Publication: Engineering News Issued: Date: 2007-05-07 Reporter: Mariaan Olivier

Advocacy Group Slams 'Secret' Alcan Power Deal

 

Publication 

The Times
Date

2007-05-07
Reporter Mariaan Olivier

Web Link

www.engineeringnews.co.za

 

Aluminium Smelter

Environmental organisation Earthlife Africa has urged the South African government, aluminium producer Alcan and electricity supplier Eskom to disclose the details of a power supply deal for the $2,7-billion aluminium smelter which Alcan is building in Port Elizabeth.

The organisation, which slammed the agreement between Alcan and Eskom as "a secret deal", urged the world's second-largest alumium producer to disclose the details of the contract, including prices, linkages to commodity prices, reselling of electricity provisions, and guarantees of supply.

Late last year, Alcan, the Department of Trade and Industry (DTI), Eskom and the Coega Development Corporation (CDC) signed a 25-year power agreement, which will result in the Canadian aluminium producer establishing a 720 000 t/y smelter at the Coega Industrial Development *1.

But Earthlife Africa claimed on Monday that the DTI, CDC and Eskom had failed answered detailed questions about their deals.

"In particular, the lack of disclosure regarding the price and possible resale of electricity is highly problematic, given Alcan's history of buying subsidised electricity from governments and selling it back to the same governments at a profit," Earthlife Africa stated.

The request from Earthlife Africa to release details on contract details comes hot on the heels of the Minerals and Energy Department refusing to disclose the rate.

Minister Buyelwa Sonjica said in a written parliamentary question reply to Democratic Alliance MP Adv HC Schmidt on Friday that Alcan would be charged in accordance with the Developmental Electricity Pricing, or DEPP, and that the rate was determined on a globally competitive price for electricity and that the customer would not be subsidised by other customers as far as possible.

The contract also included a yearly real price escalation in line with Eskom's projected forward price curve, she said, but refused to disclose the actual rate.

"The agreement and rates have been approved by the National Energy Regulator of South Africa. The actual rate cannot be disclosed publicly as it is subject to a confidentiality agreement with the customer."

DEPP is South Africa's new industrial incentive scheme, which the DTI introduced as a way of sustaining the country's ability to attract energy-intensive investment.

The Coega aluminium smelter would require at least 1 300 MW and Earthlife Africa stated that the electricity would be heavily subsidised through the externalised cost of electricity generation.

"This subsidy will be in addition to the R1,93-billion in tax-incentives already showered upon Coega. A reasonable estimate of the price of electricity granted to Alcan is around 15% of the price charged to Soweto residents (or about 5 c/kwh *2). This would be substantively lower than the industry and residential average rates of 16c/kwh and 29c/kwh, respectively," the organisation said.

Aluminium smelters are such intense energy users that plant location is determined by the price at which electricity is made available, rather than location of raw materials. Some of the world's largest aluminium producers are looking at building smelters in countries, such as South Africa, that offer cheaper power. Cutting down the cost of electricity can enable smelters to produce aluminium at two-thirds of the costs.

Eskom said previously that it would be investing some R6,4-billion on its high-voltage transmission infrastructure in order to supply the power needed for the smelter.

Earthlife Africa energy policy offer Tristen Taylor said that the sale of electricity to Alcan was the sale of publicly produced assets.

"Given Eskom's current inability to deliver enough electricity to business and citizens *3 and the fact that 30% of the population is still without access to electricity, a 25-year firesale to Alcan hardly seems appropriate. If we were getting a good deal out of Alcan, why would they refuse to disclose it *4?"

Social and environmental justice activists would demostrate in Port Elizabeth, Johannesburg and Richards Bay against Alcan's deal with Eskom on Wednesday.

Alcan MD Olivier Dufour was not immediately available for comment.

With acknowledgements to Mariaan Olivier and Engineering News.


*1       The Arms Deal comes back to haunt the entire country.

Who is the lowest common denominator?

Alec Erwin, Minister of Trade and Industry (DTI) and now Minister of Public Enterprises (Eskom).

This is a dangerous lying fool.


*2      If this is true, 5 cents per kiloWattHour (kWh), then this is a double whammy of gigantic proportions :
While this 1 300 MW for Coega is still consumption for the future, i.e. post 2010, other aluminium smelters in Richards Bay and Maputo are right now producing some 1 500 Mtonne/year and thereby consuming some 2 700 MW of Eskom power, sorry our power.

This is enough to cause an Eskom Brown Stage 2 load shed of 12 hours per week.


*3      Reality

Brown Stage 1                   0 MW < Shortfall < 1 500 MW       = Loadshed for 6 hours per week ?
Brown Stage 2            1 500 MW < Shortfall < 3 000 MW = Loadshed for 12 hours per week ?
Brown Stage 3            3 000 MW < Shortfall < 4 500 MW = Loadshed for 24 hours per week ?

Black Stage              Shortfall > 4 500 MW                      = Total Power System Failure


*4      Something is very rotten in the state of Denmark The Republic of South Africa

With Alec Erwin anywhere near, be scared, be very scared.

And keep a large poop scoop handy for the inevitable bullshit.