Bills

Whyalla Steel Works (Port of Whyalla) Amendment Bill

Committee Stage

In committee.

Clause 1.

Mr PATTERSON: I did not speak on the fact that we had a hybrid select committee, but it is worth opening up and acknowledging that that occurred. We sat over the lunch break and gave it consideration. As I said in my contribution earlier, the ability to have access to KordaMentha and some of the affected parties subject to the court proceedings would have also helped; however, that was not to be the case. We did ask some questions and maybe we will go over some of those questions here in this forum to put them on the record.

As a first question, minister: a lot of this is based upon the purported lease that is said to be in existence between OneSteel Manufacturing and Whyalla Ports Pty Ltd. Can the minister talk through the timelines of that purported lease and what the implications are of potentially having a purported lease in place?

The Hon. A. KOUTSANTONIS: I want to thank the shadow minister because he was very constructive in the stages of the select committee. It is a unique situation. It is understood, based on the information filed with the federal court, that the purported lease was apparently executed by OneSteel and Whyalla Ports on 29 June 2018. The initial term of the purported lease is stated to be 1 January 2012 to 31 December 2018. The purported lease contains a 99-year extension clause. No evidence has been forthcoming that this extension has ever been exercised. Whyalla Ports Pty Ltd claims that a party seeking to terminate the purported lease during the holdover period must give two years' notice under this purported lease.

The purported lease, in an alternative provision, provides for termination upon six months' notice. A few departmental officials and contractors associated with the Steel Task Force became aware of this purported lease in 2021. OneSteel never requested consent from the state for the lease; accordingly, a decision-making process was never commenced by the previous government.

So it is fair to say that what this legislation does is enliven what we believe to be the case as of today, anyway. The reason we do so is that it was the vision of Premier Playford that, when the indenture was first granted, a pit-to-port operation was governed by an indenture. The ability of one party to alter or enter into an agreement without the support of the government undermines the indenture process. So what in fact the parliament is doing—rather than any claims of sovereign risk, what we are actually doing is protecting the rights of the indenture and the right of the state to make indentures. What we are actually doing is preserving rights rather than restricting them.

I think that answers the question the member asked. I know he asked questions of the chief executive. We are confident in our position, but we want to have clarity for the sale process. We want to make sure that we get the very best opportunity to see Whyalla ultimately sold in a process by the administrator in a way which maintains the integrity of the indenture, which is an integrated operation from mine to process to plant to port.

Mr PATTERSON: Thank you for outlining that, minister. We talked about the fact that there is a judicial process underway, subject to court proceedings. My understanding is that the administrator, KordaMentha, has taken up, prior to this legislation coming into parliament, the cause that the purported lease is invalid and other means. This has led to court orders being issued to hear this matter, I think on 2 June 2025. It will take about 3½ days, according to the court order.

It states in the matter, if I read the court order of OneSteel Manufacturing Pty Ltd—who is taking the action via the administrator, named here as the plaintiff—that Whyalla Ports is the defendant. In addition to that, which we will touch on in other questions, Golding Contractors Pty Ltd has had leave to intervene to be added as a defendant. We are mindful that there is a judicial process listed reasonably expeditiously, because the application to the court has obviously been since the administrators were appointed in February. That is expected to last for 3½ days, after which—as your advice indicates—the expectation, it seems, from the government is that the matter will be found in favour of the plaintiff.

Maybe, to start off with, if you could talk about what advice you have been given, and by whom, as to allowing the court process to take place in the natural way. What advice has been given, and by whom, to instead be able to put this legislation which, as has been said, aims to give clarity to the indenture? As I said in my speech, that is what is underpinning the indenture: the fact that the mine, the steelworks and the port are joined. I am not asking this in a combative way but in a way so that the committee and the public of South Australia can understand, because this is a quite a serious bill we are dealing with.

The Hon. A. KOUTSANTONIS: We did seek legal advice, as you would be aware, but obviously I cannot share that legal advice with you, as is longstanding practice. Also, I do not think you are being negative at all; I think you have been very constructive throughout this entire process. From the initial legislation that we brought to the parliament that enabled the state to put GFG Whyalla Steelworks into administration through to this process, you have done what any good opposition spokesperson would do, and that is: question, ask, but ultimately make your own independent decision. You have decided to support it and we are grateful for it.

The government is confident that we are doing the right thing. The government is confident that out of an abundance of caution we want to clarify the consequences of noncompliance with the consent clauses in the indenture. The matter is being pursued in the Federal Court involving KordaMentha, Whyalla Ports and other parties. It goes to matters beyond what is being dealt with by this bill, including extending to the channels.

I have outlined the reasons earlier, but we are confident in our standing in what would occur in any court proceedings—but that is for a court to decide. What we are doing out of an abundance of caution is making sure that we can maintain what we believe was always the intention of the indenture: to maintain an integrated steelworks that went from mine to port. That has been a universal, bipartisan vision since it was implemented by Sir Thomas Playford, whose portrait hangs behind me.

The reason we have done that is that the mining operations in isolation are profitable. The port operations in isolation are profitable. What makes the steelworks able to survive is the two other operations sitting alongside it. The mine produces more ore than is used in the steelworks, so the export of that ore helps to, in some respects, hold up the operations of the steelworks, and the port gives us access to markets and the ability to move product as quickly as possible.

