Smelting plant electricity usage dispute to be mediated by Recoda

KUCHING: The Regional Corridor Development Authority (Recoda) is stepping in to help resolve a dispute between Pertama Ferroalloys Sdn Bhd and Sarawak Energy Bhd (SEB) over Pertama having to pay for unconsumed electricity at its manganese alloy smelting plant in Samalaju Industrial Park, Bintulu.

Pertama executive chairman HiroTaka Suzuki, Recoda chief executive officer Datuk Ismawi Ismuni agreed to mediate in the dispute between Pertama and SEB.

“Recoda is trying to find an amicable solution and wants to look into the legality of the power purchase agreement (PPA) signed between Pertama and Syarikat Sesco Bhd,” he told StarMetro Sabah & Sarawak after meeting with Ismawi here on Monday.

Sesco, which is SEB’s wholly-owned subsidiary, is involved in the generation, transmission and distribution of electricity in Sarawak.

Suzuki met with SEB executive vice-president (planning, strategy and corporate development) Ting Ching Zung.

Under a 20-year PPA, Syarikat Sesco is supplying 170MW to Pertama smelting plant on a “take or pay” basis.

Suzuki said Pertama could only consume 145MW but had been paying for the other 25MW that it had not consumed.

“We are paying about RM2mil a month for the unconsumed electricity,” he claimed, adding that Pertama had asked Sesco to reduce its power requirement to 145MW.

Suzuki said Sesco agreed to take the unconsumed 25MW from Pertama on condition that it had to adjust upward the power tariff for the 145MW to make up for the loss.

“Sesco wants to penalise us because they say they have to look for consumers for that unconsumed 25MW,” he said.

According to Suzuki, he could find buyers for the 25MW as there are industries in Samalaju Industrial Park that require additional power for their expansion projects.

He said Pertama, which appealed to Chief Minister Datuk Patinggi Abang Johari Tun Openg six months ago to help resolve the company’s predicament, would meet Recoda officials next month.

He hoped the issue could be resolved within three months.

Pertama, a pioneer investor in Samalaju Industrial Park within Sarawak Corridor of Renewable Energy (SCORE), is 60% owned by Hong Kong-based Asia Minerals Ltd (AML).

Its other joint-venture partners are Japanese firms Nippon Denko Co Ltd (25%) and Shinsho Corporation (7%) as well as Carbon Capital Corporation Sdn Bhd (8%).

The company’s US$400mil smelting plant expects to raise the output of manganese alloy products to 22,000 tonnes per month in the next four months when it is ramped up to full production. Current production has reached 85% of installed capacity.

Pertama now produces three standard grade products – manganese alloys, ferrosilicon and ferro manganese.

Suzuki said Pertama was unhappy with the high port tariffs charged by Samalaju Industrial Port, which he claimed, are about 50% higher than Bintulu Port.

He said the purpose-built Samalaju Port’s tariffs were based on cargo volume, meaning that a company with larger cargo volume would get lower rates than a company with smaller cargo.

“Our export/import cargo volume is about 100,000 tonnes a month,” he added.

Before the Samalaju Port was operational last year, Pertama and other industries in Samalaju Industrial Park were using Bintulu Port, which is some 60km away from the industrial park, to import their raw materials and export their finished products.

Suzuki said although Pertama could save on trucking and logistics costs by switching to Samalaju Port, this was offset by the high tariffs imposed by the new port.

He said the company was currently using the services of both Samalaju Port and Bintulu Port, saying that its bulk cargo was handled by the Samalaju Port while containerised cargo by Bintulu Port.

Besides power and port tariffs, Suzuki said Pertama had been long waiting for the Department of Environment (DOE) to grant it licence to sell the smelting plant’s by-products – silica fume and manganese slag.

Silica fume, which could be used for cement manufacturing, has a market value of US$200 per tonne while manganese slag US$20 per tonne.

He said DOE classified these by-products as scheduled wastes that required licence to sell, adding that no other country had done so.

“DOE says we need to get licence for every contract of the by-products we want to sell so that they can monitor the buyers.

“We want DOE to take quick action on this as we have been waiting for a solution for about two years,” said Suzuki.

He said Pertama stocked up about 40,000 tonnes of silica fume, a by-product of ferrosilicon, in the past two years.

He added that the volume of manganese slag in the company’s inventory was higher as one tonne of silicon manganese produced would generate one tonne of manganese slag.

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