‘Pay up or piss off’: Inside Peter Malinauskas’ crazy brave plan to oust Sanjeev Gupta
The SA premier has been plotting to execute Sanjeev Gupta for several months. At lunchtime Wednesday Peter Malinauskas blew GFG up in an extraordinary intervention that nationalises the Whyalla steelworks.
South Australian Premier Peter Malinauskas covertly planned the execution of GFG Alliance executive chairman Sanjeev Gupta over several months and secured it on Wednesday in a mid-morning parliamentary coup.
At 10.30am (ACST) on Wednesday, South Australia’s upper house MPs were summoned to a snap, secret briefing to be enlisted to support special legislation that killed GFG’s control of the Whyalla steelworks.
Debt-laden GFG owes more than $300m to multiple creditors in SA, the impact being felt so acutely in Whyalla that it posed a genuine threat to the existence of the Iron Triangle town.
The Premier, creditors and the public had become tired to the point of enraged at Mr Gupta’s constant promises that financial relief was just around the corner. These promises had almost always come to nought.
In addition, the government suspects that GFG has been using whatever money it makes from its Australian operations to service its many debts overseas.
Mr Malinauskas was also fearful – with advice underpinning his fears – that there was every likelihood GFG’s debts would balloon beyond the $300m mark, further threatening any future sale.
At lunchtime on Wednesday Mr Malinauskas blew GFG up.
The legislation places GFG’s Whyalla mines and steelworks arm OneSteel into administration, with KordaMentha appointed to oversee the transition to a new owner and operator. The steelworks will continue to operate in the interim and the state will take on legal responsibility for the payment of workers and contractors via a government guarantee.
In effect it’s a short-term nationalisation of the steelworks until such time that a new operator arrives – provided one can be found. By Mr Malinauskas’s own admission, the steps his government took might be without precedent. His government changed the laws of the state to force a business into administration. He would argue this unusual scenario was brought about by two factors – the opaque nature of GFG’s finances, which runs as a family business, not a listed company; and the threat its ever-growing debts and constant empty reassurances posed to the SA economy.
If left unchecked, this had the potential to balloon into an economic collapse to rival that of the $3bn State Bank failure which crippled SA in the early 1990s.
The other unusual feature of the arrangement is that under this temporary period of nationalisation, the SA government is responsible for running a steelworks.
It was a point the opposition hammered in question time on Wednesday, asking for guarantees the government would be capable of keeping the steelworks operational.
But Mr Malinauskas now believes almost anything is preferable to the slow death Whyalla and the steelworks were suffering at the hands of GFG.
The coup against Mr Gupta and GFG is the culmination of a months-long shaming exercise in which the Malinauskas government has become increasingly strident and candid about GFG’s financial woes.
At the same time, government figures openly attacked Mr Gupta over his planned $10m upgrade of his $39m Sydney mansion while Whyalla businesses went to the wall.
Described by one Labor figure as a “pay up or piss off” strategy, the government piled pressure on GFG, culminating with the Premier’s dismissive response to reassurances from Mr Gupta last Friday that he had resolved his financial problems in Europe and would also sell his Tahmoor coal interests to raise capital.
Mr Gupta met the Premier face-to-face in Adelaide last Sunday to reassure him that GFG had a plan but needed more time.
It was a reassurance the Premier had heard before – and one that made him pull the trigger.
As of now, the most telling moments in the SA government’s shaming campaign might be the photograph taken last Sunday of Mr Malinauskas deep in conversation at the LIV Golf Tournament with BlueScope Steel chief executive Mark Vassella at The Grange golf course.
This was a non-chance meeting. And the deliberate attention drawn to their private conversation was a not-so-subtle warning from the Premier to Mr Gupta that he was seeing other steel magnates, and was hopeful of a new relationship.
A new relationship is what the Premier – and nation – now needs. Mr Malinauskas is right when he says Australia cannot afford to go cap in hand to China to obtain the steel we need to build bridges and railways and heavy construction.
As KordaMentha starts sifting through the detritus of this former GFG asset, four questions will emerge – exactly how much money is owed, how exposed are South Australian taxpayers, what role will be played by the commonwealth? And, most of all, is this steelworks an attractive enough proposition to find a new owner anyway?
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