What a gas

Steel pro­ducer will use car­bon diox­ide flare offs to pro­duce elec­tric­ity

Finweek English Edition - - Companies & markets - GUGU­LAKHE MASANGO

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

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