Steelworks sale on track despite hit on state budget
The sale of an embattled steelworks is progressing better than the state government had hoped, despite the toll on the budget of propping up the business.
In the wake of the South Australian budget being handed down and the state being forced to absorb costs in keeping the Whyalla steelworks alive, Premier Peter Malinauskas is positive about the sale of the company.
"We're actively engaged already with potential buyers for the steelworks," he told ABC Radio National on Friday.
"In fact, that's going a little bit better than we had even hoped."
In February, the state government took dramatic action in Whyalla, rushing through legislation so it could place the city's steelworks into the hands of administrators KordaMentha because of the mounting debts of OneSteel's owners, GFG Alliance.
Since then, the SA government had ruled out taking an equity stake in the troubled steelworks but Mr Malinauskas said the federal government has not done the same.
The federal government is "open-minded" to an equity stake and the state government will work in conjunction with them, Mr Malinauskas said.
Supporting the administration of the Whyalla steelworks has taken a big hit on the state budget handed down on Thursday, with next year's surplus revised down from $449 million to $179 million.
Mr Malinauskas said that it is partly the result of the state having to fund the administration 50-50 with the federal government until a buyer is found.
"We're committed to sovereign steelmaking in this country and willing to bear the brunt of that hit," he said.
The budget allocated $650 million towards the $2.4 billion Whyalla "sovereign steel" package announced jointly with the federal government in February.
Treasurer Stephen Mullighan's state budget offered few sweeteners to residents, instead headlining with a $395 million "law and order" package to fund hundreds of extra police officers.
The law and order package includes $172 million across six years to recruit 326 officers, lifting numbers to 5000 by 2030/31.
More police security officers, civilianisation of administrative roles, and recruiting will deliver 630 extra police officers in frontline roles by 2031.
The centrepiece was not welcomed by the opposition who said the government, which is facing an election in March, is "out of money and out of ideas".
The budget also featured $73 million in already announced drought relief to relieve the escalating impact of near-record low rainfall across most of SA's farming regions in recent years.
Mr Malinauskas has not ruled out further drought assistance if the conditions continue despite the pressure on the budget.
"We're going to wait and see how the conditions unfold," he said.
"There's a bit of (rain) forecast this weekend, we hope it buckets down, but if it doesn't, the government will continue to engage with our farming community."
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ABC News
a day ago
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New $384m contingency to keep Whyalla steelworks afloat during administration
The South Australian government has set aside another $384 million to keep the Whyalla steelworks running next financial year — doubling the amount already allocated to keep the plant operating during administration. After tipping the financially troubled Whyalla steelworks into administration in February, the federal and state governments announced they would spend $384 million — split 50/50 — to cover the costs of running the steelworks while they are prepared for sale. But that initial funding will soon run out, with steelworks administrator KordaMentha recently flagging that it could not keep the steelworks running beyond August without more money. Thursday's state budget revealed the state government has set aside another $384 million to keep the steelworks afloat next financial year. The extra money — which is a contingency and might not be spent in full — has been allocated "on the basis" that the federal government will cover half the cost, according to the budget papers. The ABC has reached out to the federal government for a response. SA Premier Peter Malinauskas said the government anticipates there is still "at least" 12 months to run with the administration process. "The objective here is to transfer the steelworks to a new owner — that was always the plan," he said on Friday. "We said from the outset that the first tranche of administration funding wouldn't be the last. We said that we anticipate it would take 18 months." The initial $384 million to keep the steelworks running was part of an overall $2.4 billion "sovereign steel package" put together by the state and federal governments to support Whyalla. The state's contribution to the joint state-federal package was $650 million, according to Thursday's budget papers. Asked if he was confident the federal government would cover half of the new administration funding, Mr Malinauskas said: "That's certainly what's occurred in the past and what we would anticipate occurs in the future." The money is being paid directly to administrator KordaMentha, which took control of the steelworks in February after the government lost patience with former owner OneSteel Manufacturing over unpaid bills and underinvestment. Representatives for KordaMentha have since said they were "shocked" by the state of the steelworks when they arrived, revealing the plant was losing $1.5 million a day before they took over. The administrators have also said the steelworks had "insufficient spare parts", "poor health and safety practices" and instances of "inadequate or no maintenance", leading to high costs in the first six months of the administration. SA Energy and Mining Minister Tom Koutsantonis said at the time it was "fair to say that we have discovered more things than we anticipated that have not been done that should have been done by the previous owners". OneSteel's parent company, GFG Alliance, which is chaired by British businessman Sanjeev Gupta, has previously disputed that it underinvested in safety during its time owning the steelworks. It has claimed to have spent "over $2 billion" on repairs and maintenance upgrades "to make Whyalla fit for purpose". "The safety of our people was always our number one priority and our record of an improvement in safety during GFG's ownership, speaks to that commitment," a GFG spokesperson said in March. The ABC has contacted KordaMentha for comment. Mr Malinauskas expressed confidence in the administration process today, saying the level of interest in the steelworks from both domestic and foreign companies is "higher than what we anticipated". KordaMentha has previously said there are up to 12 companies interested in buying the asset. "This is a massive integrated mining and steel production proposition — it is an exceptionally complex business in an even more volatile global market," Mr Malinauskas said. "So, anybody that's going to buy the steelworks … is going to need to do a lot of due diligence. "That work is what we're starting to see, many businesses have already had access to the site as a precursor to the formal sale process, that has gone well both overseas and domestic industrial players. "But there is a lot of work to be gone through here before they are going to result in a final transaction."
