Port Pirie smelter owner Nyrstar to miss deadline for first $37 million payment for Government loan

NYRSTAR has unexpectedly failed to make its first $37 million payment towards its $600 million Port Pirie smelter redevelopment, placing the Government at a huge financial risk.

• Rising costs for Nyrstar at its Port Pirie smelter
• Delayed smelter redevelopment will mean $70m annual windfall
• Nyrstar starts plant commissioning as workers strike
• Nyrstar completes funding package for Port Pirie smelter

NYRSTAR has unexpectedly failed to make its first $37 million payment towards its Port Pirie smelter redevelopment, placing the State Government at a huge financial risk.

The Government underwrites nearly $300 million of the financing arrangement, courtesy of a deal struck by former premier Jay Weatherill with independent Geoff Brock.

Treasurer Rob Lucas said Nyrstar had also indicated it would defer future payments, at a further cost of about $81 million, until November 2018.

Mr Lucas said the deferral of the scheduled $37 million payment was “surprising”, and said the overall deal was a “major exposure” for South Australian taxpayers.

The Nyrstar smelter at Port Pirie, as it was undergoing a $600m redevelopment.

He told Parliament the terms of the finance deal struck with Nyrstar were “unusual”, and meant they had no “obligation” to make repayments as scheduled.

“Nyrstar has advised that it considers that it is not compelled to transfer this money, a position the state does not accept,” Mr Lucas said. “As Treasurer, I intend to defend the state’s position and we as a Government reserve our right to take all steps that may be necessary to ensure Nyrstar meets its contractual obligations.”

But he said the dispute with Nyrstar did not pose a risk to Port Pirie’s biggest employer, stressing the company had assured him the redevelopment was “progressing well”.

Former treasurer Tom Koutsantonis said he had simply underwritten a guarantee by the Commonwealth Government’s Export Finance and Insurance Corporation.

He said he was concerned Mr Lucas was “picking a fight” with a desperately needed employer.

Frome MP Mr Brock said Nyrstar’s failure to pay on time was a “surprise to me” but he had full confidence in the plant, its employees and the Government to resolve the dispute.

Nyrstar posted a profit of 47 million euro for 2017.

The State Government underwrites $291.25 million of the redevelopment.

In a statement, Nyrstar said that under the agreement with the State Government, the company had “full discretion to defer payment”.

“As previously communicated, the project construction was delayed by 18 months and was also subject to significant cost overruns that were funded entirely by Nyrstar,” the company said.

“The delay in the start of the ramp-up is impacting the realisation of cash flows from the project relative to the timeline contemplated at the time the financing arrangements were finalised in 2014.

“Therefore, Nyrstar has elected to defer payment of the Perpetual Securities. Nyrstar has not breached any agreements by delaying the payment and is in full compliance with its contractual obligations relating to the financing arrangements.”