(Bloomberg) -- Tata Steel has signed an agreement with National Grid Plc’s Electricity System Operator to build the power infrastructure required to switch its Port Talbot site to a green steel project.

The deal will see the British grid operator build the new electrical framework capable of powering the Indian company’s 3.2 million-ton electric arc furnace by the end of 2027.

“This will help us replace our aging and carbon-intensive blast furnaces with a state-of-the-art electric arc furnace capable of producing our customers’ most demanding steel products,” said Rajesh Nair, chief executive of Tata Steel UK, in a website statement.

Last year, the UK agreed to pay up to £500 million ($635 million) to help Tata Steel overhaul the country’s biggest steelworks and keep it running — one of several hefty subsidies to persuade companies to stay in Britain.

In April, Tata Steel said it will proceed with its planned investment of £1.25 billion to build the electric arc furnace at Port Talbot after months of national-level discussions with the UK’s trade unions who threatened industrial action over expected job losses.

While significantly greener than coal-fired furnaces, the new process is also much less labor-intensive. Tata expected 2,500 roles to be impacted within the next 18 months from the move. 

Read more: Tata Steel to Shut Down Loss-Making Blast Furnaces in the UK

The agreement to power the electric furnace is “another positive step towards securing the future of steelmaking in South Wales and the UK,” Industry Minister Alan Mak said in the statement.

 

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