Johannesburg - Pechiney, the French aluminium producer taken over last year by its Canadian rival Alcan, spent E45 million (R405 million) developing plans for its proposed Eastern Cape smelter in the year to last September, Alcan said this week.

A statement released by Alcan late on Monday said the impairment charge would be recorded in Pechiney's books before the takeover that would create the world's biggest aluminium producer. The charge would not affect Alcan's earnings, it said.

Costs incurred after September would be charged to its income, Alcan said.

Although details of what the E45 million charge involved were not available yesterday, Pechiney sources confirmed it was for actual expenditure incurred and did not relate to the possible penalties the company would have to pay if it decided not to go ahead with the Coega project.

Last year, in terms of a contract signed with power utility Eskom, Pechiney gave the go-ahead for construction of the massive electricity infrastructure to make the project viable.

If the project does not proceed, Alcan, as Pechiney's new owner, will be liable for what are thought by insiders to be very large penalties payable to Eskom, which is expected to spend R2 billion on the roll-out. 

Alcan, which is buying Pechiney for E4 billion, still has to decide which of its projects it will pursue. In an an interview last week, Alcan spokesperson Joseph Singerman was cagey about the smelter's chances of getting the green light.

Singerman said Alcan was reviewing all the project proposals on Pechiney's books, adding that "Coega is just one of many opportunities for profitable growth".

He said Alcan had to decide whether Coega was the best site to launch Pechiney's new AP50 smelter technology, saying this was "very important to the group". He would not be drawn on when an announcement could be expected.

Meanwhile, the Coega Development Corporation (CDC) has said the industrial development zone (IDZ) would remain viable even if Alcan chose not to go ahead with the proposed smelter.

Spokesperson Ray Hartle said that while the smelter would give the IDZ a "huge fillip ... the absence of Alcan will not mean everything grinds to a halt".

He said the CDC was "in discussion" with several companies and it had, for the past three years, pursued a strategy of attracting a basket of investments rather than a single anchor tenant.