End of an error: What happened in Whyalla
On a dramatic day for the town of Whyalla, our reporter explains what happened.
Business
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The South Australian government is among a long list of creditors who have come out in recent months complaining about non-payment of bills by steelworks owner GFG Alliance – owned by British industrialist Sanjeev Gupta.
The South Australian government is among a long list of creditors who have come out in recent months complaining about non-payment of bills by steelworks owner GFG Alliance – owned by British industrialist Sanjeev Gupta.
Tens of millions of dollars are owed in royalties while SA Water is owed at least $15m in unpaid water bills.
The government said it took the decision after “losing confidence in the financial capability of GFG to pay its bills as and when they fall due”, and having “lost confidence in GFG’s ability to secure funding needed for the ongoing operation of the steelworks”.
How did it do this?
Legislation was rushed through state parliament on Wednesday giving the government broader security over all of GFG’s assets in Whyalla, and thereby giving it the power to appoint administrators to OneSteel Manufacturing – the GFG entity that owns and operates the steelworks and associated mines.
What will the administrators do?
KordaMentha, which facilitated the sale of the steelworks to GFG Alliance in 2017 following the collapse of previous owner Arrium, has again been appointed to take control of the business.
It will continue to operate the steelworks while exploring options to sell the business to another operator.
KordaMentha will appoint a special adviser to assist the administration and is engaging with potential buyers including BlueScope.
Who could take over?
The South Australian government sounded out several groups late last year, including Australia’s largest steelmaker BlueScope, which runs the steelworks at Port Kembla.
Other groups approached included Japan’s Nippon Steel Corporation, Germany’s Thyssenkrupp, India’s Tata Steel and Korea’s POSCO, which was edged out by GFG Alliance in the 2017 takeover.
What happens if a buyer can’t be found?
If administrators are unable to find a buyer for the steelworks, there is a chance liquidators could be appointed to wind up the business.
That would involve a closure of the steelworks, and a sell-off of all company assets to repay creditors, who would probably be left with a significant shortfall. Alternatively, GFG could make a bid to take back control of the operations, but this is highly unlikely to be supported by the SA government.
How much is owed?
The exact figure is unknown but leaked reports suggest there are more than 1200 creditors – ranging from large companies such as mining services company Golding Contractors to small Whyalla businesses – owed a total of at least $300m.
What happens next?
Premier Peter Malinauskas and Energy and Mining Minister Tom Koutsantonis will travel to Whyalla and will on Thursday provide details of a “significant” financial package to fund the early stages of the administration process, covering the ongoing operation of the steelworks and worker and contractor payments.
The Whyalla steelworks employs 1000 people directly, and is a critical employer and economic driver of the town of 22,000 people.
Originally published as End of an error: What happened in Whyalla
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