Sovereign risk - Whyalla

Contracting with Australian governments just got more risky.

In March 2025, the South Australian Government passed legislation granting itself a first-ranking charge (security interest) over all of the assets of the company that owns the Whyalla steelworks.

This action by the South Australian Government should alarm every private sector business that contracts with an Australian government. Forget the legal and contractual arrangements that were agreed with your government counterparty - the government can rewrite the rules by enacting their new rules as legislation without your agreement.

This development should also frighten investors and lenders to companies that contract with the government. The government can simply pass legislation to trammel your equity interest, security interest or other rights.

Some will say Mr Gupta deserved it because he didn't pay his debts on time, but when is it not OK for a government to rewrite the rules?

Pause for thought before you invest in infrastructure in Australia. You might become the next Mr Gupta.