Basic problem at Whyalla isn't the hydrogen but rather it's the viability of the steelworks itself no matter what energy sources and technologies it uses.
Govt puts Steelworks in administration
UPDATED: The state government has taken control of Whyalla Steelworks, plunging it into administration with special-purpose legislation.
The Whyalla Steelworks. Photo: Thomas Kelsall/InDaily
Billionaire Sanjeev Gupta’s sprawling GFG Alliance no longer runs the Whyalla Steelworks after legislation rushed through both houses of Parliament today.
The state government has appointed advisory and investment firm KordaMentha as an administrator of the Steelworks, to stabilise operations and explore a possible sale to a new owner.
Premier Peter Malinauskas said the state government is not contemplating owning the Steelworks.
“For months, my government has been carefully planning a strategy to address the challenges unfolding at the Whyalla steelworks,” Premier Peter Malinauskas said.
“Throughout that period, we gave GFG every opportunity to make good on its promises and to bring creditors back into terms. It has failed to do so.”
Malinauskas addresssing the media today. This picture: David Simmons/InDaily
The government said workers and contractors will be paid and the administrators will be able to trade on and pay debts incurred during the administration period.
It follows months of uncertainty for workers at the Steelworks and suppliers to the facility which racked up sizeable debts to creditors including the state government which is believed to be owed “tens of millions of dollars”.
“Employees of the Steelworks will now have their futures assured,” Malinauskas said.
“During the administration workers and contractors will continue to do their job and will be paid with the benefit of a government guarantee.”
The premier said he was “relieved” to talk about this publically.
“I stand here now, with hand on heart, being able to tell the people of Whyalla what our plan is,” he said.
“For the people in Whyalla it means they’re in a far better position now than they were this morning.”
Later today, Malinauskas will travel to Whyalla and it is expected he will make further announcements tomorrow about the Steelworks future.
Significant issues began at the steelworks last year when its blast furnace broke down twice over the course of six months, leading to major delays and losses for the facility’s owner.
Last week, GFG announced it had reached a commercial agreement with Greensill Capital and said it would sell its Tahmoor Coking Coal mine in New South Wales to divert money towards Whyalla.
GFG said the agreement remained subject to a final binding legal agreement and marked “the final chapter of GFG’s debt settlement which has been under negotiation since the collapse of Greensill Capital in March 2021”.
The Whyalla Steelworks operations previously fell into administration in 2016 when its former owner, ASX-listed Arrium, collapsed. Arrium was sold to London-based GFG in 2017 in a deal heralded by former Premier Jay Weatherill as a “victory for South Australia”.
In September, it was revealed that the state government has requested advice as part of “contingency” planning to be ready if the operator calls in administrators.
The news comes after weeks of pressure on the operator of the Whyalla Steelworks from both the local media and the state government.
Revelations that the steelworks owes tens of millions of dollars to the government and businesses were publicised, while the Premier flew to Whyalla to “gather intelligence” from creditors.
State cabinet’s Upper Spencer Gulf subcommittee met in Whyalla on Tuesday and Malinauskas said it was an important opportunity to speak to creditors, the mayor and council team, unions and the chamber of commerce.
Under questioning in a state parliament committee hearing, SA Treasury chief executive Tammie Pribanic revealed GFG owes SA Water about $15 million in unpaid water bills.
Opposition Leader Vincent Tarzia said it was “absolutely outrageous that SA should be paying for $15 million in unpaid water bills of a billionaire” and he called on the premier to guarantee the bill would not be footed by taxpayers.
The South Australian government’s move to push the Whyalla steelworks into administration was about no less than preserving Australia’s sovereign steelmaking capacity, premier Peter Malinauskas said, adding that the operations were on a seemingly “irredeemable” path to failure under the ownership of British steel magnate Sanjeev Gupta.
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.
Peter Malinauskas on Wednesday. Picture: Dean Martin
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, with Mr Malinauskas to fly to Whyalla on Wednesday night ahead of further announcements on Thursday.
Mr Malinauskus 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 told a press conference.
“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 that this government has always had.’’
Mr Malinauskas said the government’s hand was forced by what it saw as essentially an emergency situation.
The SA government has lost patience with GFG Alliance’s Sanjeev Gupta. Picture: Supplied
“There are a number of elements which have led us to making the decision that we have done today, but none more so than the fact that state government has been in receipt of advice from our Steel Taskforce that the owner of the steelworks’ financial position wasn't just deteriorating, it was likely to continue deteriorating into the future, and more than that, it was compromising the very operations of the steelworks itself.
