South Korea’s JB Asset Management has put in its bid alongside private equity firm Newlake Alliance for the Arrium Australia assets which include the Whyalla steelworks, according to a report by the AFR.
The report mentioned that the Korean consortium is also proposing a 200 megawatt gas-fired power plant be built as part of the proposal which would not only power the steelworks in northern South Australia but also feed extra electricity back into the state’s troublesome electricity grid.
The investment and total capital spend on the steelworks, is expected to hit $1 billion if the deal goes through.
It could take weeks for a final decision to come, sources said, with federal and South Australian governments heavily involved in the negotiations.
It is also understood that there is a binding agreement that has been signed by the Newlake and JBAM consortium for the licensing of Posco’s Finex technology.
The entity is proposing a longer ownership stint than the usual five to seven years that private equity holds onto assets, with a decade-long turnaround thought to be part of the plan.
One of the by-products of the Finex process is a large amount of gas, which helps reduce costs of the whole operation by keeping costs of the 200 mega watt-gas fired power plant low in a gas-constrained market.
The report also says that the two bidders have turned their attention to Canberra after lobbing their binding offers at the end of May. Each bid is said to rely on a material amount of government support to help keep the steelworks operating.