Sanjeev Gupta looks for Whyalla cutbacks

A $1bn expansion of South Australia’s Whyalla steelworks along with a giant slate of renewable projects are expected to be frozen as his main financier, Greensill Capital, prepares to file for insolvency.

Sanjeev Gupta next to a Cultana solar plant test rig

Sanjeev Gupta is preparing to cut back on new projects and planned expansions in Australia as uncertainty swirls over the future of his industrial empire, company insiders told The Weekend Australian.

A $1bn expansion of South Australia’s Whyalla steelworks along with a giant slate of renewable projects that can deliver green technology to his steel ­assets are expected to be frozen as his main financier, Greensill Capital, prepares to file for insolvency.

Mr Gupta convened an emergency phone hook-up on Wednesday with senior Australian executives during which he confirmed an active hunt was under way to find alternate lenders amid mounting pressure to find a stop-gap solution to refinance his large debt pile with Greensill.

While no firm decisions have been made, both a long-awaited upgrade of Whyalla and a 3000 megawatt renewable pipeline are expected to be shelved as the industrialist seeks to provide any new lender with comfort that it is not over-stretched in addition to debt-laden assets it already owns.

“A lot will now hinge on securing that alternate funding and what sort of terms come along with any new banking relationship,” one company source told The Weekend Australian.

“Obviously there is huge uncertainty as things stand and you’re trying to get your house in order and just get through this rather than looking at any sort of new projects or expansions.”

Mr Gupta’s GFG Alliance proposed in December a three-pronged investment in the next generation of steelmaking: renewable energy, powering an electric arc furnace, and a new ­direct reduced iron facility initially powered by gas, and then by renewable-produced hydrogen.

The company’s planned 280MW Cultana solar farm just outside Whyalla is being worked on but a 3000MW renewables plan based mostly around solar will now take a back seat, sources say. That was to be used for a new green hydrogen steel plant at Whyalla produced with clean ­energy.

The status of whether Mr Gupta will proceed with a planned float of its profitable Infrabuild business is also under review.

Infrabuild is the country’s largest manufacturer and supplier of steel long products, with two electric arc furnaces and a recycling business.

The company consists of the east coast steel assets from the former Arrium business. It was originally slated for a sharemarket listing in 2019 that would have been the largest float of that year.

The process has been restarted and Mr Gupta still hopes Infrabuild will be able to sidestep the broader chaos enveloping both Greensill and GFG.

Infrabuild is not believed to be exposed to any direct lending from Greensill and is instead backed by separate bondholders, who held a meeting in the last week of February to discuss plans for the mooted IPO. Further talks are expected to be held imminently given uncertainty over Mr Gupta’s empire and, in particular, the fact Greensill now holds security over Mr Gupta’s shares in Infrabuild as a hedge against defaults from other parts of GFG.

Banks have not yet been appointed for joint lead manager roles to work on any Infrabuild listing, and insiders say its ultimate success still hinges on delivering strong annual results later this year to assuage any concerns over earnings performance.

A spokeman for Liberty Primary Steel said: “The transition measures we have successfully implemented at Whyalla continue to deliver for the business and we remain committed to our transformation plan and renewable projects as we look to establish Whyalla as a leader in Greensteel manufacturing.”

Greensill’s main insurer cut a $4.6bn policy this week as it grew uncomfortable over its exposure, triggering Credit Suisse to wind down $US10bn of funds invested in loans arranged by the financier.

While Greensill remains in talks to spin off some of its business at a huge discount to private equity giant Apollo, any deal would not include Mr Gupta’s sprawling empire, leaving the industrialist scrambling to find a new provider of short-term financing.