As I said earlier, the intent of our legislation is not to introduce sovereign risk; it is to protect the indenture and protect companies that enter into an indenture agreement with the government to know that they are robust and that one party cannot simply make a change to an indenture agreement without the consent of the government.

I think the opposition already know this: if the previous government had wanted to give consent to Whyalla Ports, they would have, but they did not. Either they did not know about it or a process was not begun, but for whatever reason consent was not given. What we are simply doing is clarifying that position today because of the unique circumstances that we are in where OneSteel is in administration and we are seeking to save Australian steelmaking.

We have billions of dollars of commonwealth money on the line here that is going to be invested in South Australia. We want to be able to, as quickly as possible, have this integrated steelworks sold to another party clean—as the indenture had always intended it to be. The indenture had always intended an integrated steelworks and that is what we are preserving through this legislation.

Mr PATTERSON: My question went to what advice have you received and who did you receive it from? I perhaps did not hear exactly. If you could still provide that as part of this follow-up question. Has the government undertaken any consultation with external stakeholders, including KordaMentha, prior to the introduction of this bill? If so, could the minister please outline who they were and how those discussions helped to inform this course of action?

The Hon. A. KOUTSANTONIS: KordaMentha operate independently from us. They operate under the Corporations Act, so they do not take instructions from us. We have consulted with the Solicitor-General and we have received advice from him. We have received advice from Brendon Roberts KC and Lipman Karas on this process and we are confident that we are acting in the best interests of the state based on that.

In terms of the consultation, this is a matter of an indenture in this parliament. We have had the select committee on the hybrid bill. The only other interested party is OneSteel; OneSteel is in administration. We are protecting the integrity of the indenture.

Mr TEAGUE: Perhaps just while we are characterising the circumstances that we are dealing with, it might be convenient to have reference to NRW Holdings announcement to the ASX yesterday. I wonder what, if any, part of this summary of the circumstances does the government disagree with. NRW indicates in its announcement that it was confident of a successful outcome for its subsidiary Golding at the trial that is listed to start on 2 June, based on but not limited to the following facts:

NRW notes that Whyalla Ports was incorporated and operated as its own entity and business for approximately six years prior to ownership by GFG Alliance.

Whyalla Ports was incorporated on 14 September 2011.

On 29 August 2016, KordaMentha, when appointed as administrators of Arrium, filed a report as to the affairs in relation to Whyalla Ports, which listed and valued the plant and equipment owned by Whyalla Ports Pty Ltd at $199,386,602.91.

On 31 August 2017, KordaMentha sold the shares in OneSteel and Whyalla Ports from Arrium to GFG Alliance.

To the extent the South Australian government purports to say it was unaware of the lease, specifically from at least 9 July 2021, the State of South Australia has been on notice about the lease between Whyalla Ports and OneSteel.

In those circumstances, NRW Holding raises a concern that this legislation will, in effect, determine certain, if not all of the issues that are before the Federal Court for determination at a trial to commence in three weeks' time.

The Hon. A. KOUTSANTONIS: I cannot speak for NRW or the chief executive when he entered into this purported arrangement with security over this purported lease at the very end of the long and troubled relationship he had with OneSteel. There was a long period of time of non-payment; they were trading at the point where they had over $113 million being owed without payment. That was something that Goldings, a subsidiary of NRW, did themselves. The state did not force them to do that.

Then at the very end of that, as the financial realities were becoming quite clear, they claimed to have some sort of security over a purported lease. Whatever due diligence they did over that lease obviously will be examined by their board rather than me giving a critique on the way that they conducted themselves. That is a matter for them to understand that, but we fundamentally disagree with NRW's statement about the merits of their case because the security that they rely on was granted without any consent.

We are a party to that and members opposite were in government at the time, and they did not grant consent, and quite frankly they did the right thing. I suspect that even if the application had been made and there was a process to assess it, the answer would have been the same—the answer would have been no. The reason is for the same reason now: we seek to maintain the indenture because we want an integrated steelworks.

Mines in isolation make money; the port in isolation is an access and would have use; the steelworks is the hard part, and the steelworks is by far the largest employer in the town. The commonwealth government and the commonwealth opposition both agree that it is a strategic interest of this country to maintain structural steelmaking, not just unfinished products but rolled products—structural steel, rail line—for obvious geopolitical reasons and obvious strategic reasons, and the most obvious reason is, of course, defence.

The state knows this is not like a standard commercial relationship. Consent is critical—it just is—because the indenture is what governs everything that occurs within the precincts of the steelworks. NRW are entitled to have their views, they are entitled to have their opinions, but it does not make them right.

Mr TEAGUE: That summary that I was providing, an extract from NRW's statement, might have just been a convenient way to cover a range of things, including the circumstances that are presently being litigated. One observation of NRW was that Whyalla Ports was incorporated back in 2011, and I know it might be regarded as ancient history in many ways, but we have been referring to Tom Playford and the beauty of the indenture.

