IDC upbeat on Alcan smelter at Coega

Posted On Thursday, 14 July 2005 02:00 Published by eProp Commercial Property News
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CANADIAN aluminium and packaging group Alcan will make its decision on whether to go ahead with building a $2,5bn smelter at the Coega industrial development zone in Eastern Cape in October, said Industrial Development Corporation (IDC) CEO Geoffrey Qhena yesterday.


Property-Housing-ResidentialQhena said he was confident Alcan would go ahead with the smelter given the progress made on the negotiation of an electricity tariff for the smelter — one of the key issues in its decision to participate.

Alcan, the world’s second biggest primary aluminium producer, inherited the $2,5bn smelter project when it took over French rival Pechiney in 2003, but has yet to commit to the project.

It has promised to announce its decision on the Coega project several times but has so far failed to do so.

Qhena said a final decision would only be made at an Alcan board meeting in the latter half of the year.

If Alcan goes ahead with the smelter, the IDC will likely take a 15% holding in the project — which will be second only to the Barclays takeover of Absa in terms of foreign direct investment in SA.

The negotiation between Eskom and the Canadian group over the electricity tariff is seen as key to whether the project goes ahead.

Smelters are big users of electricity, with the Mozal smelter in Mozambique accounting for half of that country’s total electricity consumption.

Eskom spokesman Fani Zulu said it had given Alcan a quotation that was within the "framework" provided by government and the National Electricity Regulator, and was now awaiting a response.

Zulu said the negotiation with Alcan was "tough" but was "progressing well".

Alcan spokesman Alexander Christen would not say whether the group had come to a decision to proceed with the smelter.

Christen, however, did say that Alcan would make an announcement on the progress of a feasibility study on the smelter being done in collaboration with the South African government and the IDC in "a few weeks’ time".

Alcan said it needed a new feasibility study as it had decided to revert to the known AP35 technology rather than the highly advanced AP30 smelting technology.

Qhena said: "We are confident that the smelter will go ahead, that’s why we would like to take a 15% stake".

If Alcan decides to proceed, construction could begin at the end of this year with the first metal produced in 2008. It would then produce up to 660000 tons of aluminium a year.

He said Alcan had invested a lot of resources into investigating the possibility of developing a smelter at Coega.

The smelter is expected to be the anchor tenant in the development, which has been struggling to attract investors.

Two months ago Coega announced it had attracted its first investment, which is now clouded in controversy.

The tenant, Sander International, a textile maker, has run into problems regarding its empowerment partner, ICAN, which is battling to raise funding for its stake.

Coega Development Corporation CEO Pepi Silinga said last month that 5% of the 70 projects the corporation had lined up were expected to materialise within 18 months. The corporation said an announcement on a large further investment at Coega would be made in the next three months. With Reuters

Last modified on Thursday, 26 June 2014 09:37

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