Published by earthlife at October 16, 2009
Press Release: Earthlife Africa Welcomes End to Rio Tinto Smelter
Earthlife Africa Jhb
16th of October 2009
Sense is beginning to reign in the South African energy sector. Eskom, the Industrial Development Corporation, Department of Trade and Industry, and Rio Tinto announced yesterday that Rio Tinto/Alcan’s planned aluminium smelter at Coega was scrapped. This has saved South Africa billions in power generation CAPEX, and marks the end of Earthlife Africa Jhb’s three-year campaign against the smelter.
The 1350MW smelter would have required Eskom to have effectively built a new coal-fired power station to service the smelter, which had a long-term supply agreement at favourable rates. While the exact tariffs to Rio Tinto were never made public, the estimate of 12c to 14c/kWh remains reasonable. This would have been another BHP Billiton situation, where a sweetheart deal with a wealthy multinational corporation is effectively underwritten by the public.
Further, cancelling this deal will prevent further negative effects on the global climate through the prevention of carbon dioxide emissions. In a very real sense, the deal would have been a perverse global warming subsidy.
South Africa’s current power & tariff woes stem from a perceived need to supply large amounts of electricity to industrial and mining concerns (inside and outside of South Africa) at very low rates. The costs of these long-term contracts (and the generally low Megaflex rate) are only now becoming apparent with Eskom’s latest tariff hikes.
In research recently completed by Earthlife Africa Jhb, Eskom’s costs have diverged from its revenues because of rising fossil fuel costs and that it sells the majority of its electricity below the average cost of production and, in some cases, below the actual costs of production. The reasons for this have been industrial policy and deals like the one with Rio Tinto. The details of these deals are still hidden away from public scrutiny, despite the public being asked to bear 45% annual increases over the next three years.
This research concludes that, “Eskom cannot be a self-funding utility or can internally finance CAPEX unless industrial tariffs are raised and the practice of selling below cost of production is halted. To do this, the contracts between Eskom and its intensive users (inside and outside the borders of the country) will have to be examined in public and then renegotiated. Hiding behind “commercial secrets” is a sure way to decay the common good.”
To view this research, please go to:
Tristen Taylor, Project Coordinator at Earthlife Africa Jhb, states, “From 2006, Earthlife Africa Jhb and other civil society organisations have been actively campaigning against this smelter. It has been a hard slog involving residents of Port Elizabeth, students, community organisations, landowners, social movements, and environmentalists.
“The scrapping of this smelter has not only saved a lot of financial pain for the country at large, saved residents of Port Elizabeth from industrial pollution, but also marks the possible beginning of a shift away from cheap power to industrial consumers. This cheap power to industrial concerns means that Eskom does not have the necessary funds for its CAPEX programme, and now the entire country is being asked to pay. We have to revise all the agreements with intensive users.”
For more information, please contact:
Earthlife Africa Jhb
Cell: +27 84 250 2434
Tel: +27 11 339-3662