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Whyalla steels itself as financier files for insolvency

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The main financier of Whyalla’s steelworks has filed for insolvency in the UK overnight, further clouding the future of the Sanjeev Gupta-owned plant.

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Supply chain financier Greensill Capital – a major funding source for Gupta’s GFG Alliance – is reportedly also in discussions to sell its core operations to Appollo Global Management.

Giles MP Eddie Hughes, whose electorate covers Whyalla, said he had been in talks with the Australian Workers Union, GFG at a local level, steelworks staff and contractors since the Greensill issue began emerging a week ago.

“There’s obviously uncertainty, which is never good, given the complex set of financial arrangements which have still got to sort themselves out,” he told InDaily.

“I live in a community that’s been through uncertain times in the past – this is the fifth time I’ve been through something like this.

“Three generations of my family has worked at the steelworks and one of my sons currently works there.

“The attitude of the workforce is we’re going in, we’re getting paid and we’ll just get on with it.”

Supply chain finance is typically used to pay suppliers for their goods and services quickly at a discounted rate rather than making them wait up to 90 days for payment.

Companies such as GFG Alliance would then pay Greensill the full amount at later date.

Hughes said it was his understanding that many local suppliers had continued to be paid by the steelworks.

“When I spoke to GFG late last week they said the latest round of payments to suppliers had gone out and there has been a focus on ensuring some of those smaller to mid-size contractors are looked after,” he said.

“Sometimes there are delays but it looks as though payments have been made.

“GFG has come out with some public statements and in conversations I have had they are looking to secure financing – there is still that uncertainty around how this might play out.”

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.

Treasurer Rob Lucas last week said it still intended to pay the $50 million but would only spend it on “tangible infrastructure projects that would assist the transformation of Whyalla into an efficient operating plant”.

“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,” he told InDaily on Friday.

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 in 2017, vowing to improve and expand the operation.

GFG had planned a $1 billion upgrade at Whyalla but that was delayed by up to seven years last year as the global alliance flagged huge cuts amid sluggish steel sales.

Hughes said almost a quarter of the jobs in the Whyalla region were dependent on the steel industry.

“For every one job in the steel mill and mining here in Whyalla there’s another two out in the community so it is incredibly important we get this right,” the Labor MP said.

“But we also need that capacity as a nation to provide structural steel and rail and Whyalla is the only integrated steelworks that provides that service in the Australian economy.

“My view is there is a real future for steelmaking here in Whyalla but it does require that injection of investment dollars to modernise the plant – we’re talking about a plant that was commissioned in 1965.”

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