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Recent Comments

Re: “Former Sen. David Wyatt dies at 65

Senator Wyatt was a special public servant. He had my full respect on every level. He sought the best solutions to help people and create opportunity. To a special life: Salute!

5 likes, 1 dislike
Posted by ATRS on 01/12/2015 at 9:30 PM

Re: “Again with the double-dipping; thank a Republican

ATRS is an investor and that is all. This investment would have the same risk/reward profile in Mississippi except that here ATRS does haves access to an estimated $50 million dollars in total state rebate tax credits over up to 14 years. Those credits can reduce the real cost of the ATRS' 20% ownership in a $1.1 billion dollar state of the art and the most energy efficient steel mill in the world from $60 million dollars to $10 million to $15 million dollars. From the standpoint of ATRS, that is a deal we like more than a little.

Without state incentives, BRS will not exist in Arkansas. The direct jobs and subsidiary jobs will not be in Arkansas absent the state support because others states will pay. Smart investors will use all advantages to reduce risk and maximize profits. Remember those in the 1800's who agreed to build railroads if the government would convey land for the right of way and other tracks as an incentive? Why did Jerry Jones give Romo the contract that he did recently? By the way, I am not as high on Romo myself. Jerry Jones agreed to pay those tens of millions to get and keep a player that he considers a winner for his team. Arkansas is doing the same to get and keep a 40 year plus jobs player. Once a steel mill is here, you can bet it is here for the duration of its 40 to 50 year effective life cycle!

Trucking companies, support industries, and companies that use steel will hire employees and locate near BRS. Without that state investment, BRS will exist but not in Arkansas. By the way, Arkansas should never use Amendment 82 to attract an investment to the state if the incentives would be the difference between success and failure of the investment. Based on that, Amendment 82 incentives should always invite the question that you ask Sound Policy on why give money to a winning project. The state should pay the cost to bring a economic engine that will be in operation for 40 or more years with a big payroll. The reports show that BRS is a winner but the state will be a winner too.

1 like, 0 dislikes
Posted by ATRS on 04/05/2013 at 8:01 PM

Re: “Again with the double-dipping; thank a Republican

Elwood: On 7 above use $10, $15, $20, or $25 to stay consistent with the problem. The real project is 1,000 times the numbers in 1 through 6 above. Also remember that the IRR projection by ATRS does not depend upon obtaining any cash for its recycling tax credits.

1 like, 1 dislike
Posted by ATRS on 04/05/2013 at 6:09 PM

Re: “Again with the double-dipping; thank a Republican

No, that is an ANNUAL internal rate of return (IRR) of 40% based on a 5 year average. Here is a quiz. What is your annual IRR on a 20% investment in the equity of an asset worth $1,100 that has the following characteristics?

1. $100 of the asset is given to the equity owners as a grant.
2. There is a 12% return on the total asset (this is the projected return GA's consultant)
3. total equity is $300, so you pay $60 for your 20% of equity.
4. the leverage on the asset is $2.5 dollars of debt for every $1 of equity while ignoring the grant.
5. The annual cost of the leverage is 5%.
6. The 20% investment for which you pay $60 is valued at 9 times (9X) an recent annual return after 5 years.
7. Just for fun add additional income of say $10 million in cash as part of $50 in a tax rebate that you can reallocate for cash to other equity holders. Or maybe make that, $15, $20, or $25 million.

Can you pass this quiz Elwood? A hint, the return is not 8% a year? Please show how you arrive at the answer if you want a passing grade.

2 likes, 1 dislike
Posted by ATRS on 04/05/2013 at 6:01 PM

Re: “Again with the double-dipping; thank a Republican

I am still good with an estimated 40% annual IRR when during the first 5 year period. Nothing has changed. Retired members do not pay a contribution to ATRS. Requiring a retiree to pay a contribution would actually violate federal law. The cost to ATRS of shortening the separation period is due to the effect it has on member behavior to retire earlier than the member would retire if a full 6 month period is required. If you look at the actuarial report from the General Assembly's actuary on SB127 on the General Assembly's webpage, you will see that the actuary comments on this behavior change and the material cost it would create for ATRS.

Posted by ATRS on 04/05/2013 at 5:05 PM

Re: “Arkansas teachers to take 20 percent stake in new steel mill

I do not plan to get into responding to each and every comment. I was told to expect other steel producers to begin to spend big dollars to attempt to kill an Amendment 82 approval by the General Assembly. As to the failures of the management team, here is the story on the management team on mini-steel mills like to one here:

Over the course of the past twenty five years, the management team has built or expanded fifteen mini mills (six of them are similar to Big River Steel) and all have been profitable. Let me repeat, ALL have been profitable. A 20% equity position that is "pari passu" with world class industrial investors. A $60 million dollar investment gives ATRS a 20% stake in a $425 million dollar investment after the Amendment 82 incentives are added. This means that ATRS will pay $60 million dollars for an $85 million dollar position. That is essentially buying the investment at a 30% discount. ATRS has no investment manager here, like in most investments, to pay either fees or carried interest.

Now let me say a few things about this mill:

The mill will make high end products for which demand is increasing and supply is still scarce, targeting the niche markets:

1. energy (oil and gas drilling and transmission)

2. power (electricity generation, transmission and consumption)

3. automotive (light-weight high-strength steels)

Big River Steel will be the only mini mill in the US capable of producing certain grades of steel while also being the producer of the widest and thickest steel slabs.It will be able to produce a full range of motor lamination steel and in planned phase two expansion will produce both grain and non-grain oriented electrical steel. The mill will have the capability of making Advanced High Strength Steel (AHSS). This capability becomes essential in the steel industry as vehicle manufactures have become increasingly interested in improving the fuel efficiency and environmental friendliness of their vehicles. AHSS steel being, as the name suggests, very strong and lightweight, will likely become a much larger percentage of future vehicles.

The Mississippi County site is almost perfect for material and supplies at a low delivery cost and for deliver of the finished products. The site also has the needed electrical and gas capacity at the site without the massive cost to delivery these needed for many otherwise good locations such as building transmission lines to the plant. I could go with the benefits but will stop here.

4 likes, 3 dislikes
Posted by ATRS on 01/30/2013 at 6:44 PM

Re: “Judge Susan Webber Carter preparing for retirement

Judge Webber Carter was a fine law professor and is a fine judge. From a former student, I wish her well as she takes senior status.

2 likes, 2 dislikes
Posted by ATRS on 10/05/2012 at 8:10 AM

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