Is the government able to make some observations just conveniently at this moment about what, if any, difficulty might have been foreshadowed by the incorporation of Whyalla Ports back in 2011 and the events that have led on since then in terms of that separate entity? Was it not a difficulty at all in 2011 and something went off the rails during Arrium's time that led to this difficulty and the need to clarify, then leading to the purported lease? Is there something the government can put on the record about that?

The Hon. A. KOUTSANTONIS: Arrium are entitled to incorporate any entity that they like, but if they enter a lease that is when the indenture is triggered. I do not think it changes our view that we disagree with NRW's assertions, and we disagree with their filings, and we are confident that what we are attempting to do today would have been reflected in any decision. But the courts are independent—they make up their own minds—but we are confident. What we are attempting to do is, in effect, legislate what we know to be the case today: there is no lease because there is a process to grant and approve a lease, and that process was not conducted.

Mr TEAGUE: In light of those answers, does the government have therefore any broader residual concern about this particular point in time of legislating? Has it sought advice about that, knowing that a trial to determine these matters is listed to commence on 2 June? Can the government give an indication as to the comfort it has drawn about the particular issues involved in legislating in the course of litigation that would, I think we all agree, be an alternative means of determining these questions?

The Hon. A. KOUTSANTONIS: I think the best way to put it is obviously the advice is not given to us in isolation: the advice is given to us in the full knowledge that there is a court proceeding on foot. I cannot give you the advice we received. The government is confident the advice was given in the full knowledge that there are court proceedings at hand. We are comfortable that that advice navigates all those potential outcomes, and we are confident that we are on strong ground. That is the advice I have from Lipman Karas, Brendon Roberts, the Solicitor-General and the Crown Solicitor.

Clause passed.

Clause 2.

Mr PATTERSON: Commencement: obviously, this act will come into operation on the day when it is assented to, which will be imminent; that is my understanding as we go through this. Going back to some of the questions about timelines, which then goes to the commencement, the advice given is that there was a purported lease set up in June 2018. There was no knowledge of that provided to the government, and it only came to light I think in 2021 with green steel.

That has been sitting there and never was elevated to a stage where a minister could rule on it. I concur with your observation that had that been formally put to a minister, that there should be a lease on the port subject to an option to extend it to 99 years, it would have been rejected. I think that is a fair observation. If I was then the mining minister, I would have rejected it. It comes to February this year, and the government put through legislation forcing OneSteel Manufacturing into administration. The legislation that went through was carefully crafted to protect the state's interests.

At that stage, had the purported lease been elevated into the Public Service? Was it in the full knowledge of those writing the legislation that they could have also put this amendment and tied it up as part of that legislation, or did the implications of this lease only become understood as KordaMentha were going through their administration process post February and then they realised this was going to delay, cause uncertainty and lack of clarity for a potential buyer, and understandably that is why KordaMentha took the action to take it to court to have this lease ruled as null and void, effectively? I am trying to work through the timelines as well.

The Hon. A. KOUTSANTONIS: Before the administration I had written to OneSteel Manufacturing, which was under the care and control of Mr Sanjeev Gupta, and asked about details of this purported lease, which was being reported on. There was no response. I wasn't getting the information I needed. So when we drafted the initial legislation we weren't attempting a holistic measure to wrap everything up in one bow. What we wanted to do was remove GFG from the operation, care and control of OneSteel Manufacturing because of the harm that was being done to the blast furnace, the operations, the creditors, the general reputation of OneSteel Manufacturing and because of the loss of market share and the fact that the steelworks was on its knees and he only had about a day or two of coke and coal in storage and on the water. The whole thing was unravelling.

Once the administration had been put in place we were able to garner more information, and as we have been garnering that information we have been able to have a secondary approach to all of this. It would have been a bit difficult to move this bill as a wrapped up bill at the beginning if we didn't have the information. So we weren't attempting to go in with—this might sound strange in hindsight—a sledgehammer. It was a surgical operation to remove OneSteel Manufacturing into administration.

As far as we were concerned there was no lease on the Port of Whyalla. More information has become available to us as the administration has got hold of documents and property that was not being shared with the government that should be, under the indenture. Now we are fully aware of what has occurred, and that is why we are bringing this legislation now. In terms of the clause on assent, that will be obviously as quickly as possible.

Mr PATTERSON: Thank you for that; it is useful information to understand. In terms of commencement and 'as soon as possible', in my understanding debate is being guillotined today by 5.30pm with the intention now to pass it in the Legislative Council. Previously it was the understanding that there would be that delay between the sitting weeks where our upper house colleagues could understand this; however, it seems they are ready to move on posthaste. In all likelihood that means it will be assented to quite quickly.

In light of that, previously, as I said, that court order talks to there being a court hearing commencing 2 June, which was before the next sitting week, so potentially the court proceedings would have begun. Can the minister inform the committee what advice has been given about the effect of this piece of legislation on the current court proceedings? Will it in fact render them unnecessary by virtue of the fact that the lease will have been declared invalid and no compensation payable and then interests in rail infrastructure across as well?

The Hon. A. KOUTSANTONIS: In short, no, it will not make the core process futile. It will clarify some of the aspects of the facts of the case, and it should expedite the core procedures.

