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Steel giant faces suit

By unknown | Mar 13, 2008 | COMMENTS [ 0 ]

Isaac Moledi

Isaac Moledi

South Africa's steel giant, ArcelorMittal, is facing a lawsuit from women's empowerment company EcoElectrica.

EcoElectrica accuses ArcelorMittal of cheating them by excluding them from a multi-billion rand electricity project originally initiated by it.

The women entrepreneurs have also appealed to Eskom to end its relationship with the steel giant, They and are also seeking legal intervention to halt the steel group from continuing with its power plans at its plant in Vanderbijlpark.

The R1,2 billion EcoEmfuleni Power Plant is designed to source waste gas from the Vanderbijlpark Steel Works and convert it into electricity.

This will be sold to Eskom as part of the power utility's co-generation plans. The proposed plant will have an estimated output of 120 megawatt (enough to power a small city such as Polokwane) into the national power grid, estimates Vanessa Gounden, EcoElectrica's chief executive.

She says the project, pursued by her company as a potential business project with ArcelorMittal since 2003, must be stopped.

She says her company cannot have spent millions on developing the project only to be excluded by ArcelorMittal. She describes the steel giant's conduct as "grossly unprofessional" and as a "fraudulent misrepresentation".

Gounden says EcoElectrica, whose primary focus is the development of ecologically sustainable independent power projects, first approached ArcelorMittal in 2003 when it was clear that South Africa was facing a pending energy deficit.

The steel giant expressed interest in taking part in the project as EcoElectrica's partner, Gounden says.

Her company registered the EcoEmfuleni project with Eskom and the Department of Minerals and Energy. The National Energy Regulator also issued the empowerment company with a provisional licence.

She says until July 2005 negotiations to implement the project were conducted on the basis of a possible joint venture between EcoElectrica and ArcelorMittal.

After initial feasibility studies and the acquisition of all necessary licences, ArcelorMittal decided to sell the waste gas to the EcoEmfuleni Power Station on a commercial basis, says Gounden.

By October 2006 ArcelorMittal, now under new management, made overtures to re-engage with EcoElectrica, offering either an equity partnership or to purchase the entire project from the entrepreneurs.

Gounden says it was after the completion of the due diligence process and conclusion of a purchasing power agreement with Eskom in December 2006 that ArcelorMittal informed her company of their withdrawal from the joint project, pursuing it on their own.

ArcelorMittal approached Eskom to register the same project as a co-generation without their knowledge.

In turn the women's empowerment group was offered R2million for its research and development.

"We were shocked to learn of ArcelorMittal's duplicity," Gounden says.

Eskom rejects Gounden's allegations and says: "Eskom was never a party to any of the relationship and-or shareholder discussions between EcoElectrica and ArcelorMittal.

ArcelorMittal confirms receiving EcoElectrica's summons for damages, but says it will contest it.

According to Tami Didiza, ArcelorMittal's general manager for corporate affairs, the two companies investigated the viability of developing a power plant at the company's Vanderbilpark Works.

After a study it was determined that the project would not be financially viable on the basis of the proposal made by EcoElectrica.


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