The $600 million hydrogen plant project planned near Whyalla, South Australia, faces uncertainty as Premier Peter Malinauskas stops short of guaranteeing its future. The project, initially a key election commitment, was intended to support the decarbonization of the Whyalla steelworks, but financial concerns surrounding the steel plant’s owner, GFG Alliance, have raised doubts about its feasibility.
Government Hesitation Over Funding Allocation
The South Australian government has indicated that the hydrogen plant’s viability is tied to the future of the Whyalla steelworks. Premier Malinauskas stated that if GFG Alliance does not invest in necessary upgrades for the site, the allocated funds could be redirected to other economic projects in Whyalla.
During a parliamentary session, Malinauskas revealed that GFG Alliance is significantly behind on its financial obligations, with royalty payment arrears in the tens of millions of dollars. Treasurer Stephen Mullighan confirmed that these payments have been overdue for the past six months.
Other financial concerns linked to GFG Alliance include :
- Debt to the South Australian government: Tens of millions in unpaid royalty fees.
- Outstanding payments to SA Water: Although GFG has met its payroll tax obligations, some other payments remain unclear.
- Lack of transparency on debts to contractors: The government has requested further clarity on outstanding amounts owed by the company.
While the government is open to disclosing the full amount owed, concerns have emerged over GFG’s overall financial health and its ability to meet commitments.
Ties Between Hydrogen Plant and Steelworks Future
The hydrogen power plant was designed to provide a renewable energy source to support Whyalla’s shift toward green steel production. The project, initially announced as part of Labor’s 2022 state election campaign, was meant to be a key step toward positioning South Australia as a leader in hydrogen production.
However, Malinauskas has expressed concerns that proceeding with the hydrogen plant without a financially stable industrial partner could create risks for the government. If the Whyalla steelworks does not invest in necessary upgrades or if its financial situation worsens, the hydrogen plant could lack a guaranteed customer, potentially jeopardizing its long-term viability.
The government sees two key factors as critical for moving forward:
- Investment from GFG Alliance: The steelworks must commit to infrastructure upgrades to utilize hydrogen as a fuel source.
- Economic feasibility: The government must ensure that the hydrogen plant will have industrial demand before proceeding with full-scale development.
Opposition Criticism and Project Cost Concerns
The opposition has criticized the government’s handling of the hydrogen plant, suggesting that it is backing away from its original commitment. Opposition Leader Vincent Tarzia accused the government of shifting its language on the project, arguing that the premier is now using GFG’s financial uncertainty as a justification for reconsidering the plan.
There are also concerns about potential cost escalations, with estimates suggesting the project could rise from $593 million to as much as $1 billion. The opposition has questioned whether the investment remains justified, given the uncertainty surrounding the steelworks.
Critics have pointed out that:
- The project has been in development for four years, but little physical progress has been made.
- The estimated cost has increased significantly, raising concerns about long-term viability.
- The government may be using GFG’s financial issues as an excuse to backtrack on its original commitment.
These concerns have fueled skepticism over whether the government remains fully committed to the project or is preparing to quietly abandon it in the face of mounting financial and political challenges.