Mr PATTERSON: Going to that, from that answer I feel I know where this could potentially go, but it is still worth asking: have you received any advice on whether the action here could be challenged constitutionally or in the High Court by, probably not the plaintiff, but the defendants in the court matter that is subject to the order of VID 420/2025?

The Hon. A. KOUTSANTONIS: The government is confident we can withstand any challenge.

Clause passed.

Clause 3.

Mr PATTERSON: My understanding is that this clause is about clarifying, because the current indenture is not clear on what the implications are if the lease is not found to be consented to. This says that the indenture will be void and of no effect, and also talks to compensation. This act has its genesis from the 1937 act and then over to the 1958 act. Are there any instances over the life of the indenture act where consent has been asked for and not given, or any rights conferred along the way, or is this the first time this has occurred?

The Hon. A. KOUTSANTONIS: Yes, Mr Gupta would regularly ask me to separate the mines out of the indenture, and I would say no.

Mr PATTERSON: In terms of the compensation clause, here it says, 'No compensation payable in respect of operation of certain provisions of the act.' I take it that means there is no compensation to, in this case, the purported leaseholder. Certainly, I raised observations in my speech and was able to ask questions in the select committee, but for the benefit of this committee—and I think also the shadow attorney has touched on this—Golding, which is a subsidiary of NRW Holdings, took security over the lease of Whyalla Ports, which is purported. Then also—

The Hon. A. Koutsantonis: These are not the leases you are looking for.

Mr PATTERSON: Good, not looking for these—property rights as well. They have it as an outstanding debt of $113 million tied up with security there, which the court may well find was non-existent. We are not disputing that. This bill is trying to make that quite clear around the lease aspect of it. To clarify, this will mean not only that Whyalla Ports would not be able to seek compensation but that any third party such as I have mentioned—NRW or Golding—would not be able to either. I will leave it at that and ask you a follow-up question.

The Hon. A. KOUTSANTONIS: It is a belt and braces amendment, as I am advised, to make sure that there can be no unusual action taken against the state afterwards. They have claims on the chattels that are associated in and around. We are not attempting to change anything there, but as far as we are concerned there is no lease. We agree on this. This is in an abundance of caution, and the state should not be liable for these things anyway.

Mr PATTERSON: Following up from that, it is a belt and braces approach and it signals to those that that is the case. We talked about what consultation you had with stakeholders before introducing this bill to parliament. It does appear, from that explanation, and I think most people have reached the conclusion as well, that, should this go through, Golding's, which has an outstanding debt—security will be effectively worthless from that point of view. It also talks here about putting up a regulatory power so that if there are instances where potentially the belt and braces approach has had an unintended side effect, where there was an assignment in place or some right that we want to keep in place, can the minister confirm the effect of regulatory power? Is this something anticipated, or is that in place, the fact of prescribed regulation, in case something does arise? Have you thought through the process and tried to work with good-faith parties, such as NRW Holdings, knowing that they have accrued a significant debt?

The Hon. A. KOUTSANTONIS: So you are talking about subsection (3)?

Mr Patterson: Yes.

The Hon. A. KOUTSANTONIS: That was put in place in case something unintended was captured and we could remove it from this process. I go back to the point that you made earlier. NRW, or Golding's, or whatever the organisation was that was conducting the mining operations, as a subsidiary of NRW, the publicly listed company, entered into this debt knowingly. They were operating on the basis that they presumed they were going to get paid one day. At the very end of this process, they were reaching out trying to grab everything they could because they knew—I think they were the largest creditor—that Mr Gupta did not have the resources to pay NRW, or Golding's, so they latched onto this purported lease as purported security over this port, which they do not have.

We are not the ones who are removing any security that they have. It is not us. NRW, Golding's, entered into this arrangement where they operated for GFG knowing they were not being paid and continued to accumulate debt. I know that is not what you are saying, but someone reading this may think that is what you are asserting. Golding's have accumulated $113 million in debt, from my understanding—well over $100 million worth of debt, well over $80 million of debt—before they even attempted to get security over a port. But there was no lease on the port to have security over, so their due diligence is up to them. This regulatory power is to make sure that, if you capture something unintentionally, we can remove it from the process if we need to.

Mr TEAGUE: I turn to new section 6A(1), which is expressed in general terms and purports to capture everything under the Indenture Act 1937 or clause 31 of the indenture, and then has the general proviso that if the assignment or purported assignment was made with the consent of the state, granted before the assignment or purported assignment, then it is okay. Is there a reason for that clause being drafted in the general as opposed to being drafted in the specific, given that we are focused on what we know is a single purported lease and purported security taken over it?

Is the government confident of both sides of the coin in the general, that is that by voiding everything under this new subsection it is not disturbing anything else inadvertently? On the other side, I take it from everything that the government has said it is confident that there is no form of consent granted by the state that might yet be litigated even in reliance on this clause?

The Hon. A. KOUTSANTONIS: Subsection (3) deals with the unintended consequence that you talked about. Part 2 is the general aspect of what we are attempting to do to preserve the indenture and then we start prescribing later on in the bill the specific parts. So we have the general application, the carve-out for an unintended consequence, and then, quite brilliantly drafted, a specific focus on the lease.