“That advice completely accords with all of the information that we are receiving on the ground from people who work within the steelworks.
“Given the state of the steelworks was going from bad to worse, and the finances of its owner were compromised, it ran the very real risk that as every week and month went by, where the owner of the steelworks was not able to invest in the operations appropriately, it was approaching a point where it would be irredeemable.
“That is unsatisfactory. That invites government intervention.’’
The government revealed last month that Sanjeev 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 that 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 significant debts at its Tahmoor coal mine 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.
In parliament on Tuesday, he warned the directors of GFG directly that they should be mindful of their fiduciary duties not to trade while insolvent.
“The obligation, first and foremost, is on the directors of GFG,’’ he told parliament.
“The Corporations Act outlines very clearly, in a way that is not open to interpretation, the obligations on directors of companies in this country.
“And the obligations on those directors include ensuring that they are trading in a way that is solvent, that is to say that debts are being paid, as and when they fall due.’’
Mr Malinauskas called the state’s Upper House MPs to an emergency meeting at 10.30am on Wednesday, with MPs not told of the substance of the meeting beforehand.
Standing orders were suspended for the legislation to be able to be passed in both the lower and upper house.
British industrialist Sanjeev Gupta at the Whyalla 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 $13m-$14m a week.
But the executive chairman of GFG Alliance would not give a specific date for when creditors at the steelworks will be paid in full, saying 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 that a deal had been agreed to – although not legally finalised – which would wipe the company’s slate clean globally – while also announcing GFG would sell all or part of the Tahmoor coal mine in NSW, with bids expected in the $800m range.
GFG is also trying to finalise a $US100m debt package, with that money to go towards operational costs and paying creditors at Whyalla.
Mr Gupta told The Australian that 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.
The port operations at Whyalla have also been under pressure.
“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,’’ Mr Gupta 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.’’
Around 3000 staff work for GFG in South Australia, directly and indirectly.
Let's just say you aren't the first person to have that thought and nor am I.
The counterargument is no pain, no gain.
Turbines for hydrogen plant to be on-sold after industry plans shelved
State-of-the-art turbines acquired by the state that were set to power SA’s electricity grid will be on-sold after the government shelved its hydrogen industry plans yesterday.
A render of GE Vernova's LM6000VELOX turbine. Photo: GE Vernova
Four gas turbines acquired by taxpayers in November last year as part of ambitious hydrogen energy plans will be on-sold after the state government “deferred” its goal of establishing a new industry in order to divert funds for a Whyalla Steelworks rescue package.
Energy and mining minister Tom Koutsantonis confirmed in Parliament yesterday that the turbines would be on-sold “for the original purchase price or higher – with the guarantee they will be installed in South Australia to provide additional generation capacity”.
In November, the government announced it had secured an agreement with ATCO Australia to contract GE Vernova to supply a first-of-its-kind aeroderivative gas turbine solution, capable of running on hydrogen fuel.
The four turbines would have operated at the Whyalla hydrogen power plant. Hydrogen fuel would have powered the LM6000VELOX turbines to provide power to the state’s electricity grid.
The agreement was signed at COP29 in Azerbaijan. If installed as part of the government’s now-shelved $600 million hydrogen plans, it would have been the first time a GE Vernova power plant project would have been powered by aeroderivative gas turbine combustion technology capable of operating on 100 per cent hydrogen.
Yesterday, Koutsantonis said the government “remained committed to the establishment of a hydrogen industry in Australia”.
“The Office of Hydrogen Power SA – or OHPSA – will continue to operate, with a focus on exploring and facilitating investment opportunities for a hydrogen industry in South Australia,” Koutsantonis said.
“OHPSA has undertaken a significant body of work, including the procurement of hydrogen-capable gas turbines.
“The world wants green iron and steel, and hydrogen will play an important part in that transition. But South Australia can only manufacture green steel with a strong, sustainable Whyalla Steelworks. This must be our priority.”
The government’s plans for a green hydrogen hub at the Upper Spencer Gulf were shelved yesterday, with the $600 million allocated for its development and construction instead being diverted to the Whyalla Steelworks rescue package.
Announced yesterday, the state and federal governments will invest $2.4 billion to support the steel industry and creditors left hanging in the wake of the administration of the Whyalla Steelworks.
“What we’re doing is we’re relieving them of all the burden and the struggle associated with the administration so they can get on with doing what they do best, and that’s keeping this place running and making steel in this country,” Premier Peter Malinauskas said yesterday.
