Gupta adviser confirms billionaire’s interest in Portland smelter

One of Sanjeev Gupta’s advisers has confirmed the billionaire is pursuing a deal to buy the Portland aluminium smelter.

Global chief executive GFG Alliance Sanjeev Gupta. John Feder/The Australian

One of Sanjeev Gupta’s advisers, Ray Horsburgh, has confirmed the commodity billionaire is pursuing a deal with Alcoa to buy the under-threat Portland aluminium smelter backed by new investments in renewables.

The Australian revealed on Tuesday that Mr Gupta’s GFG ­Alliance has entered in-depth ­negotiations with Alcoa over a deal that would keep the manufacturer operating amid concern it could be prematurely forced to close, putting Portland’s 600-strong workforce at risk.

Mr Horsburgh — the Smorgon Steel veteran who joined Mr Gupta’s GFG Alliance bid for Whyalla and now sits on its Australian advisory board — said the British industrialist could make a deal work if the US company were a willing seller.

“If he can get the electricity costs component of Portland working in his favour, then a deal could certainly make sense,” Mr Horsburgh told The Australian.

Keeping the 33-year-old facility running was essential to safeguard the future of the next coal plant due to expire, EnergyAustralia’s Yallourn facility, and would boost the industry’s confidence that Australia’s three other big aluminium smelters could also stay in business.

“I’m a firm believer these smelters are viable and I don’t think there are any unsolvable problems,” Mr Horsburgh said. “It’s easy to say imports are too cheap — but costs are going up overseas too — and if you can get on top of the power issue then most of these industrial assets should be viable.”

Mining giant Rio Tinto has also voiced concerns over high energy costs threatening its Australian aluminium smelters: Tomago in NSW, Boyne in Queensland and Bell Bay in Tasmania.

Part of the strategy for Portland would follow Mr Gupta’s ambitious renewable-backed plan for the Whyalla steelworks after he rescued the facility from financial turmoil in 2017.

Mr Gupta has proposed a string of new clean-energy investments for Whyalla, including the Cultana solar farm, would help to lower the cost of power backed up by a pumped hydro project at the neighbouring Middleback Range.

“It’s a matter of filling in the gaps on the curve,” Mr Horsburgh said. “When domestic demand is up you can use the solar back-up and then fill in the gaps. The solar pumps the water uphill and the hydro runs it when the sun is not out. That’s a pretty sustainable model.”

The Portland smelter has faced a tough operating environment for several years with the closure of Victoria’s Hazelwood coal plant in 2017 ratcheting up pressure on the facility, given electricity costs account for a substantial proportion of its costs.

A four-year supply deal agreed with AGL Energy for power from its Loy Yang plant and $230m in Victorian government subsidies will both expire in 2021.

Alcoa entered talks with GFG earlier this year and in October flagged a global review of its costliest and high-carbon-emission plants in a process that could see the asset either shut or sold.

Officials from Victoria’s Department of Treasury and Finance have also been involved in the discussions between the two companies, including briefings on regulatory arrangements and the status of $200m in state subsidies.

Alcoa and Australian-listed Alumina jointly own 55 per cent of Portland, with Citic and Marubeni each holding a 22.5 per cent stake.

For Mr Gupta, the potential Portland acquisition would look to replicate his “greensteel” business model, which relies on renewable sources of energy to power his heavy-­industry enterprises.

Despite ongoing market chatter about the health of Mr Gupta’s globe-spanning empire, it is understood key stakeholders — including unions and governments at all levels — would be likely to welcome his involvement in Portland, given GFG’s willingness to invest in the troubled assets it has previously bought.