Mr TEAGUE: To progress that then—tell me if this is not right—there is no present known unintended consequence that will find its way into the regulations. It is not a known unknown or an unknown known. There are no present contents of said regulation. That is actually a safety valve and there is no present intent of the government to regulate pursuant to subsection (3)?

The Hon. A. KOUTSANTONIS: I don't think we want to be coming back to the parliament with every agreement we might uncover.

Mr TEAGUE: We agree on it; we do not need to.

The Hon. A. KOUTSANTONIS: Exactly. Because the information is coming through piecemeal, this gives us the ability to deal with it generally and for what we know, specifically, and then have the carve-out for any unintended consequence.

Clause passed.

Clause 4.

Mr PATTERSON: Just with the regulations, this gives effect to what we spoke about in the previous clause in 6A(3). These are what the regulations can stipulate. In terms of the court case that is scheduled for 2 June, that will decide on property rights or rights that have been conferred potentially. If it turns out that the court finds in favour of the defendant—that there seem to be some rights that are be able to be conferred—would this regulation then allow that to be inserted back in, or is it basically 'belts and braces', as the minister explained?

The Hon. A. KOUTSANTONIS: I do not think it is a scenario that the government believes will occur, given that we know no lease has been granted. So I am just not sure how that could eventuate, and we obviously still have, in the earlier provision, what I have coined the 'safety valve'—subsection (3)—which allows us to remove any unintended consequence.

Mr PATTERSON: I am comfortable with that. That talks more to the regulation-making powers to be in place if something comes to light—a right or a property that is required—as opposed to being there because the government think the advice they are getting is sound and that the court case, the action that KordaMentha is taking, will be successful, as that may not be the case. So, for the absence of doubt: the government have not received advice—because your evidence to the committee is that the government are doing this because they have advice that the position is sound—there is no advice provided (I cannot remember the names of each of the legal advisers you outlined) that states that actually the government is at risk in certain situations and that therefore you may have to introduce it back in.

The Hon. A. KOUTSANTONIS: The advice we have from Lipman Karas, Brendon Roberts and the Crown—lawyers of the Crown, from the Solicitor-General down—is that there are no issues that we anticipate will cause us any problems.

Mr PATTERSON: Can the minister advise, in terms of this amendment, if this could alter any rights of parties that are registered with the national Personal Properties Securities Register and, if there are alterations, what they might be?

The Hon. A. KOUTSANTONIS: My understanding is, from what has been explained to me—and I have forgotten the acronym that you used—that the only property that is protected for the purposes of the PPSA is property that is appropriately covered by the indenture. Or rather, the only property taken out of the operation of the PPSA is property controlled by the indenture.

Mr PATTERSON: Just to make sure we are talking about the same thing: it is the PPSR, the Personal Property Securities Register. Sorry I did not correct you before. I am assuming you mean the same register, but just in case you were referring to a different one.

The Hon. A. KOUTSANTONIS: We are talking about the act, but yes.

Mr TEAGUE: That is helpful for the record, that the intent of all this is to limit its scope to those things that are properly the subject of the indenture: so fixtures, real property and doing away with the purported lease. There might be an opportunity to deal with that at clause 5 in a moment because there has been quite a lot of particularisation of various fixtures.

Given that the regulations speak to new section 6A(3) and the unintended consequences, and that we understand nothing is specifically known to the government at the moment—so there are no regulations that are in the works—and it is a hybrid bill and the government I think has said, 'It's a hybrid bill because it's affecting OneSteel,' and I think I said in the course of the second reading debate, 'It's also, we see from the proceedings, arguably affecting the private interests of one contractor in particular: the subsidiary of NRW, Golding,' is the government able to advise the house in terms of the general characterisation of this so far as Golding is concerned?

Is this proposition good: that the government has satisfied itself that Golding—or anybody else who has been doing business with Gupta over the last period of time, the period that Golding purported to take security and then continued to trade—was foolish to do so and was on thin ice and that the chips fall where they may as a result? Is the government content that it is not necessary to provide any more comfort to Golding and it has just taken its chances and that is the way it crumbles, to put it in the vernacular?

The Hon. A. KOUTSANTONIS: The way I view what Golding has done is: anyone who looks at this business knows that it is governed by an indenture. It had a royalty regime governed by an indenture, it had development approvals governed by an indenture, it had land access governed by an indenture and it had maritime access governed by an indenture.

If you are taking security over a piece of land that is covered by an indenture, I would have thought you would hire someone like yourself or the Solicitor-General or whoever to go through it and say, 'We are being offered this security at the end of a very long process where we are owed $113 million and this guy is not paying his bills to anyone, but, by the way, he is holding up this bauble and he says it's worth X.' Where is the DD on that? The first DD is: you go to the indenture. Has the lease between Whyalla Ports Pty Ltd and OneSteel Manufacturing been approved by the South Australian government? Otherwise, there is no lease. There is no 99-year lease to have security over. There is nothing you can sell. There is nothing you can do with it.

As I said earlier, I have met Jules Pemberton a couple of times. I do not make any disparaging remarks about him at all. He is a businessman and the board has confidence in him. The board and their risk committee will look at this after this has all washed out and probably ask themselves some very difficult questions. But I do not blame Golding. I blame Sanjeev Gupta, who used dry cleaners, snack bars, steel fabricators not as customers but as banks. He borrowed money from them and he was not paying it back, and Golding were no different here.

