Refinancing a Bankrupt Business at Taxpayer Expense

On December 6 2019 in my article Westbury Prison Part II that was published on Tasmanian Times, I wrote:

The first smelter to close will be the TEMCO smelter at Bell Bay employing about 300 people. It processes manganese used to improve the strength of steel and aluminium. South32 owners of TEMCO announced in May 2019 that it was reviewing the operation and that the company would provide an update in October; no further comment has since been made.

The smelter was sold in August 2020 to Sanjeev Gupta’s GFG Alliance with completion subject to approval from Australia’s Foreign Investment Review Board. Upon satisfaction GFG will make a nominal payment and acquire 100% of the shares in TEMCO.

It would appear that little or no money has so far changed hands and that the whole operation has yet to be finally transferred or should I say gifted to the Gupta group companies. It would be interesting to see the TEMCO staff employment liabilities in this contract and to whom and how they were or will be transferred. The estimated Tasmanian Government superannuation liability as of 30 June 2020 is A$7 billion yes A$7 billion; such matters are of seemingly no concern to our live now and pay later pollies.

In 2017, GFG Alliance, led by Gupta, acquired the South Australian Whyalla Steelworks, associated iron ore mines, the Port of Whyalla and the associated steel manufacturing, recycling, and distribution businesses for a nominal sum. Arrium had been in voluntary administration for over 12 months with $4 billion in debts. The acquisition effectively saved 5,500 jobs and the viability of Whyalla. The Mayor said that:

… the proposed transformation of the steelworks would transform not only the company’s operations, but also the entire community. The company’s vision for the region had the community’s full support.

Gupta’s companies have aggressively sought state funds for investment post-acquisition. Gupta’s Australian Steel group lost A$125 million in the last financial year. The South Australian Small Business Commissioner Mr John Chapman has warned his state government not to commit A$50 million to Mr Gupta’s companies until they commit to paying their suppliers in 30 days.

This is seemingly the Gupta modus operandi.

The former mayor of George Town and now Liberal Party Federal politician Bridget Archer claimed the credit for the TEMCO deal in her press release of 13 August 2020:

As resident in the George Town community I know first-hand the relief this will bring to the approximately 300 employees of the George Town plant and to the local economy.

During the 12 months since being elected to federal parliament and previously as Mayor of George Town, I have been working closely with stakeholders, including the state government on securing a future for the plant.

I congratulate the state government, particularly Minister for State Growth Michael Ferguson for his tireless work in bringing stakeholders together leading to this positive outcome.

The future supply of electricity from Hydro Tasmania is an area worthy of consideration regarding the possibility of the future corruption over due process. Has a warning been issued by Hydro Tasmania to the state government over any further reductions in the price of Hydro’s electricity as supplied to the aluminium smelter under the ownership of TEMCO?

I ask Archer what is the current price and how much of our most valuable clean and green electricity is removed from the Tasmanian grid at a loss to Hydro Tasmania all to subsidise employment at TEMCO?

Are Tasmanian paying an unnecessarily high price to heat and power their homes through winter so as to keep Hydro solvent while Hydro gifts a valuable public good owned by Tasmanians to the smelters? The scrapping of the carbon tax by Abbott, Abetz and their Liberal Tasmanian friends to win an election saw Hydro’s carbon tax cash instantly vanish yet Hydro continues to gift our water and the resultant power to the state’s smelters at below cost.

The actual amount of power delivered, and the real cost, is a very closely guarded government secret. Due to climate change, the generating lakes remain at historically low levels, levels that saw the smelters close during the Bass Link crisis, having been run down to virtually empty to generate cash for Hydro Tasmania.

It is known that Norske Skog, Nystar, Rio Tinto Alcan and TEMCO collectively consume around 5800 GWh per annum. This is more than half of the energy supplied by the Tasmanian power system; best estimates therefore are that 45% of Tasmania’s generated electricity is used for the purposes of smelting.

It is an uneconomic use of a major state good by complicit politicians to protect industries in terminal decline.

The Federal Liberal MHR Bridget Archer served on George Town Council from 2009 as Mayor before her election to the seat of Bass by a margin of 563 votes in the last Federal election. Without her winning the seat Australia would have had a hung parliament, yet the Liberals cannot see the peril they are now in as a clever entrepreneur starts to tie them up in knots.

Gupta in his press release regarding the TEMCO acquisition stated:

While living in Australia, I visited Tasmania a number of times and was impressed by its natural beauty, its commitment to renewable energy and the diversity of its industries. Most of all I was inspired by the Tasmanian Government’s passion for green industry and underpinned by long-term, sustainable, and quality jobs.

The welcome and encouragement the government extended to me to invest in Tasmania, played no small part in the conclusion of this agreement today. I’m certain it will lead to GFG taking a leading role in the future development of industry in Tasmania.

I am passionate about industrial communities with a long heritage, their commitment to see their facilities succeed is a testament to the human spirit. I look forward to visiting George Town again as soon as possible.

As we have seen, in the past Gupta companies have brazenly sought state funds for investment post-acquisition. To avoid widespread redundancies there may be more taxpayer money available in Tasmania in a less obvious form: the commercial in confidence electricity subsidy that will further test the finances of Hydro Tasmania. Hydro is the jewel in the Tasmanian crown abused by Liberal governments as a cash cow to hide their fiscal deficiencies. Hydro has lost $467m, or 23 per cent, of its value in two years.

Will Hydro at the government’s insistence, agrees to a deal with Gupta to keep Archer in her seat at the next election?

A deal that will allow him to turn around a dud smelter at the expense of all Tasmanians and their ever-increasing electricity bills?