Smelter Asia still in tariff talks with SEB

Smelter Asia Sdn Bhd is still in negotiation with Sarawak Energy Bhd (SEB) for the supply of more than 600MW to power its proposed aluminium smelter in Samalaju Industrial Park, Bintulu.

“Negotiations are on going,” SEB vice-president (strategic communication and corporate social responsibility) Nick Wright told StarBiz.

He could not say how much longer it would take for the two parties to wrap up talks on the price of electricity.

Smelter Asia, a joint venture between Gulf International Investment Group Holdings Sdn Bhd (GIIGH) and Aluminium Corp of China, sealed an agreement in April last year to jointly develop the US$1.6bil (RM4.95bil) aluminium smelting plant with an annual capacity of 370,000 tonnes.

The company subsequently executed principal terms of power purchase agreement with SEB-owned Syarikat SESCo for the supply of electricity to the proposed smelter.

GIIGH is headed by billionaire Tan Sri Syed Mokhtar Al-Bukhary and UAE-based business leader Mohamed Ali Rashed Alabbar.

If built, Smelter Asia's plant would be bigger than Press Metal Bhd's new 240,000-tonne-a-year aluminium smelter in Samalaju Industrial Park.

According to SEB chief executive officer Torstein Dale Sjotveit, Press Metal's new plant will start operations by June.

Press Metal owns and operates Malaysia's first aluminium smelter in Balingian in Mukah Division which is currently operating at full capacity of 120,000 tonnes per annum. The combined capacity of Press Metal's two plants would be 360,000 tonnes a year.

Sjotveit said SEB would supply 480MW to the new smelting plant.

On Tuesday, Sarawak Aluminium Co Sdn Bhd (Salco) a joint venture between Rio Tinto Aluminium (M) Sdn Bhd and Cahya Mata Sarawak Bhd called off plans to build a US$2bil aluminium smelter in Samalaju, four years after the project was unveiled.

Cahya Mata group managing director Datuk Richard Curtis had said the company and Rio Tinto had been unable to finalise commercial power supply terms with SEB that would meet the parties' current respective financial considerations and economic imperatives.

Sjotveit said although SEB had negotiated with Rio Tinto and Salco in good faith, the concerned parties' positions on the price of electricity for the project was just “too far” apart.

“We are disappointed that we were not able to find a mutually acceptable solution,” he added.

It is understood that the negotiated power tariff was based on the supply of 750MW to the project.

According to Sjotveit, SEB had reached agreements with Sarawak Corridor of Renewable Energy (SCORE) investors and export customers (Indonesia and Brunei) to sell more than 2,000MW of SCORE power.

He said this would mean that the entire firm output of the Bakun hydroelectricity facility was already committed, adding that there was now a long queue of potential customers competing for SEB's remaining power.

SCORE energy-intensive industries would get their power from Bakun and Murum hydroelectric dams.

The 2,400MW Bakun dam, which was commissioned several months ago, will have a firm supply of 1,771MW when fully operational while the 900MW Murum dam (with firm supply of 635MW) is expected to come on stream in 2014.

SEB has announced starting the construction of a proposed 600MW coal-fired power station in Balingian this year. The project is estimated to cost more than RM3bil.