What a gas
Steel producer will use carbon dioxide flare offs to produce electricity
MITTAL STEEL SA is being forced to embrace the process of reducing gas emission in South Africa. The steel giant intends building a 130MW power plant at Vanderbijlpark to lessen carbon dioxide discharge to the atmosphere. The associated carbon dioxide saving would be 670 000 t/year.
The plant, which will cost in excess of R1bn, will use large volumes of gas currently flared into the atmosphere and that have been a cause of discomfort for the community of Vanderbijlpark, south-west of Johannesburg.
The construction of the plant is something that the local population of “Steel Valley” will celebrate, many of whom have allegedly had to leave their homes and/or lost their animals to pollution.
Flaring fuels in the area resulted in health costs due to respiratory problems being projected at more than R270m in 2005.
CEO Rick Reato says that Mittal Steel SA had accepted the challenge to reduce carbon dioxide emissions. That seems to be a radical shift of strategy by Mittal, which has been avoiding the problem in SA. Reato says that given the cost of energy, the issue of carbon dioxide reduction is also driven by business needs for sustainability and profitability. “It’s an issue that has the highest level of commitment from the organisation.”
Mittal Steel SA anticipates that if the new plant is authorised as a clean development mechanism (CDM) project, which deals with the selling of carbon credits to international buyers, a worthwhile return could be generated from carbon credits. “It’s difficult to ascertain what the value of such credits would be in future,” says Reato.
Hopefully, Mittal Steel SA is constructing the new plant due to a moral obligation to the public it serves and not just to pursue new revenue streams. Why is it important for the company to cut carbon dioxide emissions? “Mittal Steel SA shares the concern of other stakeholders that global warming is becoming a reality and needs to take proactive steps in that regard,” Reato says.
The process to reduce carbon dioxide is a massive task for any company and Mittal has established a dedicated team to deal with the issue. The team also plans to reduce a further 260 000 t of carbon dioxide flare off and intends to spend around R192m doing so. That energy generation project is likely to deliver an additional 33MW of electricity. Mittal will approach it as a CDM project.
However, SA’s major polluters – such as Mittal, Eskom and Sasol – aren’t doing enough to reduce harmful emissions. Says Reato: “It may be unfair to state we’re one of the biggest polluters when comparing us against the energy sector.”
It’s refreshing to hear Mittal Steel SA agreeing that many of its pollutants are quite visible and do create a negative perception. However, Reato says: “When looking at the list of significant projects the emission reductions that Mittal Steel SA will achieve are indeed huge and we’re very proud of this enormous undertaking.”
Hopefully, the millions being thrown by Mittal at the problem will lessen gas emission into SA’s atmosphere.
Meanwhile, Mittal Steel SA has committed a total investment of R250m to set up a development fund. The money will be used to create start-up ventures in the downstream steel industry. The fund was introduced after a series of talks with Government to assist with further growth and development of small and medium enterprises. Mittal will invite interested companies to apply for finance from its investment committee. “We’ll attempt to be as flexible as possible to facilitate exciting new ventures or the expansion of existing companies,” says Reato.
Asked whether Mittal Steel SA is going
The construction of the plant is something that the local population of “Steel
Valley” will celebrate.
to have a shareholding in these yet to be established ventures, he says: “It can be a combination of equity and/or debt, depending on the individual project’s requirements.”
The fund will not have normal return objectives, as Mittal will treat it as a developmental and social undertaking.
It seems as if Mittal Steel SA has been nudged by Government to create this fund, as the group will derive no value. Mittal already contributes substantial amounts to social investments and procurement. In its 2006 financial year it spent R733m on procurement, of which black economic empowerment suppliers received a large portion.
Finally dealing with the problem. Rick Reato