Devil is in the detail with city-saving $2.4 billion steelworks package
The state and federal governments have announced a sweeping rescue package for the steel industry nationally, with $2.4 billion promised to ‘save Whyalla Steelworks’. But a major government project has been shelved for the dream to come true.
Having yesterday taken unprecedented action to force the Whyalla Steelworks into administration through special-purpose legislation, the state government has partnered with the Commonwealth to announce a $2.4 billion support package for the steel industry in South Australia.
But the state government’s $600 million green hydrogen project – planned to complement the steelmaking operations in Whyalla – has been “deferred”, Premier Peter Malinauskas said.
Appearing alongside the Prime Minister at the Steelworks in Whyalla today, the Premier rejected the idea that South Australian taxpayers were on the hook for billionaire industrialist and now-former owner of the Steelworks Sanjeev Gupta’s failed business.
“I can appreciate how elements of the media will be attracted to that chain of reasoning, but it is patently wrong,” Malinauskas said.
“There is no bail-out here of GFG, their debts aren’t going anywhere.”
Instead, the plan is to use taxpayer funds to make ‘Creditor Assistance’ payments – $50 million worth. In exchange, the Premier said creditors who accept one of these payments will forfeit their dividend from the administration back to the state government.
“What we’re doing is we’re relieving them of all the burden and the struggle associated with the administration so they can get on with doing what they do best, and that’s keeping this place running and making steel in this country,” he said.
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But it remains to be seen how much a dividend from the administration will be worth, and, as history shows, it’s never the case that creditors receive a dollar back for a dollar owed once the process is settled.
Nevertheless, taxpayers will be paying for an upgrade of the Steelworks – something Gupta had long promised to do.
This includes $32.6 million in “immediate, on the ground” infrastructure upgrades and a “Jobs Matching and Skills Hub” worth $6 million.
The state and federal governments will also invest a further $384 million to keep the steelworks operational during administration – which explains what the Premier meant yesterday when he said the administration was “fully funded”.
The kicker is $1.9 billion of state and federal funds that will be invested alongside the new owner on upgrades and new infrastructure for the steelworks’ future.
There’s still little clarity on whether or not the Federal Government will nationalise the facility.
When asked today, the Prime Minister simply listed the positive elements of the facility and agreed with the Premier’s position that “we’re very confident… we can get not just any steelmaker, but the right steelmaker to be committed”.
To keep the Treasurer happy, funds are being diverted from the planned $600 million green hydrogen plant which has now been “deferred”.
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The Premier said there was still a “future” for it, but hasn’t committed to anything beyond that.
The project would have created the world’s largest hydrogen electrolyser at Whyalla, which would’ve powered green steel manufacturing at the Steelworks.
How Whyalla’s transformation into a green steel-producing facility will come about remains to be seen.
There’s also the question of the gas turbine for the hydrogen plant that the government bought with ATCO in November last year. The Premier said there will be “further announcements on that in the not too distant future”.
In any case, the Office of Hydrogen Power will continue to exist without any concrete plans.
“The reason why we were building the hydrogen facility in Whyalla was because there’s a steelworks here… that was what Mr Gupta said he wanted,” the Premier said.
“And we’re willing to do what it takes to make sure that vision comes to fruition.
“The future of hydrogen is there and it’s clear that people appreciate the necessity of it. I guess what we’ve got to make sure is that we’ve got an iron and steelmaking business that is there in the first instance.”
Workers at the steelworks appeared happy in Whyalla today.
Prior to a press conference, the Premier gave a rousing speech to more than 100 steelworkers who welcomed the coup of Gupta.
The Premier and PM then spent about 10 minutes taking selfies with staff who were gracious to be free of the billionaire. They were thanked, cheered and praised.
The city-saving package was a hit. How it will play out remains to be seen.
