Eskom, Rio say Coega project can go ahead

Johannesburg - Eskom and Rio Tinto yesterday maintained that the $3.25 billion (R25.5 billion) Coega aluminium smelter would be able to go ahead from 2012 despite projections from BHP Billiton that there would be no power available to build extra local smelter capacity until 2018. Andrew Etzinger, an Eskom spokesperson, said in the best case scenario, where Eskom cut demand by 10 percent, the local power system would have 10 percent spare capacity by 2012, including power that would be drawn down by the 1 350 MW Coega smelter. If the the company could not get people to use less electricity by 2012 it would have a deficit of about 4 percent. Last month Eskom reported a 4 percent demand saving. Etzinger said previous smelters had been built when Eskom had a spare capacity of more than 15 percent. Vimla Maistry, a department of public enterprises spokesperson, said it would be a few months before analysis was completed to determine when the Coega smelter could be accommodated on the grid. Maistry said if demand were cut and Eskom's two power stations came online that "would place the economy in a strong position to achieve a 15 percent reserve margin around 2012 or 2013". Marius Kloppers, BHP Billiton's chief executive, said yesterday: "As I understand it there is no more Coega project team. We are not really taking over anything because there isn't anything. Certainly there is no sense in restarting a project that Rio just shut down." BHP Billiton is trying to buy Rio Tinto, which has a majority in the Coega project. "We would obviously have to take a look when we get to that project [Coega]. We think there are terrific opportunities in other things at the moment and that is where we are putting our money." Jean Chawapiwa-Pama, a Rio Tinto spokesperson, said the Coega project team had been cut from 50 to between five and 10. The extra staff had been sent to Rio Tinto projects elsewhere in the world. Kloppers said: "I don't think there is any possibility [for new or existing smelter expansions] as far as we can see in our projections for the next decade. "We have looked at the reserve capacity, looked at the projects and looked at the trajectory of people building," he added. "There is not going to be much spare power available here for quite some time." BHP Billiton's three smelters in Richards Bay and Maputo had lost 8 percent of their production capacity as a result of the power cutback. "Acknowledging that there just might not be the electricity [for the Coega project] is a difficult thing to articulate," Kloppers said. In May, Rio Tinto announced that the start up of the smelter had been delayed until 2012. Since that announcement the company has cut its development team. Nick Cobban, a Rio Tinto spokesperson, said since May nothing had changed regarding the timing of the project . "Coega is a committed project - we are still finalising the timing," said Etzinger. Enough energy would be available to build the smelter if Eskom's new power stations were built to their present schedule. The 4 800MW Medupi power station is set to come online in mid-2012, 21 months after first scheduled. ---Business Report