Treasurer Jim Chalmers on Austal decider: ‘I want to make sure that I get this one right’
Navy shipbuilder Austal sweats on $500m National Reconstruction Fund grant as Treasurer Jim Chalmers delays crucial foreign investment call because ‘I want to make sure that I get this one right’.
The future of navy shipbuilder Austal is a sensitive issue for Treasurer Jim Chalmers who blew through a September deadline for deciding whether its South Korean shareholder can increase its stake to 19.9 per cent.
Austal has hundreds of millions of dollars of taxpayer funding on hold as it sweats on Dr Chalmers’ Hanwha call. It is understood the National Reconstruction Fund has agreed in-principle to handing Austal up to $500m towards work needed at its Henderson shipyards south of Perth.
Dr Chalmers conceded on Wednesday that his verdict on Hanwha going from a 9.9 per cent stake to about 19.9 per cent is overdue. The government is also yet to release the results of a $126m study into the infrastructure required at Henderson.
His assessment has been complicated by Japan’s Defence Ministry raising concerns with Canberra about Hanwha, and Austal’s position as a trusted shipbuilder for the US navy working on warships and key components of nuclear-powered submarines.
Japan’s Mitsubishi Heavy Industries will build the navy’s new $10bn fleet of frontline warships that will shape the Australian Defence Force for a generation. The first three of the frigates are set to be built in Japan, with the remaining eight to be built by Austal at Henderson. Andrew and Nicola Forrest are the biggest shareholders in Austal with a 19.9 per cent stake to their name.
Dr Chalmers indicated on Wednesday that more work was needed on the Hanwha bid, which has been under scrutiny since March, and made no apologies for the delay.
“There was a deadline at the end of September. We missed the deadline, and that’s on us,” he said. “The reason I put it like that is because when we’re dealing with proposals which are this complex and have a number of issues associated with them, sometimes it takes us a bit more time to consult whether it’s internal to government or external to government to make sure that we take the right decision.
“We’ll make a decision as soon as we can. I take my responsibilities as a decision maker in the FIRB system incredibly seriously, and I want to make sure that I get this one right. It’s a complex decision (and) we’re taking a bit more time.”
Dr Chalmers said the Hanwha approach warranted extra attention.
In August, Austal finalised a much-anticipated strategic shipbuilding agreement with Australia’s Defence ministry for around $20bn of work building landing craft initially, and then the Japanese-designed frigates and autonomous warships at Henderson.
Hanwha declined to comment and has remained tight-tipped throughout the eight-month FIRB process.
Austal chief executive Paddy Gregg was understanding of the Treasurer’s position. The Austal board has said it sees little value in what Hanwha claims it can bring to the table.
“We absolutely respect that it’s his decision. He wants to make the right decision, so I’d rather he made a good decision than a quick decision. So good luck to him,” Mr Gregg said.
Mr Gregg has previously called for “less talking, more doing” at Henderson and taking the delay up with the prime minister.
Dr Chalmers has avoided any contact with Mr Gregg during the FIRB process but they sat within metres of one another at a business breakfast in Perth on Wednesday.
Mr Gregg said Austal had plenty of work to do and the sooner it started work on the infrastructure required the better.
“We don’t read anything into it (the FIRB delay). We’ve got an amazing strategy we’re executing well (and) we’ve got a brilliant relationship with the government. We’ve been appointed the strategic shipbuilder,” he said. “It’s just an unknown, but it’s not causing us any problems.”
Austal declined to comment on the prospect of National Reconstruction Fund backing but it is understood the company may have to reapply for funds that have been earmarked amid a lack of clarity about the work required at Henderson.
The government has pledged to spend $12bn expanding naval shipyards at Henderson as part of AUKUS.
Austal will rely on private capital and taxpayers to fund much of the infrastructure work needed to build the frigates.
In anointing the Forrest-backed company a sovereign defence partner, the government included a “poison pill” that could be used to protect Austal’s secretive work from a takeover by Hanwha or another foreign entity. It allows the government to acquire Austal’s Australian operations, including all infrastructure and its workforce, at a market price if any party increases its share in ASX-listed entity to more than 20 per cent.
Hanwha abandoned a $2.85-a-share takeover bid last year after complaining the Austal board had made it impossible to carry out due diligence.
The Austal share price was down 3 per cent to $6.42 in trading on Wednesday.
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