Where there's a will there is always whyalla
I understand your sentiment John, but Australia has an opportunity on a small scale, to try and see if green steel is possible.
Fortescue reconsiders US hydrogen timeline
Fortescue is considering pausing almost $1 billion of approved hydrogen projects in Australia and the United States as it assesses the second Donald Trump administration’s attitude to clean energy.
The miner controlled by Andrew Forrest cut its full-year capital expenditure forecast by one-fifth to $US400 million ($630 million) at its energy division, reflecting reduced spending on green fuels projects and their slow adoption.
Fortescue boss Andrew Forrest has been a vocal proponent of green hydrogen. Domenico Pugliese
Fortescue warned that the election of Trump as a second-term US president has called into question the development timeline for its $US550 million green hydrogen project in Arizona, after grants promised under the Biden administration have been threatened.
The miner is also considering the time frame for its $150 million electrolyser manufacturing facility in the Queensland city of Gladstone.
“For the Arizona project, the Trump administration has been a flurry of executive action around some sections of the [Inflation Reduction Act] from the grants that come into question and including hydrogen production tax credits,” said Fortescue Energy chief executive Mark Hutchinson.
“Until we have a much clearer view on that, we are being quite cautious about what we’re doing. We’ve spent about one-fifth of the capex on Arizona, so we’re being very cautious, very disciplined about the money we spend. We’re waiting on the outcome of several elections globally.”
He added that Fortescue remained “fully committed to hydrogen”, and that more clarity on the projects would be announced at the financial year-end.
Hydrogen setbacks
Last July, Fortescue axed 700 jobs and slowed its push into green hydrogen and ammonia by pulling back from its complex at Gibson Island in Queensland. The miner refused to confirm how many of those job cuts were specific to its energy division.
Fortescue hopes its Arizona Hydrogen plant, which is scheduled to begin production in 2026, will spur the decarbonisation of heavy transport in the southwestern US. Low-carbon “green” hydrogen is made by using renewable energy to split water into its constituent parts.
However, Fortescue and rival Woodside Energy have seen their commitment to US hydrogen projects questioned following the introduction of rules that make it tougher to access government tax credits.
Hutchinson also poured cold water over the outlook for Fortescue’s green ammonia projects in Norway and Brazil, which may not be progressed unless customers were found. “We’re not going to bring [the projects] to the board until we’ve locked in the buyers,” he said.
Meanwhile, South Australia has scrapped its plans to build a green hydrogen plant at Whyalla, marking a blow to the Albanese government’s vision for the energy source.
Thursday’s hydrogen setback came as Fortescue’s interim profit fell by more than half, prompting the miner to slash its dividend. Its shares, which have lost more than one-third of their value over the past 12 months, declined 6 per cent to $18.28.
Perth-based Fortescue increased iron ore production to a record high during the December half, shipping 97.1 million tonnes, as commodity prices sagged.
Net profit slumps
The wobbling Chinese property sector has weighed on prices of the key steel-making ingredient, forcing Australian iron ore miners to increase production to underpin revenues.
Fortescue posted net profit after tax of $US1.55 billion – less than half the $US3.3 billion reported a year ago and 12 per cent lower than analysts were expecting. Revenue during the final six months of 2024 was down by one-fifth at $US7.6 billion.
Investors will receive less than half the $1.08 payout they pocketed a year ago, with Fortescue proposing to pay a fully franked interim dividend of 50¢ a share. The payout ratio of 65 per cent of Fortescue’s net profit was unchanged.
The dividend is worth about $560 million to Andrew and Nicola Forrest, who separated in 2023 and collectively control 36.7 per cent of the miner.
Fortescue noted higher costs at its troubled $US3.9 billion Iron Bridge project, which the miner warned was unlikely to reach its production capacity of 22 million tonnes by its September deadline. Guidance for Fortescue’s full-year iron ore shipments remained unchanged, despite disruptions from cyclones in the Pilbara region.
Jarden analyst Jon Bishop said the results undershot consensus expectations, and warned that the falling iron ore price could place future dividends under pressure.
The miner did not offer an update on a native title claim that was filed against Fortescue and the state of Western Australia that has almost doubled to $1.8 billion.
The Yindjibarndi people have sued Fortescue and the state of WA to compensate for lost economic benefits and cultural and spiritual damage caused by its Solomon project in the Pilbara.
Fortescue mining boss Dino Otranto declined to discuss the claim, but said the miner had “never shied away from the right compensation outcome”.
