Paul Starick: Sanjeev Gupta’s grand Whyalla ambition folds | The State

Sanjeev Gupta’s billion-dollar Whyalla ambition has been fuelled by hype, not reality, writes Paul Starick.

Sanjeev Gupta’s billion-dollar plans to transform Whyalla with a green steel revolution have been exposed as a feel-good mirage.

The fallen British tycoon’s over-hyped plans followed a cargo cult narrative that has become depressingly familiar for a weary South Australian public.

Mr Gupta promised big. In December 2019 he was poised to pull the trigger on more than $1bn worth of spending in Whyalla in the next six months.

He announced a showbag of goodies, including breaking ground on Australia’s largest solar facility at Cultana, worth $500m, expected approvals for a $600m steel-rolling mill, a $45m hotel and $145m horticulture project.

But the bold plan has slowly unravelled. South Australians wanted to believe Mr Gupta was the white knight riding in to save Whyalla and rejuvenate the hard-hit heavy manufacturing industry.

Instead, Mr Gupta’s grand vision looks more cargo cult, like the MFP of the 1990s or Mike Rann’s promotion of the $30bn Olympic Dam expansion a decade ago.

There has always been some thought that Mr Gupta was too good to be true. By June last year, he was in talks for taxpayer cash but the State Government was demanding a “sustainable” proposal before releasing up to $50m. At the time, Treasurer Rob Lucas vowed to continue engagement with Mr Gupta’s company, GFG Alliance, “in the interests of trying to see a viable long-term future for Whyalla”.

On Thursday, GFG Alliance put on the market the stalled Cultana project, just outside Whyalla, and 100MW Playford Battery Project. These renewable energy projects underpinned Mr Gupta’s much-trumpeted plan to revitalise the Whyalla steelworks as a green steel powerhouse.

This came a day after GFG said it had refinanced its Australian debt and had adequate working capital to continue to operate the steelworks. This deal is not finalised and has “customary conditions precedent and documentation’’ to be completed over the next four weeks.

For the sake of Whyalla’s people and economy, hopefully these conditions are as routine as they sound. The consequences would be severe for the Steel City, Upper Spencer Gulf region, the state – even the nation – if Whyalla’s steelworks was again in financial limbo. The industry and its customers need certainty.

Sovereign steelmaking capacity is vital as supply chains fracture during a global pandemic. Senior construction industry figures have told The Advertiser uncertainty over Whyalla’s fate makes Chinese steel more attractive because there is less doubt over its supply.

Developers need steel to turn up on time to ensure their projects run smoothly and profitably.

At the moment, this is best described as doubt, rather than turning away from Whyalla steel. But neither GFG nor the region can afford uncertainty to fester.

GFG Alliance head Sanjeev Gupta. Picture: Ben Stansall/AFP

Thankfully, in March Mr Gupta revealed Whyalla had turned a profit “for the first time in many years”. This offers at least some hope for the future.

There had been some early warning signs about Mr Gupta’s precarious finances before GFG was enmeshed in the collapse in March of its key financier, Greensill.

It is understood former foreign affairs minister Alexander Downer and eminent economist Ross Garnaut – both members of GFG’s 16-person global advisory board – had been asking questions about Greensill for some time.

A July 2019 UK Sunday Times article charted Mr Gupta’s rise through “ongoing deal-making through complex financial engineering”.

“ … Beneath his meteoric growth lies a fragile and inter­dependent ecosystem: politicians desperate to save jobs in tired industries, companies keen to shed problematic assets, financiers eager to package and sell government subsidies, and investors hunting for yield in the ultra-low rates environment,” the newspaper said.

In February 2020, London’s Financial Times, which has relentlessly probed Mr Gupta’s global operations, reported on “unhappy lenders, delayed supplier payments and a number of businesses with accounts in the red”, painting “a picture of a stretched organisation”.

In an open letter to Whyalla in April, Mr Gupta declared the Steel City his “spiritual home” and said he could not “wait to be back in Whyalla again with you all”.

He said operations would continue as usual, saying the firm was “benefiting from strong tailwinds in steel and iron ore markets and high demand for our products in Australia”.

But Mr Gupta’s green steel dream is over in Whyalla and hopes for the region have evaporated. At least the steel works are still open.