SHEFFIELD Forgemasters yesterday refused to give up hope on its bid to install a new forging press after the coalition government axed an £80m soft loan handed out by Lord Mandelson in the lead up to the general election.
The company was relying on the loan for the 140m project to put it at the top of the 40bn supply chain for the new wave of nuclear power stations.
Westinghouse, the US nuclear reactor provider, had backed the deal with 40m of forward orders, with the remainder of the funding expected to come mostly from bank debt with some private equity.
"We have some options we are looking at and we have not given up on the press," Graham Honeyman, chief executive, told the Yorkshire Post yesterday.
The project was to have created up to 200 jobs on the site and a further 200 jobs in the company's supply chain in South Yorkshire. It was expected to boost sales from 120m to 250m a year and would have led to a big increase in profitability.
Adrian Bull, head of stakeholder relations at Westinghouse UK, said: "Our participation remains on the table if somebody else can come up with the 80m. It's not a change of heart on our part."
Dr Honeyman described the government announcement as "a huge disappointment to all at the company" and said Forgemasters "will continue to develop its significant involvement into civil nuclear, thermal and hydro power generation markets and seek other ways to develop the business".
Vince Cable, the new business secretary, claimed the government could not carry on writing out cheques but said he hoped the company would secure private investment for this "worthwhile project".
Dr Honeyman said the company has no strategy plan for the press and expressed doubt about other methods of funding.
"Private equity would take the whole of the shareholding away from Forgemasters and put it in the hands of somebody else," he said.
"That's not just my shares (49 per cent) or the other directors, 65 per cent of the shop floor own the shares in the company. The amount of money to put in to fund the press would more or less have to absorb the whole of the shareholding."
Dr Honeyman also appeared to rule out bank debt. He said: "The reason why we went to the government is the interest rates were reasonable. Bank interest rates are very high therefore we would have to make huge profits every year in order just to pay off interest on the debt. This is why we needed support from the government."
Forgemasters was struggling nearly a decade ago and in one month lost a staggering 75m before going into administration in 2003. A team led by Dr Honeyman rescued and then restructured the business, nursing it back to health and profitability.
The company spent at least two years putting together the funding bid for the new forging press and on negotiating support from the government, the banks and Westinghouse in the form of forward orders.
It is thought that those orders will now be channelled back into Japan Steel Works, which owns one of only a handful of presses in the world capable of making components large enough for the next wave of nuclear power stations.
Yesterday's announcement comes after a series of less-than-supportive statements from coalition ministers about nuclear power.
Charles Hendry, the energy minister, said: "Withdrawal of this loan is no reflection on the company, the project, its management or staff, or on our intention to remove unnecessary barriers to new nuclear power stations in the UK."
Most of Britain's existing stations are due to be decommissioned by 2023.
Forgemasters board meets next week to decide the next steps.
Dr Honeyman said: "We have to absorb the information and we are reluctant to stick our necks out at the moment to make any definitive statement until we have had a board meeting."
He added: "It is very difficult for me to comment on government policy, which I'm not prepared to do at all."
but here's some good news...
On a more positive note, Sheffield Forgemasters is set to sign a historic agreement worth 30m today with an Indian state-run power equipment firm.
India's minister for heavy industries, Vilasrao Deshmukh, and delegates from his government and Bharat Heavy Electricals, will visit the company to launch the trade agreement.
Under the 10-year deal, Forgemasters will sell tech-nology and specialist engin-eering knowledge to Bharat.
The venture, which helps to protect future Forgemasters' markets in the subcontinent, will serve India's rapidly growing domestic market for turbine and power generation products.