Power Supply Issues Block Planned Coega Smelter

Planning by Rio Tinto to develop a 720,000-mt/y aluminum smelter at Coega, on the Indian Ocean coast of South Africa’s Eastern Cape province, was halted in mid- October 2009 when it became apparent that future availability of electricity would be insufficient to power the smelter. South Africa’s Department of Trade and Industry, the power utility Eskom, state-owned Industrial Development Corp., and Rio Tinto Alcan jointly announced that a longterm electricity supply agreement signed in November 2006 had been terminated.

Discussions regarding the agreement were driven by unplanned power outages that disrupted South Africa’s economy in early 2008. Rio Tinto, Eskom and the government agreed to terminate the agreement both in light of current power supply issues and of the absolute need for a project such as the Coega smelter to have a readily available power supply that would not impact the daily needs of South Africans.

Guy Larin, Rio Tinto’s vice president business development-Africa said, “Rio Tinto Alcan is willing to pursue discussions with our key partners and stakeholders, and we remain ready to assist South Africa in realizing the considerable benefits of a smelter project in the Port Elizabeth area. Since November 2006, Rio Tinto Alcan and IDC have invested approximately $130 million in the project, which was originally scheduled to begin construction in September 2008. Many of the attractive conditions for this project are still in place, including excellent infrastructure and a supportive community. Other elements, such as a long-term, competitive power supply agreement, are essential and would need to be re-negotiated. We fully understand that conditions surrounding the availability and forward pricing of power in South Africa have shifted significantly in the last two years.”.

As featured in Womp 2009 Vol 09 - www.womp-int.com