Golding, unfortunately I think, got into the trap where they were owed too much to stop and had to keep on going to try to get some of their money back. I do not know what internal discussions that they had, that is a matter for them, but any due diligence over a purported port lease with OneSteel, a quick email or a letter to the South Australian government maybe could have sorted all that out.

Clause passed.

Clause 5.

Mr PATTERSON: As I think I spoke to previously, the first part of the bill, the clauses that we have gone through to date, 1 through 4, talk about giving clarity to what happens if there was not consent asked for or given to the transfer of property rights assignments. This clause here inserts schedule 4 and it is specifically around the lease relating to the Port of Whyalla, declaring that specifically void. If the minister can talk through the fact that we have already got clause 3, which talks about: this is what happens when it is void, no compensation payable.

The rationale for having this particular schedule is because it is now talking to the specifics, so it is actually specifically mentioning the purported lease and going through in great detail around that. It declares that, 'Lease or purported lease over prescribed land is void,' which I think we have talked through here. We are in furious agreement and we can agree with that. Then there is, 'Interests in certain rail and other infrastructure is void and of no effect,' as well. Maybe if the minister can give some commentary, at a broader level, around the schedule 4, but then focusing in on, 'Interests in certain rail and other infrastructure,' which is over and above the lease, because I think there is quite a good understanding around the lease from the questions we have asked. It is this next part around rail and other infrastructure which gives cause to additional questions.

The Hon. A. KOUTSANTONIS: The understanding that I have from the advice I have received is that the first clauses that we are talking about were general. In the schedule we are now talking about the specific parts of the lease and the parts of the land that are particular to the lease. That should be covered and protected within the indenture. We are now drilling down out of an abundance of caution and it is spelling out what it is we are interested in. That is probably poorly put, but I think you understand the intent of what I am trying to say is we have a general clause, we have the general cover all, we have the regulation to any inadvertent mistake and here we are now homing in on the parts that we are focused on, which are in the lease, impacted by the lease and covered by the lease. This purported lease says X and we are covering the things that we think are connected to the indenture.

Mr PATTERSON: Picking up on more questions along the line of that schedule about the interests in certain rail and other infrastructure being void, I note that NRW put out a release to the ASX yesterday. I will go through it a little bit and that will help give information as to the question I am talking to. They made the claim here that NRW Holdings Limited had a 'first-ranking security over the assets and shares of Whyalla Ports in respect of money owed by OneSteel Manufacturing'. We have talked through the prudence of them so doing that. The announcement states:

Golding's security interest attaches to both Whyalla Ports' assets and its contractual rights, including Whyalla Port's rights under a lease with OneSteel.

We have talked a lot about the lease, and I think we are in furious agreement about that. The next question is going to relate to that other part, which is the assets of Whyalla Ports, and I go back to what NRW Holdings said:

A number of Whyalla Ports' key assets with substantial value (which are the subject of Golding's security) are located on the leased Port premises.

They then go on to say:

That security was granted to secure OneSteel's indebtedness to Golding…

Again, we can talk about the prudence of that. The amount owed is $113 million. They then go on to talk about the implication of the specific section within schedule 4, section 4, basically stating interests in certain rail and other infrastructure being void. I will ask for clarification or an outline from the minister around what 'other infrastructure' entails as well. The press release goes on to say:

The likely effect of the Proposed Bill is to cause the lease agreement granted by OneSteel…to have never had legal effect.

Yes. It then goes on to say:

…the Proposed Bill will clarify that the creation of an interest in certain infrastructure constructed on the port facilities is void and that the infrastructure forms part of the land is not personal property. This will likely mean that the Proposed Bill will cause ownership of the infrastructure constructed and paid for by Whyalla Ports on the port facilities to now be owned by OneSteel…

So the question then becomes—and we did talk about this in the select committee, and I think it would be worth elevating this to the broader committee on the bill as well—what is the impact of other infrastructure? Whyalla Ports was started back in 2011. Over time, it would have built up infrastructure, such as the conveyor belts that go along there, the ship loaders. Those assets are purported, according to NRW, to have a substantial material value approximating the $113 million that they are owed. We can argue about that, but if we just talk about those assets, can the minister talk through the other infrastructure?

Will that impact, as I said, all the conveyor belts that go on there, the ship loaders, the other assets that are on the port? Will they be moved over to OneSteel? The impact of this transfer means that obviously it would impair and undermine Golding's security. We can understand that. Trying to get to the point of this decision, is there an issue as well if it is the case that these assets are getting transferred? Is there certainty from the government that Whyalla Ports, between 2011 and 2018—when it was sold as part of the first administration process—has not then built up those assets and that they are then getting transferred across to OneSteel? As NRW says, this would:

…enable OneSteel to usurp that personal property by declaring it void and part of the land, with ownership vesting to OneSteel without any mention of compensation to Whyalla Ports.

