CAPE TOWN — After several years of anxious waiting and uncertainty, the Canadian aluminium producer Alcan — the world’s second-largest — will finally sign agreements next week to establish a $2,7bn aluminium smelter at Coega.

Alcan is due to sign a landlord agreement with the Coega Development Corporation and an electricity supply deal with Eskom next Friday following the resolution of electricity supply problems between Alcan and Eskom last week.

Alcan will then have to secure financing for the mega-project and the shareholding structure of the project will also have to be finalised. In the past, a 30% stake for Alcan and a 15%-20% share for the state have been suggested.

Negotiations for Alcan to build the smelter, which have dragged on for several years, hinged on it securing a cheap and reliable electricity supply.

The latest developments will bring to a close government’s tortuous, stop-start process of securing a smelter project for the Coega industrial development zone and give SA a huge boost of confidence as a foreign investment location. Development of the smelter at the newly established port of Ngqura, outside Port Elizabeth, is also expected to have a major impact on the Eastern Cape economy.

It is understood that construction of the plant, which will produce 700000 tons of aluminium a year, will begin only in 2008 as environmental effect assessments must be finalised, the engineering and design plans completed, and orders for materials placed well in advance.

As it usually takes about three years to build such a smelter, the first metal is likely to pour out of the furnaces only in 2011.

The trade and industry department is scheduled to publish developmental energy pricing regulations for comment this week, leaving only the application by Alcan for this benefit, and government’s consideration of it, as the other remaining issues.

Trade and Industry Minister Mandisi Mpahlwa said yesterday he had been in close contact with Alcan over the past two weeks to sort out the final outstanding issues over electricity supply.

Aluminium smelters consume massive amounts of electricity, which represents about a third of their total production cost. It has been crucial, therefore, for Alcan to secure cheap electricity to make its proposed investment viable.

“Alcan is very upbeat about the process,” Mpahlwa said at a parliamentary media briefing on the economic cluster.

Alcan took up the rights to build a plant at Coega when it took control of another producer, Pechiney of France, three years ago but its commitment to the project appeared at times to be rather shaky.

Mpahlwa said government wanted to develop a developmental pricing model also for telephony to make SA an attractive investment location for business processing and offshoring. One of the major disincentives to foreign operators was the high cost of telecommunications.

Telkom would be asked to offer a developmental pricing model for strategic projects, he said.