Otranto also highlighted Fortescue’s $254 million takeover of junior rival Red Hawk, which “fits well within our portfolio”. The buyout gives Fortescue access to Red Hawk’s Blacksmith iron ore deposit, 30 kilometres west of its Solomon operations in the Pilbara.
Nearly half of all SA hydrogen projects quietly ‘archived’
Of the 15 previously “active” hydrogen projects in South Australia, seven have been quietly moved to a list of “archived” projects on a government website.
A render of the now-shelved Whyalla hydrogen plant. Photo: Supplied
Just eight hydrogen projects in South Australia are active, with a further seven moved quietly to a list of archived projects on the CSIRO website.
This list of archived projects includes the South Australian Government’s $600 million hydrogen facility, which was shelved in February with funds diverted to support businesses in Whyalla following the administration of the city’s steelworks.
Other archived projects include Neoen Australia’s Crystal Brook Energy Park near Port Pirie – which received $1 million in state government funding for a feasibility study – and the company’s proposed hydrogen export project near Burra which received state government approval in 2021.
Singapore-based Trafigura Group’s Port Pirie Green Hydrogen Project is also on the archived list. That project would have created a large-scale renewable-based hydrogen manufacturing facility at Port Pirie, with a $5 million front end engineering design study for the Port Pirie Green Hydrogen Project jointly funded by the company and the state government.
Further, AGL’s Torrens Island Green Hydrogen Hub was archived in October last year, with the energy giant noting market, pricing and regulatory pathway challenges when announcing the project was paused “indefinitely”.
A joint South Australian and Victorian project being led by Australian Gas Networks has also been archived.
The organisation was investigating the feasibility of 10 per cent renewable hydrogen in gas distribution networks, transitioning to 100 per cent hydrogen over the long term in both states. The project attracted Victorian and South Australian government funding.
Meanwhile, the South Australian Government’s Port Bonython Hydrogen Hub is included on the list of archived projects with the caveat it has been moved to HyResource’s Hubs Webpage. But that project encapsulates a number of other projects such as the shelved Whyalla Hydrogen Power Plant, the Cape Hardy Green Hydrogen and Industrial Precinct (which remains active), the Renascor Resources Siviour Graphite Project and the Northern Water Project.
In operation
The majority of South Australian hydrogen projects remain active, including one operational project: Australian Gas Networks’ Hydrogen Park South Australia located at the Tonsley Innovation District.
The Tonsley project is just one of 15 hydrogen projects nationally that are operational. In Australia, there are 92 active hydrogen projects either under development, in construction or pre-operational.
According to the CSIRO data, the next South Australian project set to become operational is Marubeni Corporation’s Green Hydrogen and Battery Energy Storage System.
This $17.5 million project – funded jointly by Japan’s Ministry of the Environment and the company – is expected to be operational this year, and consists of a demonstrator scale hydrogen production and battery storage system at Bolivar. It’s considered a “proof of concept” project for the transport of hydrogen absorbed in a metal hydride tank for safe handling and utilisation in Indonesia.
Kimberly-Clark’s Millicent Mill Green Hydrogen Project is another active project. At this stage it is just a feasibility study to determine whether to replace the energy supply of Kimberly-Clark’s Millicent Mill with renewables-based hydrogen.
Another project “under development” by Australian Gas Infrastructure Group is the proposed Hydrogen Park Adelaide which would blend renewable hydrogen with natural gas at volumes of up to 20 per cent into Adelaide’s gas network by 2028. The project is working towards financial close before the end of 2025.
Amp’s Cape Hardy Green Hydrogen Project is another “under development” project that is estimated to cost $40 billion. It would see Amp create a green hydrogen and green ammonia production facility on the Eyre Peninsula in partnership with Iron Road Ltd.
Other projects “under development” but with no operational date announced include The Hydrogen Utility’s Eyre Peninsula Gateway Project, Hallett Group’s Green Cement Decarbonisation Project, and Vast’s SM1 project at Port Augusta.
Premier Peter Malinauskas told ABC Radio Adelaide yesterday that the state government was “dramatically curtailing the Office of Hydrogen Power”.
“There’s work that is being led by my Department, the Department of Premier and Cabinet at the moment, in conjunction with the Department of Energy and Mining to actually work out what that looks like and where it ends up. There will still be some work that is being done within government about hydrogen because it’s not just about the steelworks, it’s about other opportunities as well, but it’s going to be in a very, very smaller state,” he said.
“At the moment the office is there, it’s been curtailed, there is work that should continue because it’s in the economic interests of the state but in terms of what happens to that particular unit that is being worked through as we speak.”
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