The Hon. A. KOUTSANTONIS: Obviously, the rail infrastructure is dealt with in paragraph (a):

(a) a tramway or railway made, formed, laid down, constructed by or on behalf of the Company, or an extension of a tramway or railway, on the prescribed land…

That prescribed land is land owned by OneSteel. Other infrastructure is dealt with by:

(b) any jetties, wharves, works, buildings, approaches, road ways, conveniences, vermin fences, dog proof fences or rabbit proof fences erected or constructed by or on behalf of the Company on the prescribed land…

—owned by OneSteel for the operation of a port under the indenture. So if Whyalla Ports Pty Ltd, whatever that is, built anything permanent, it was being built on OneSteel's land because Whyalla Ports Pty Ltd did not excise that land. If it did, it would need ministerial approval under the indenture. So whatever has been built for the operation of a port has been built on OneSteel's land. What we are doing here is dealing with that to make sure it is clear that the real property is preserved for the operation of a port under the indenture, the purpose for which it was built.

I will also go a step further: I think it is correct to say to the house that the approvals under the indenture to build this infrastructure were to build in the interests of OneSteel under the indenture. Whatever NRW or Golding claim that they have as security through a purported lease, whatever that purported lease claims to be, the land all of this is on is OneSteel's land. Any separation of that under the indenture needs ministerial approval, and none was given. So we are clarifying exactly what is in the interests of the land under the indenture for the safe and secure operation of a port, and we are securing it.

Mr PATTERSON: I am trying to work my way through this and relate it back to everyday circumstances. Say, for example, in council areas there is council land and a sporting club wants to build a building for a training facility. Usually they have a lease, so then the sporting club can say, 'If we go to the extent of spending our money, at least we know we have tenure over the land.' Unlike when you have Torrens title and you own everything, they are building that building and know that ultimately, effectively, they are improving the council's land. 'We do not really have claims to that building, but because there is a valid lease in place, we will get to use it.' Correct me if that analogy is wrong.

In enacting this bill, effectively this schedule is really honing in and putting property under OneSteel Manufacturing's control. The point of the exercise is to allow a potential buyer to have some clarity and certainty. I know that KordaMentha has said publicly that two buyers have already gone through the site. Is this legislation being put in place now because there is a buyer ready and willing to buy it when this act is assented to? Is that forcing the expeditious nature of this bill, going to the upper house today, or in fact is this just clearing the decks and then the normal process of buying will continue?

As my final question, maybe the minister could talk through where the process is at in terms of a buyer. Is it that the buyer is basically ready to go, and once this is cleared that can commence, or are we still looking into the future where the process of securing a buyer still has to be undertaken?

The Hon. A. KOUTSANTONIS: I think the analogy about the council is a good one—about the port as being a subsidiary of the council. Improving the land ultimately still vests with the council at the end.

In terms of the buyer, no, to my knowledge there is not a buyer ready to go who is going to hand over a cheque tomorrow and purchase it. There is a process underway by the administrator. They are doing an independent process. Yes, the state and commonwealth government are funding the administration, and that would imply that we are doing our very best to make sure that this process is done properly. But KordaMentha have 333 Capital, which is assessing potential buyers; and there is a data room that is open, and people are looking at the data available for mine expansion, operation of the steelworks, what the money from the commonwealth and state governments is linked to in terms of a beneficiation of the electric arc furnace and a direct iron reduction facility, what the gas availability is, and, of course, the access to the port.

So what we are attempting to do here is to spell out what is already the case now but make it clear to clear the way for a sale process. We are not rushing this through because there is a buyer waiting at the end. There is a process to go through, and that process is conducted under the Corporations Act by the administrator who has been appointed. So they will conduct a sale process, but we as the state and commonwealth government control the moneys for the reinvestment, not the administrator. We fund the administration, we are funding recapitalisation and we have got the money for the transformation.

So, obviously, we are an interested party. We want to see who has the capability to deliver these things. What is their reputation? I think it is fair to say that the Sanjeev Guptas of this world need not apply. I think we are looking for people with demonstrable experience in steelmaking, transformation, distribution, mining capability, port operation and operation of an integrated steelworks.

I cannot tell you the number of times people have come to me in my office to tell me to close the blast furnace. 'Don't worry about the jobs. Close the blast furnace. The port will be fine. We will use it to export the ore, fund met 1, met 2'—the mining expansion programs—'and just make it an iron ore mine.' It will be, 'Oh, well, we used to make steel, bad luck.' That is not the government's aspiration, not the commonwealth government's aspiration, not the commonwealth opposition's aspiration and I do not think it is your aspiration. We want to see steel made in Australia, so we want to see a good buyer.

One of the things we need to clear up is to make clear what is the case now, and because of what is occurring with the administrator and any potential legal action we are just stating what the state believes are the facts to protect the indenture for any successful purchaser to know that they have a clean site.

Mr TEAGUE: Just in respect of the lease or the purported lease, as we are calling it, is it or was it registrable? Was it ever registered? Has there ever been duty paid on it? Has there ever been any trigger for it to be otherwise evidenced?

The Hon. A. KOUTSANTONIS: That is an excellent question. I am glad you asked it. No. And I would have thought in that statement published to the ASX if that was available they would have said so. No duties have been paid. It was not registered. That is the advice I have. So I am not quite sure on what basis this purported lease was taken as security.

