Coega aluminium smelter to go ahead - IDC

Posted On Thursday, 14 July 2005 02:00 Published by eProp Commercial Property News
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South Africa's State-owned Industrial Development Corporation (IDC) said yesterday that it would take a 15% stake in the planned 660 000-t aluminium smelter at Coega, in the Eastern Cape.

Property-Housing-ResidentialSpeaking at a press conference in Johannesburg yesterday, IDC CEO Geoffrey Qhena said that Canadian firm Alcan, which owns 49% of the project, was expected to make an announcement in October that it would go ahead with the estimated-$2,5-billion project.

Alcan, the world's second biggest primary aluminium producer, inherited the $2,5bn smelter project in 2003 when it took over French rival Pechiney, which had commited to the project.

He said that the IDC saw the project as "very strategic" for South Africa and the Eastern Cape, particularly in light of its strategic intent to focus investment into the country's poorer provinces.

Qhena also said that the IDC was comfortable that it was not overexposed to aluminium, despite its stake in the Mozal smelter, in Mozambique, (estimated at R2-billion) and its 1,4% interest in BHP Billiton, the world's third-largest aluminium producer.

However, he did say that the corporation would continue to actively manage and monitor its portfolio to ensure a healthy balance.

Qhena said that the most prominent outstanding issue at Coega, the question of power supply, had been resolved, although he did not provide any details and it remains unclear what electricity tariffs Eskom will offer Alcan as an incentive for its investment.

However, the power utility said earlier this month that it had made a policy decision to move away from commodity-linked electricity-tariff agreements.

CEO Thulani Gcabashe explained that the instrument had given rise to significant financial-statement volatility following the introduction of new global accounting standards, which insist on 'fair value' adjustments for all so-called embedded derivatives.

Instead, Eskom has stated that it will seek to follow pure arms-length-transaction incentive models.

The main incentive for Alcan, however, remains that South Africa continues to be the lowest-cost producer of electricity in the world, well ahead of Canada.

Qhena also confirmed that the technology to be employed at the Coega smelter has been changed, to processes already in use at the Mozal plant.

He said that the IDC would continue its involvement in Mozal, and was particularly pleased with the project as a model for further investments.

He emphasised that the investment matrix will increasingly be determined by analysis of the development implications of each investment in a measured way, by looking at factors such as black economic-empowerment and small and medium-sized business development.

It also emerged that, although the IDC is focusing on a diverse portfolio, including smaller projects and investments, it retained a strong resource focus and was looking at several significant projects in the rest of the continent.

These include the Corridor Sands and Moatize Coal project, in Mozambique, a diamond-mine in Botswana and a big investment project in the Democratic Republic of the Congo.

Last modified on Thursday, 26 June 2014 09:32

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