First Whyalla, now Portland: Sanjeev Gupta joins race to rescue smelter
After rescuing Whyalla steelworks, Sanjeev Gupta is in talks to buy Portland’s aluminium smelter.
Commodities billionaire Sanjeev Gupta is in talks to buy Victoria’s threatened Portland aluminium smelter, two years after rescuing South Australia’s Whyalla steelworks, with owners Alcoa prepared to sell the high-cost facility.
Mr Gupta’s GFG Alliance is understood to have held in-depth negotiations with Alcoa over a deal that would keep the manufacturer operating amid concern it could be prematurely forced out of the market, putting the future of Portland’s 600-strong workforce at risk.
The operator of Portland flagged a global review of its costliest and high-carbon-emission plants in October, in a process that could see the asset either shut or sold.
However, industry sources said commercial discussions between the two companies started several months earlier. They said the US player was receptive to an exit, allowing it to avoid tough decisions with subsidies and an electricity contract with AGL Energy expiring in 2021.
Officials from the Victoria’s Department of Treasury and Finance have also been involved in the discussions, offering insights into regulatory arrangements governing the facility and the status of $200m in state subsidies due to run out in 2021.
Alcoa and Australian-listed Alumina jointly own 55 per cent of Portland, with Citic and Marubeni each holding a 22.5 per cent stake.
A deal could be agreed to as early as January, but the government has raised issues that would have to be dealt with should ownership change hands.
Alcoa and GFG declined to comment.
For Mr Gupta, it would mark the latest big-name acquisition in an international buying spree.
Deals have included the purchase of Arrium’s financially troubled Whyalla steelworks in 2017, a $US500m ($727m) buyout from Rio Tinto of Europe’s biggest aluminium smelter and plans for $1bn of investments in solar, wind, battery and pumped-hydro generation in Australia.
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 both 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.
A goal for Mr Gupta’s Liberty House Group to become the world’s first carbon-neutral steel company by 2030 may also work in its favour, given Victoria’s ambitious renewables and emissions targets. Sources in the energy sector say GFG would need to find in excess of 800 megawatts of new capacity, spread between renewables and “firm” generation, and in the short-term coal power capacity, given the limited spare power capacity in the state.
AGL currently supplies 500MW of electricity to Portland from its Loy Yang A coal plant and has indicated it expects the plant to continue operating.
But industry players are now sensing market opportunities amid expectations Alcoa wants to divest the asset and let another party attempt to find a new growth path for the industrial developments.
The Australian revealed power baron Trevor St Baker is putting together an ambitious plan to keep Victoria’s Portland aluminium smelter operating, aiming to build a coalition between Victoria’s legacy and renewable power generators to chip in to deliver cheap power to keep the struggling smelter running for at least another decade.
The talk comes only a week after GFG agreed to buy the Duffel aluminium plant in Belgium from Novelis, adding to a string of European acquisitions in the space for the British industrialist.
A year ago Mr Gupta agreed to pay $US500m for Europe’s biggest aluminium smelter, Aluminium Dunkerque in France, although GFG and seller Rio Tinto are still locked in a dispute over the final payment in that deal.
Mr Gupta was also linked with the acquisition of Rio’s Pacific Aluminium assets in 2017, a year after picking up the Lochaber smelter in Scotland — the last remaining aluminium smelter in Britain.
GFG boasted last week it had announced commitments worth £500m ($972m) for its suite of aluminium, steel and energy assets since commencing its northern acquisition spree. His acquisition of South Australia’s Whyalla steelworks, while not without its challenges, has also seen substantial spending.
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