Forgemasters asks Brown to help with bid for steel press cash

Sheffield firm needs £20m of Government finance

By Sarah Arnott
Tuesday 18 February 2014 05:13
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The Prime Minister is being asked to arbitrate in a Sheffield company's attempts to persuade the Government to stump up £20m for one of the world's biggest steel presses. Sheffield Forgemasters hopes the massive 15,000-tonne open-die press will help it secure a slice of the world's ballooning nuclear reactor market.

The company – which made headlines around the world in the 1990s Iraqi supergun scandal and was re-born in a management buy-out in 2005 – has raised around £120m to buy the press. But without an extra £20m loan and a guarantee underwriting another £40m, the project will not go ahead.

Forgemasters was hoping for a decision from Lord Mandelson, the Business Secretary, last month. But to head off a potential rejection, given a climate where requests for money from the Government join a long queue, the local Sheffield MP, Richard Caborn, is raising the matter with Gordon Brown.

Peter Birtles, a director at Forgemasters, said: "It's a good proposition for the UK. The export potential, as well as the domestic market, will generate at least 200 jobs in the company, and a similar number in the supply chain, as well as underpinning the 800 positions we already have."

The potential market is huge. At the very least, the UK's existing nuclear programme will need forgings in the order of £400m. Although some are likely to come via reactor maker Areva's existing contract in Japan, a UK forge stands to secure a significant amount of domestic business. But the export potential is the real prize. Around 230 new nuclear power stations are planned across the world over the next quarter-century, and all will need giant forgings. Currently there are only four in the world, and only the one in Japan is capable of making the very largest that are needed.

So far, Sheffield Forgemasters has raised £25m through normal bank funding. Another £25m is to come through conventional government grants, that are expected to be signed imminently. A further £80m is to come from arrangements with the company's customers and suppliers. One major customer has agreed to put up a £40m loan in return for discounts on future work and some of the equipment providers for the press project itself have agreed to fund the work upfront.

"We are short in total by less than £20m, and the customer would like some form of guarantee for their loan," Mr Birtles said. "We've asked the Government to bridge the gap, either as a grant anchored on some sort of rewards from profit, or a payback system, or whatever mechanism they want."

A giant press in Sheffield would also mean the UK nuclear industry would not have to queue for a slot with the few international forges. Currently there is only enough capacity globally to produce a maximum of eight reactors annually, but worldwide demand will soon be running at 13 a year.

The Forgemasters press would be able to turn around two reactors a year, a sales output it estimates would be worth more than £110m.

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