Despite widespread predictions of doom and gloom in 2009 due to the global financial crisis, there were more ups than downs in a year in which WA led the rest of the country.
AS the sun sets on the rollercoaster that was 2009, one thing is abundantly clear – Western Australia is back in business.
When financial markets collapsed last year and the S&P/ASX200 index ended 2008 at just 3,772 points, most observers predicted Australia’s long boom was over.
Furthermore, they expected the mining states of WA and Queensland would feel the most pain as commodity prices tumbled and tens of thousands of workers were thrown out of work.
Eleven months later, the facts paint an entirely different picture.
By the end of November, the S&P/ASX200 index had rebounded 25 per cent to 4,701 points, while a survey by National Australia Bank last week showed business confidence was now at a seven-year high.
WA’s place at the head of that dramatic turnaround becomes clear with a glance at the Deloitte WA stock index, which tracks the performance of the state’s 100 largest companies.
In the 11 months to the end of November, the index grew in value by more than 104 per cent to $153.6 billion.
The rebound in local business prospects has also had a dramatic impact on the state’s finances, with Treasurer Troy Buswell last week predicting the state’s economy would grow 2.25 per cent this financial year and 2.75 per cent the year after.
That compares with his May forecast that WA’s economy would contract by 1.25 per cent this year, and a further 0.25 per cent in 2010-11.
The key to that turnaround can clearly be attributed to a handful of major factors: the flow-on benefits of approval of the giant Gorgon gas project; the recovery of Chinese demand for raw materials, particularly iron ore; and the confidence resulting from the billions of dollars in new infrastructure pledged by the state and federal governments.
But despite the state’s incredible recovery, 2009 was still a year of ups and downs, heroes and villains.
Gorgon LNG
The year’s crowning glory came in September, when energy giants Chevron, Shell and ExxonMobil officially approved development of the massive $43 billion Gorgon liquefied natural gas project on Barrow Island.
Hailed as a mini-stimulus package in its own right by politicians, Gorgon is expected to create 10,000 jobs during construction and generate a $33 billion spend on Australian goods and services over its initial phases.
Ravensthorpe closure
If Gorgon was the highlight of the year, the lowlight arguably came months earlier.
In January, BHP Billiton devastated the communities of Ravensthorpe and Hopetoun by closing its $3 billion Ravensthorpe nickel mine just eight months after production began, due to plummeting nickel prices and ongoing technical problems.
An unmitigated public relations disaster, the mine’s 1,800 workers were told of their imminent redundancy under the auspices of a safety briefing. BHP chief Marius Kloppers conspicuously chose to stay in Melbourne for the announcement.
Though events have now turned full circle with the $376 million sale of the mine to First Quantum Minerals, which plans to reopen it in mid 2011, BHP is still considered unwelcome by many locals.
BHP-Rio Tinto JV
In early June, BHP was a key player in the next most significant moment – the proposed $116 billion joint venture of BHP and Rio Tinto’s Pilbara iron ore operations scheduled for completion by mid next year.
Aside from creating the world’s single most important iron ore business, the move also crystallised growing fears in Beijing of endemic anti-Chinese sentiment in Australia. Not only did it derail China Inc’s $24 billion buy-in to Rio and its Pilbara business, it promised to give unprecedented market clout to China’s key iron ore suppliers.
Beijing’s response was rapid, with Rio’s chief China-based iron ore negotiator Stern Hu arrested a month later on allegations of spying and stealing state secrets.
The joint venture deal also marked the ascendancy of Rio iron ore boss Sam Walsh as heir-apparent to the chief executive’s role, following his elevation to the mining giant’s main board.
Montara oil spill
Perhaps the most notorious moment of the year occurred on August 21, when workers were forced to evacuate the West Atlas platform due to a leak at Thai company PTTEP Australasia’s Montara oilfield in the Timor Sea, 400 kilometres north-west of Wyndham.
The leak continued unchecked for 10 weeks before it was finally plugged in early November.
In addition to the environmental damage, the spill also caused enormous damage to the industry’s reputation at a time of mounting opposition to major oil and gas developments in the Kimberley.
Great Southern fails
Another lowlight of 2009 was the collapse in May of timber plantation manager Great Southern when it was unable to refinance debts totalling more than $800 million, leaving thousands of investors out of pocket.
Coming just days after the failure of business rival Timbercorp, the collapse effectively spelt the end of the managed investment scheme-based agribusiness.
Oakajee port
In March, Premier Colin Barnett signed a state development agreement for the $4 billion Oakajee deepwater port and rail project in the Mid West, a venture he described as WA’s most important project of the next 50 years.
The agreement with Oakajee Port & Rail was followed soon after with a $678 million pledge of state and federal funds for common-user port infrastructure critical to create a world-class iron ore industry in the Mid West.
The port, 25km north of Geraldton, is expected to generate 2,000 jobs during the three-year construction period, and 400 full time jobs once in operation in early 2014.
Use it or lose it
The federal government this month signalled new resolve to enforce the “use it or lose it” provisions of resources legislation, effectively ordering Woodside’s partners in the $30 billion Browse LNG project in the Kimberley to agree on James Price Point near Broome as the best processing site by April, or risk losing their permits.
The declaration was a huge win for Woodside boss Don Voelte, who wants to approve development by 2012.
Dissenting partners Chevron, Shell and BHP all favoured a slower development whereby gas would be piped to the North West Shelf to replace declining output after 2020 – 50 years after the gas was discovered.
ASIC v Andrew Forrest
In April, the corporate watchdog started its highest profile prosecution since Rene Rivkin with the five-week trial of Fortescue Metals Group and its billionaire founder, Andrew Forrest.
ASIC alleged investors were misled by claims Fortescue had signed binding construction deals to develop its Pilbara iron ore project with three Chinese companies in 2004. The Chinese companies subsequently denied they were binding but merely framework agreements expected to lead to binding contracts later.
While both sides claimed to have come out on top in court, the judge has still not handed down a decision.
SAS Global
Just as WA property investors began to relax at signs of an uptick in local property markets, the spectre of another Westpoint-style collapse sparked renewed fears about the health of the sector.
In November, six property syndicates controlled by West Perth-based SAS Global went into receivership owing more than $150 million, after they were unable to refinance more than $80 million owed to NAB.
Firepower
The year ended with the image of embattled Firepower founder Tim Johnston’s return to Perth to reluctantly face questioning over the $100 million collapse of his failed fuel pill business. Any joy felt by Firepower investors over his Federal Court appearance was no doubt dampened by his apparent memory loss.
