in a statement.
“As a responsible seller, Tata Steel is engaged with a range of stakeholders, including the UK government, to give the best chances of future sustainability for the business in the future, whoever the future owner of the business might be,” Tata Steel added.
Tata Steel signalled its intention to divest the business at the end of March, saying it couldn’t sustain the losses any longer. The company said that it will consider various restructuring options, including a partial or full sale of its UK assets, putting in jeopardy nearly 15,000 jobs.
Early this week, Tata Steel UK has completed the sale of its entire long products business to investment firm Greybull Capital Llp. Under the agreement signed in April, which will save about 4,800 jobs, Greybull Capital paid a nominal £1 for the entire long-products business along with its assets and liabilities.
The UK government is desperate to avert a meltdown of the steel industry just weeks ahead of the referendum on the UK European Union (EU) membership and has been pressuring Tata to keep running its plants, the Financial Times report said. However, the report said both the proposed loan and the pension changes risk setting the UK on a collision course with Brussels over state-aid rules.