Anthony Albanese dreams green after Peter Malinauskas’s move to wipe out Whyalla steelworks company

Anthony Albanese will offer financial support to help transition Whyalla into a major producer of green steel, after the South Australian government pushed the mill into administration.

Anthony Albanese during a visit to the Whyalla steelworks in 2023. Picture: NewsWire / David Mariuz

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Anthony Albanese will offer ­financial support to help transition Whyalla into a major producer of green steel, after the South Australian government forced the mill into administration because it was on an “irredeemable” path to failure under British magnate Sanjeev Gupta.

The Prime Minister will on Thursday join South Australian Premier Peter Malinauskas at the site, about 400km northwest of Adelaide, where they will unveil a “transformation plan” to work with a private buyer to transition the mill into one that produces steel with zero-emission energy sources.

The Australian understands the state and federal governments would consider providing a capital injection or a loan to the next buyer to help refurbish the mill so it produces steel with an electric arc furnace that is powered by ­renewable sources, including ­hydrogen. The government will also encourage the new buyer to source more of its iron ore from the magnetite mine that is part of the Whyalla steelworks site.

Mr Albanese is expected to outline a broader “green steel” strategy after last month committing $2bn into helping the aluminium sector decarbonise.

A spokesman for Industry Minister Ed Husic said the Albanese government had been working closely with South Australia to provide a solution for Whyalla.

“What’s going on in and around Whyalla can’t continue: workers kept in the dark; creditors, including the SA government, unpaid; a proud industrial city left wondering about its future,” a spokesman for Mr Husic said. “We want a strong future for Australian steelmaking and Whyalla has a big part to play.”

As he staged an extraordinary legal intervention to take control of the mill, Mr Malinauskas declared Labor wanted to preserve a “sovereign steelmaking capacity”.

The SA government on Wednesday morning convened an emergency sitting of parliament, where “surgical” amendments to the legislation governing the ­operations of the steelworks were passed. The amendments have the effect of ensuring the government, which is owed “tens of millions” of dollars in royalties, and about $15m more via state water utility SA Water, would have ­security over both the steelworks and the land it sits on.

This then enabled the government to place the steelworks in administration.

High-profile insolvency firm KordaMentha, which ran the steelworks under administration after Arrium failed in 2016 and eventually sold it to Mr Gupta’s GFG Alliance, will be installed as administrator.

About 3000 staff work for GFG in South Australia, directly and indirectly.

Mr Malinauskas said the government had consulted widely, including with its own Steel Task Force, and came to the conclusion it had no choice but to act.

“We take this action very conscious of its significance, very conscious of the responsibility that is being bestowed upon us by taking this action,’’ Mr Malinauskas said.

“But we do so with absolute confidence and clarity that this is the right course of action to secure steelmaking in this country.

“It is unacceptable for such an important, critical piece of economic infrastructure for the nation to be in a situation where its ongoing operations are so severely compromised as we believe was the case prior to today.

“By putting OneSteel Manufacturing into administration it will allow for the administrator to stabilise the business, put it on a far surer footing in the immediate future, with a view to secure its long-term future, which is the objective this government has always had.’’

The SA government revealed last month that Mr Gupta’s LPMA, which is owned by his global group GFG Alliance, owes the government “tens of millions” in unpaid royalties, while SA Water is owed in the vicinity of $15m.

Documents leaked to The Australian indicate the amount owed by LPMA to creditors of the steelworks and associated iron ore mines is in the vicinity of $300m – a figure not denied by the company – while LPMA is also understood to have racked up big debts at its Tahmoor coalmine in NSW.

Mr Malinauskas has been increasingly strident in urging GFG to pay its creditors in Whyalla and map out a credible path for the ­future of the steelworks.

Mr Gupta told The Australian earlier this week that he aims to get the steelworks back to profitability by mid-year, with the operation now turning over between $13m and $14m a week.

But the executive chair of GFG Alliance would not give a specific date for when creditors at the steelworks would be paid in full, saying only they would be paid progressively as the business ramps back up to full production.

GFG last week struck a crucial agreement with its global creditors, bringing to an end a four-year process precipitated by the failure of the company’s financier, Greensill, which at the time landed GFG with a $US5bn debt burden.

Mr Gupta announced on Friday a deal had been agreed to – although not legally finalised – that would wipe the company’s slate clean globally. He also said GFG would sell all or part of the Tahmoor coalmine, with bids expected in the $800m range.

GFG is also trying to finalise a $US100m ($157m) debt package, with that money to go towards ­operational costs and paying creditors at Whyalla.

Mr Gupta told The Australian the plan for the rest of the financial year was to execute on the company’s “Back to Black” plan at Whyalla, normalise its payment terms with creditors – rumoured to be owed in the vicinity of $300m – and get the steelworks to a break-even point.

“Back in December we were basically at death’s door, and my best people, even despite the best efforts throughout the year were losing hope, so it was bringing that back from the jaws of death,’’ he said.

“So I’m very happy that we managed to rescue the plant, the plant is still delicate of course.

“That was part one of the plan. Now we’re starting the steel production phase, the ramp up phase, so revenue is starting to flow.’’