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Feb 08, 2011

Draft carbon tax a ‘nonstarter’, Nyembezi-Heita asserts

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ArcelorMittal South Africa CEO Nonkululeko Nyembezi-Heita and CFO Rudolph Torlage on possible power generation projects and the impact of a carbon tax. Camera Work and Editing: Darlene Creamer. (8/2/2011)
 
 
 
Africa|Eskom|Waste|Africa|Energy|Steel|Waste
Africa|Eskom|Waste|Africa|Energy|Steel|Waste
africa-company|eskom|waste-company|africa|energy|steel|waste



Steel producer ArcelorMittal South Africa (Mittal) has warned that the proposed introduction of carbon taxes could undermine its competitiveness against both developing and developed country steel producers, which do not currently confront such a tax burden, and could also materially affect its profitability.

In fact, CFO Rudolph Torlage indicated on Tuesday that, had the proposed tax been introduced during 2010, it would have equated to almost 50% of the group’s earnings before interest, tax, depreciation and amortisation of R3,5-billion.

“So from our perspective, this is a nonstarter,” CEO Nonkululeko Nyembezi-Heita added. “So, we are hoping very much that this is not quite where we will end up.”

She revealed that Mittal was in the process of preparing its formal comment on the discussion document, which would be completed ahead of the February 28 deadline set for such public feedback.

A recent report by Deloitte indicated that, should carbon dioxide equivalent (CO2e) prices be set at R165/t, it could yield R82,5-billion in additional tax revenue for the South African government, given estimated total yearly emissions of about 500-million tons of Co2e.

While the National Treasury’s discussion document, which was released in December, explored three carbon tax options, it stated that a tax imposed directly on measured emissions of CO2 appeared to be the “most appropriate”.

Deloitte calculated that the model could result in Eskom paying R37-billion a year in carbon taxes, while Sasol could be required to pay some R9,9-billion a year, and Mittal about R1,7-billion a year.

“Were the carbon tax to be implemented in the form currently contemplated, it would have a devastating impact on this company’s financial performance,” Nyembezi-Heita argued.

She stressed that Mittal was also moving to meet its target of reducing CO2 emission by 8% a ton of steel produced by 2020, with 2007 as the base year.

As a signatory to the National Energy Accord, the JSE-listed company had also committed itself to reducing its electricity consumption by 12% by 2014, and the group was looking to increase its internal generation capacity from the current level of around 80 MW.

It was even considering wind generation options at Saldanha Bay, with the primary focus on capturing waste heat and off gases for conversion into electricity.

Mittal was also investigating ways to make its coke batteries compliant with the rigours of South Africa’s new Air Quality Act, which came into force last year. Noncompliant facilities had five years to become compliant and ten years to meet the stipulations of the new Act.

Should Mittal move towards total compliance it was likely involve a “significant capital outlay”.
 

Edited by: Creamer Media Reporter

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