Mr TEAGUE: I think I referred earlier to the fact that there has been a fair bit of effort to spell out, and now we are getting very specific, a whole variety of items—this is particularly at clause 4 of the new schedule—that all fall into the category of fixtures and, according to ordinary principles, that would all therefore be captured. Is there any particular reason for spelling out each and every one of those fixtures? Is it because it is a diligent exercise and they are all known to be fixtures at the site? For example, there are various different kinds of fences that are stipulated, but they are all characterised by the nature of being fixtures.

The Hon. A. KOUTSANTONIS: That infrastructure listed is all the infrastructure that is recognised by the current indenture.

Mr TEAGUE: So that is the rationale, rather than that they are all necessarily to be found on the site? It is that they are recognised by reference to the indenture. My final question on clause 5 goes to, perhaps, a broad point. Is the government satisfied—it might be an easy answer to say that no-one is getting windfall gains out of any of what is going on—by dint of Golding not being able to enjoy the security it thought it had, and given it is continuing to trade and provide services and invest in the whole operation, that there is no windfall that is coming OneSteel's way the result directly of this legislation; that is, there is not an unfairness being visited upon Golding beyond the taking away of what the government has already described as an attempt to gain some security that was not really there?

The Hon. A. KOUTSANTONIS: Their debts are still part of the administration process. No-one is saying that that $113 million debt no longer exists: it is still part of the administration process. But I say the reverse is true. If I were to be unkind to Golding, they are trying to deprive OneSteel of something that is rightly theirs on the basis of a purported lease and a purported security done under distress at the very end of a long drawn-out process of non-payment.

There are two ways of looking at this. An ASX-listed company is seeking to deprive OneSteel of land that belongs to it under an indenture, under which the government did not agree to this 99-year lease, and wants us to recognise it. What we are doing here in this process is preserving what the state has agreed to with OneSteel under an indenture. I take your point, and Golding's rights under the administration are preserved, but we are also preserving our rights under the indenture.

Mr TEAGUE: I appreciate the answer. If the Chair wants to deprive me, I will cop that and maybe put it in the third reading. It can be dealt with quickly.

The CHAIR: Okay. I will take your word for it.

Mr TEAGUE: I understand that. I understand the proposition about the potential for that attempt at security to deprive other creditors and so on. The question is going, really, to whether or not the government is aware of any particular super-added investment that Golding made in the interests of keeping the show on the road directly off the back of its purported security, and therefore by taking away the security there is a sort of windfall of a kind to OneSteel as a result.

The Hon. A. KOUTSANTONIS: Good point. This is my understanding of how it operates. This is going to be an inarticulate explanation of the way that mining operations work. Golding are not being paid. There is a cost in de-escalating, that is, withdrawing from the site. They would incur a cost and they have to write up the debt. They have to recognise that debt immediately. By continuing to work, Golding are not having to realise the debt and they are saving costs in demobilising their workforce.

They were receiving some payments in arrears, but not covering their debt. Every month that went on, their debt was going up and up and, if they demobilised at any point, they would have to realise that debt or get to the point where it became obvious that they were no longer the miner, they had no leverage over continuing the mining operations. The leverage that Golding had, in my opinion, from looking at their operations, was they were the miner, they were the ones generating the revenue for GFG, so they were attempting to do what they could to try to maintain their position.

Did they get any windfall? Did they grant us any windfall? No, I do not think they did. In fact, I think at every stage Golding have acted in the interests of its shareholders rather than in the interests of Whyalla, as you would expect them to do. I do not think there is an ASX-listed company anywhere in Australia that acts in the interests of its community that it operates in above its shareholders. It operates in the interests of its shareholders; in fact, it has a legal requirement to do so.

Mr PATTERSON: There are many to go through. In terms of Whyalla Ports itself, by not having a lease, not having assets, how does it generate income? Has the government received any advice or consideration, as part of this, that it may cause Whyalla Ports to go into administration? I do not think you will get too many tears for Whyalla Ports going into administration, but what is the flow-on effect to companies that may well have debts accrued? Also, potentially, will it have an effect on the current administration of OneSteel Manufacturing, and what advice might that be?

The Hon. A. KOUTSANTONIS: I suppose if you ask Mr Gupta, all of his companies are trading solvent and there is no reason to believe that Whyalla Ports is trading insolvent. That would be an offence under numerous pieces of legislation. I do not know. The administrator has an obligation to act in the best interests of OneSteel. We are acting in the best interests of the state. We are preserving and protecting the integrity of the indenture, and for other companies that wish to enter indentures with us to know the indentures will be upheld.

I think we are exercising the very best of the indenture model, as first touted by Mr Playford standing behind me, to give certainty to companies that enter into agreements with the South Australian government, and that is what we are maintaining. Whyalla Ports going into administration or otherwise is a matter for their directors, not a matter for the South Australian government.

Clause passed.

Title passed.

Bill reported without amendment.

Third Reading

The Hon. A. KOUTSANTONIS (West Torrens—Minister for Infrastructure and Transport, Minister for Energy and Mining) (17:14): I move:

That this bill be now read a third time.

Bill read a third time and passed.