A day after the South Australian Government rushed legislation through parliament that allowed it to place steelworks owner GFG Alliance into administration, Prime Minister Anthony Albanese told Whyalla workers their work was "critical to sovereign Australian steel".
"It's one of only two Australian steelworks, produces 75 per cent of Australian structural steel and is the only domestic producer of long steel products," he said on Thursday.
"Steel from Whyalla helps Australia build and maintain its infrastructure – including railways, bridges, schools, hospitals, high-rise towers, transmission infrastructure and defence assets."
The funding will deliver $100 million in immediate support, including creditor assistance payments ($50 million), infrastructure upgrades ($32.6 million), jobs matching and skills hub ($6 million) and stabilising the steelworks ($384 million).
The state and federal governments will jointly invest $384 million to fund the steelworks' operations during administration, ensuring workers and contractors keep working and continue to be paid.
Another $1.9 billion has been allocated to investing in upgrades and new infrastructure to ensure the steelworks has a sustainable future.
Mr Albanese and SA Premier Peter Malinauskas announced the package to jubilant steelworkers in Whyalla.
GFG had been under intense pressure from the SA government to pay debts to creditors of the steelworks and the state, which is owed "tens of millions of dollars", including $15 million to SA Water.
The federal and SA governments would "combine dollar for dollar on administration" to ensure the steelworks keep operating, staff are paid and creditors are paid, while a new owner is found, Mr Albanese said.
Mr Malinauskas said locally-made steel was "vital to South Australia and Australia's future" and he was "never" going to allow a taxpayer funded bail-out of GFG.
The federal government also announced a new green iron investment fund to boost green iron manufacturing and supply chains.
Up to $500 million from the fund will support the longer term transformation of the steelworks, and make financing available to the future steelworks owner to upgrade the facility to produce green iron.
The PM and Mr Malinauskas sidestepped questions on whether the steelworks could potentially be nationalised, but did not rule it out.
Both indicated the preference was to find a new owner and Mr Malinauskas said "we're not in the 'rule out' position but I don't think that nationalisation would be a desirable outcome".
Administrators KordaMentha will appoint a special adviser to assist the administration and is engaging with BlueScope Steel, which is also considered a potential buyer.
KordaMentha said keeping the steelworks running would "preserve around 4000 direct and indirect jobs".
If creditors are owed money by GFG, the state government would pay them what they are owed, and the creditors will hand over to the state the dividend that they will receive from the administration process, Mr Malinauskas said.
"So what we're doing is relieving them of all the burden and the struggle associated with administration, so they can get on with doing what they do best," he said.
Whyalla mayor Phil Stone said "the vibe in town is unbelievable".
"The morale has just gone through the roof. It's the first time I've seen a group of workers and creditors sitting around at a meeting, not just chatting, but with smiles on their faces," he said.
"You've got an immediate $100 million on the ground in support for creditors, infrastructure upgrades, and also setting up a jobs matching and skills hub to help move it forward."
GFG's owner, UK billionaire Sanjeev Gupta, said the state was on the "wrong course" in forcing the operation into administration and he was seeking legal advice, according to an internal company memo obtained by The Australian Financial Review.
Mr Gupta last Friday said a debt settlement deal had been reached with creditors of global financier Greensill Capital, which had advanced billions of dollars in credit to GFG before collapsing in 2021.
