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State Govt watching but no bailout cash as financial storm approaches Whyalla

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Treasurer Rob Lucas says that a $50 million support package for the Whyalla steelworks promised by the former Labor government will not be handed over to Sajeev Gupta’s GFG Alliance to help bail the company out if it or its South Australian operations fall victim to a financial crisis engulfing its major lender.

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Supply chain financier Greensill Capital – a major financier to Gupta’s GFG Alliance – is set to file for insolvency in London. In Australia, pressure is also mounting on Greensill after $5.9 billion worth of credit insurance expired on Monday.

Lucas told InDaily there was widespread concern in relation to what the implications might be not only for Greensill but in particular GFG.

“GFG have told our offices that their Australian operations are operating well, which is comforting to hear but clearly the international and national press would certainly be raising some questions in relation to what possible implications there might be and what challenges it might pose for GFG and Whyalla and various other projects,” he said.

“It certainly raises questions and we’ll continue to monitor the situation closely.

“There’s nothing we can do about Greensill obviously – there are international forces at play there and we are very interested observers and only time will tell.

“When the dust settles there we’ll have to look at what the implications are in collaboration with GFG.”

The former state Labor government committed to a $50 million support package for the Whyalla steelworks expansion. While the Liberal government has said it will honour the commitment, it is yet to hand over any of the money.

“I’m on the public record as indicating we would only pay that money over if we could see tangible infrastructure projects that would assist the transformation of Whyalla into an efficient operating plant that would continue into the future,” Lucas said.

“We’ve made it clear that we’re not interested in using that $50 million of taxpayers money to assist repayment of debt or financing of loans or paying off suppliers.

“Time will tell what the implications if any there are with any problems Greensill have got so we’ll just have to monitor those circumstances but I’m not going to add to public speculation about what the future of GFG might be.”

About 1200 people work at the Whyalla steelworks, Whyalla’s biggest employer.

UK-based Sanjeev Gupta was hailed a saviour of the business and town after former steelworks owner Arrium went into administration and he took it over, vowing to improve and expand the operation.

Union and community leaders last year stood by Gupta when his global GFG Alliance flagged massive cuts due to sluggish steel sales.

This included delaying a proposed $1 billion upgrade of the Whyalla plant by as much as seven years.

GFG Alliance’s other Australian interests also include an East Coast integrated manufacturing, distribution and recycling business formerly known as OneSteel, iron ore mines in South Australia, coking-coal operations in NSW and an iron ore bulk handling facility at the Whyalla port.

The billionaire British industrialist also has plans to develop 1GW of dispatchable renewable energy, starting with the 280MW Cultana Solar Farm near Whyalla, which is expected to begin construction this year.

In a statement to InDaily this week, SIMEC Energy Australia chief executive Marc Barrington said all permits and licences for the Cultana project had been received but the project was still working towards financial close.

SA small business commissioner John Chapman has written to Gupta airing his concerns about the future of GFG Alliance in Australia and its potential impact on hundreds of SA businesses.

He told ABC radio this morning he had asked for a response as soon as possible.

“Hopefully we will get an assurance in the not-too-distant future that will put everyone’s minds at rest,” he said.

“There are many small businesses particularly in Whyalla but also further afield – there are 500 plus in South Australia that do business with the GFG group and my concern is that they continue to get paid on their payment terms.”

Chapman said the implications could be far-reaching – not just for GFG Alliance –  if Greensill entered into administration or further financial difficulty.

“I don’t know what the arrangements are between GFG and Greensill but my understanding is there are loans in the hundreds of millions of dollars – there will be some implications and that may mean loans need to be recalled or they may need to be put on new terms, it just depends what those terms are,” he said.

“For the people of Whyalla in particular, having been through the Arrium administration five years ago, this is something they don’t need.”

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