Topics: Arrium; meeting with POSCO; Hazelwood
But I should have on my phone now, and I think he's in China, we'll find out where, Minister Greg Hunt. Greg, good morning and welcome.
I'm extremely well thank you.
Tell the people of SA where you are.
At the moment I'm in Beijing.
It's early in the morning here, and I've just come from Korea where, along with Tom Koutsantonis and the head of the AWU, we were at the POSCO steel plant in Pohang, doing our absolute best to help present a united front for POSCO to invest in and actually expand production at Whyalla.
All right. Where are we with that? Have they made a decision? Does it look good? Where do you think we stand?
So POSCO is certainly making a very serious and very significant offer.
The decision maker is actually the administrator, which is KordaMentha and the creditors, so the people who are owed money.
But POSCO's plan is about not just purchasing and keeping the Whyalla plant open, it's about investing in a new technology called FINEX, which they have installed at their extraordinary plant in Korea, which makes 16 million tonnes of steel a year.
And this would expand capacity at Whyalla by 50 per cent, reduce costs, improve quality, and just as significantly include a 220 megawatt gas power plant using the waste gas.
So that would provide stable, reliable, affordable electricity for the plant itself, for the Whyalla steel making facility, and for the electricity grid past Port Augusta. So a very significant contribution to South Australia in terms of jobs and affordable, reliable electricity.
This would be, if it comes to fruition, the best news we've had in South Australia for a couple of years, easily. Easily.
I think for Australian manufacturing, not just South Australia, this would be an immensely important step.
One of the things is the POSCO management had been to Whyalla, they had looked at the work practices, and their view was that it's an outstanding workforce.
They were really, genuinely supportive of the workforce, which was just tremendous to hear.
They said they're creative, they're efficient. The issues were with the costs of electricity, the costs of shipping, and so they had plans to make the plant dramatically more efficient.
And to put in place a major investment, both on the production side, which is the new technology, the innovative steel making technology which they're pioneering in Korea themselves, and then secondly to put in place the new gas-fired power plant, which would come from the waste gas.
So this, on every front, would be good for South Australia.
So the only thing standing in front of this would be whether or not the people owed money by Arrium would say yes, or whether they want the company broken up to get their money because they believe that they might get a better deal.
Is that where it stands?
That's exactly right, and we would urge, obviously, all of the creditors to take the biggest picture approach, because preserving the steel plant, and in fact investing, modernising and innovating, would have a huge impact, a positive impact on South Australia.
It would help with, you know, for the banks that are concerned about their investment, they also have to be aware that it’s a decision which would impact Whyalla would impact on the mortgages, it would impact on their overall profitability.
So the big picture here is all about the humanity and the community of Whyalla, and it's also about the profitability of the banks and the plant themselves.
There's a very clear way forward, and that is, I think, this proposal, or if there are any other similar proposals we would welcome them just as much.
Now, is it not the case that back in 2012 POSCO made an offer for Arrium but it was unsuccessful?
That's correct. POSCO did point that out yesterday, not with any sense of glee or righteousness.
They actually made the point that we have been interested in modernising and upgrading the Whyalla plant for quite a while.
They made a bid in 2012 and that was unceremoniously knocked back by the board and management of the day, but they're back and they're back in a very positive way.
And one thing that we did yesterday was we worked as a team.
A very unified team with Tom Koutsantonis, South Australia putting forward the things that they could do to assist, the Australian Government putting forward the things we could do to assist, and we had the head of the AWU, Scott McDine, all three working as a seamless team.
Any partisan differences just evaporated. All that mattered, and all that does matter, is this sense of giving Whyalla, South Australia, and Australia the opportunity at being one of the world's most innovate steel makers.
Do you have any idea, just for interest here, what this deal in monetary terms is worth? If they're going to buy Arrium, what would they pay for it?
No I don't, and that's because it's in the hands of the administrator and that's not something that I've been looking to know, and in fact I'd prefer not to because the administrator will run their process, and they have to work with all the different bids or parties.
What I care about is that we get an outcome for Whyalla, and that's why the Australian government put on the table assistance for the power plant through the Clean Energy Finance Corporation, and for any other investment through the Export Finance Insurance Corporation.
And the South Australian Government, and I'll let Tom Koutsantonis speak for them, was also very constructive, and the unions were very constructive.
So we're trying to make it as easy as possible for POSCO to put forward an investment.
We're also happy to talk with any other potential bidders, but these are the only ones that are public and have been made known to us by the administrators and through POSCO's own public position.
Well when Korea was building its steel industry back in the 1960s, the first place they visited was Whyalla.
So I suspect that they've been interested in the plant there for a while.
So basically, once the administrators decide what to do, that's when we'll know what the future is. Is that the way it's going to be?
Look that's absolutely correct.
And they are the effective private owners at this point in time. They're acting on behalf of the creditors, the people who are owed money.
But the creditors have to look at the overall picture. Now I don't know what the bid price will be. That's something between POSCO and any other bidders, and the administrators.
But I do know that this could be a tremendous outcome for Whyalla and South Australia and would actually give the banks a tremendous shot at managing their overall risks.
I think you have to look at the risks to the town, as well as the risks to the steel plant.
And if they can put value into the mortgages, value into people’s homes, that is of deep social importance, but it's also in hard-nosed economic terms, something that is absolutely in the bank's interests.
Greg will you keep us in the loop on this? This is a tremendously important announcement.
I'm optimistic that there'll be a really good outcome. But it this not an example where this is the good side of trade, where we can actually combine with another country and its expertise and build things together for mutual benefit?
This is innovation and trade writ large, where it's all about, not just securing Australian jobs, but creating new jobs and investment.
That's the point that sometimes people worry about the term innovation, and I absolutely understand, but the only way for our manufacturing businesses to remain here and to thrive is to be world class competitive.
International skills, international capital or investment are fundamental to that. It's about making sure that in a global economy, you're connected in.
And if you are connected in, and if you are world class, and the only way to be world class is to be innovative and at the cutting edge, then Australian firms can absolutely prosper.
Now the other thing we have to control, of course, is to make sure we give them the most competitive arrangement in terms of electricity prices.
And we're also fighting at a national level, to make sure that South Australia has, as part of the national grid, the most competitive electricity prices that they can.
Well you won't be happy that today it's being announced to the Victorian workers at Hazelwood, that that power plant is to be shut in March, because it's coal.
But we're not going to reduce coal consumption, we're going to get it from somewhere else. So there's nothing green about it.
Well what's happened here, and you're absolutely right, I am deeply concerned for the workers, the company will make their announcement, I'm advised, in all likelihood later today.
And we'll respond to that with a very significant and immediate Federal Government package.
But what's happening here is you've got Federal Labor calling for workers to be put out of their jobs, not just in energy, but also in manufacturing.
Sam Dastyari moved a motion in the Senate, only a few weeks ago with The Greens, calling for the closure of energy plants and manufacturing plants in Australia.
The party of the worker, allegedly, has now become so captured, and so closed, that they are literally delighting in and thrilling in, closing down jobs on a mass scale.
I have never seen anything like this in Australia. Our concern, our focus is for the workers and for the impact on the price of electricity.
Greg Hunt, thanks for joining us and a safe trip back, and again, you'll keep us in the loop, won't you?
Absolutely. I do say that I came hopeful, but I leave confident that there is a deep long term future for Whyalla and steel in South Australia.
That's the Federal Industry Minister, Greg Hunt, who's called us from Beijing.