By Kate Holton
REUTERS - Senior staff at Port Talbot, Britain's biggest steel works, are seeking to launch a management buyout plan with the support of staff, investors and the government to save the loss-making plant put up for sale by Tata Steel.
The Indian group announced plans to exit its entire British steel operation last month, leaving the government battling to save a once mighty industry that has been hammered by a surge in cheap Chinese imports, soaring costs and weak demand.
On Wednesday the managing director of Tata UK's strip products unit, Stuart Wilkie, said he was working to develop a plan, but analysts were sceptical that a solution could be found for a business losing 1 million pounds a day.
"There is confidence in the future of primary steel making in Port Talbot and across Wales," Wilkie said in a statement posted on Wales online (http://www.walesonline.co.uk/).
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"We are now working with partners to fully develop proposals which we believe offer very real prospects of sustainable future success."
Once the birthplace of the modern steel industry, Britain has shed thousands of jobs in the sector in recent years due to high costs and historically low steel prices which have been dragged down by oversupply and cheap Chinese imports.
The only other public expression of interest for Tata Steel UK has come from commodities company Liberty Group, which is considering a bid if the government guarantees lower power prices.
It would also plan to change the raw material for the steel plants to locally available scrap from imported iron ore.
According to local media reports, Wilkie's plan is based on a turnaround proposal submitted to Tata earlier this year which was rejected in favour of a sale.
The plan, which envisaged Port Talbot keeping its blast furnaces and not adopting new methods of producing steel, required a cash injection of 100 million pounds ($144 million), prompting speculation that staff could need to contribute up to 10,000 pounds each to keep the plant afloat.
Wiktor Bielski, head of commodities research at VTB Capital, said any management buyout would need to clear a lot of hurdles.
"You would have to see how much of the debt they would have to take (on) or how much Tata would be left with, or how much the government would be prepared to absorb," Bielski said.
"An MBO (management buyout) can only work with the help of the government ... given how tight the government's budget is at the moment, (you can speculate) that they would look to provide the absolute minimum help because they can't afford to do anything else."
Tata Steel said its advisers had already approached 190 potential financial and industrial investors worldwide.
"All expressions of interest, including any management buyout proposals, will be considered when received," it said in a statement.
Prime Minister David Cameron's government has come under pressure to prevent the loss of thousands of jobs just before the country's referendum on European Union membership on June 23. While it has refused to nationalise the plant it has said it could offer state loans to tempt a bid.
Stephen Kinnock, the local lawmaker for the plant in Wales, said he believed a management buyout was the right way to proceed and urged Tata and the government to give enough time for the funds to be raised.
"I know that the workforce stands ready to work with all potential investors, and I would urge government to stand ready to provide the necessary support," he said in a statement.
($1 = 0.6954 pounds)
(Additional reporting by Clara Denina and William James in London and Sangameswaran S in Bengaluru; Editing by Sandra Maler and Susan Thomas)
