Valco - The National Asset Worth Preserving

In a harshly worded article with the title "Who advised the purchase of VALCO?", which appeared in the Monday March 26 2007 edition of the Daily Graphic, Mr. K.B. Asante, a regular columnist of the newspaper more or less accused the government of causing financial loss to the state for revamping the Volta Aluminum Company (VALCO).

This is how he concluded his piece: "Those who advised or were involved in major decisions such as buying VALCO however have a more serious charge to answer. They have to show that they have not through incompetent analysis and appraisal caused distress and financial loss to the state."

Donning the garb of a pooh bah, the former Educationist, Civil Servant, Diplomat, now newspaper columnist, said many things in this article with his usual reference to Osagyefo Dr. Kwame Nkrumah as though he was the right hand man of the former president in decision making during the 1st Republic. But that's another matter altogether to be examined later.

His article was a riposte to a Daily Graphic editorial on the temporary closure of VALCO. In the editorial the Daily Graphic had made reference to the use of coal to generate power to run the factory.

This is what seems to have invited Mr. Asante's ire and he thundered with these words: "I have heard this suggestion over the airwaves. I dismissed this as exuberant ignorance." He then goes on and on in this vein eventually wondering aloud as to whether his knowledge was out of date!

On that issue, unfortunately, his knowledge is woefully out of date. Though Mr. Asante is an octogenarian, he is only a mouse click away from the current information on "coal's resurgence in electric power generation".

In a January 2007 assessment using data derived from Energy Information Administration (EIA) Annual Energy Outlook 2006, the US expects to achieve 154 GW, that is, 154,000 MW new coal capacity by 2030. This will account for 51% of new capacity additions. To this end, there are already 159 proposed and new plants capable of providing 96 GW power at an investment of US$141 billion.

Specifically, what this means is that coal as a source of electricity generation is not only viable but also vital in this energy hungry world.

In India, one of the fastest growing economies of the world, "Tata Power Company Ltd plans to invest 100-150 million rupees in mainly-coal-fired power projects over the next five years." Speaking to Reuters last October Adi Engineer of Tata, said "Coal is the only fuel with long-term viability to ensure lower tariffs." It is worthy of note that coal is India's "dominant commercial fuel generating 70 percent of its power." It is also the world's third largest producer after China and the US.

Ghana's own independence twin, Malaysia, is now widely regarded as a mid-income country, with many giant industrial concerns. It is as power hungry as any major industrialized country. A major part of its energy is derived from coal-fired power plants.

Major plants are located at Perak, Selangot and Johor. In a recent study of the Malaysian energy scene, we read that, "Malaysia has approximately 16 gigawatts (GW) of electric generation capacity, of which 87% is thermal and 13% hydroelectric. In 2003 Malaysia generated around 70 billion kilowatt hours of electricity.

The Malaysian government expects that investment of $9.7 billion will be required in the electric utility sector through 2010. Much of that amount will be for coal-fired plants as the Malaysian government has adopted a policy of attempting to reduce the country's heavy reliance on natural gas for electric power generation."

In neighbouring Indonesia the "state-owned electricity company Perusahaan Listrik Negara (PLN) on November 18 [2006] opened tenders for the construction of 25 coal-fired power plants outside Java Island. The tenders are part of the GOI's 'fast track' programme to build an additional 10,000MW of electricity generating capacity by 2009." In South Korea, another South Asian tiger, "the country's long term plan is to build 117 new power plants by 2015 to increase the country's power generation capacity to 80,830 MW." Already the Danglin power plant, made up of four 600MW coal-fired units is operating in that country. Total investment was $2.7 billion.

Coming closer home to South Africa, we discover that she is a net exporter of energy, with total energy production exceeding consumption by a "moderate margin".

Significantly, this difference "has been due to its coal exports." The statistics are very impressive: "South Africa presently ranks as Africa's second greatest energy producer (behind Algeria) and 17th greatest in the world in that regard, accounting for about 1.4% of the world's total annual energy production, and the world's 19th greatest energy consumer (and the greatest energy consumer in Africa) accounting for about 1.1% of the world's total annual energy consumption. South Africa's energy production and consumption have each increased by about one-third over the past decade."

This fact may come to K.B. Asante as a surprise: "South Africa generates nearly half of Africa's electricity, more than 90% of which is generated from coal".

Coal still forms an important component of the world's mix of energy sources and holds its own against oil, gas, nuclear and hydroelectric, the other main sources of energy.

Experiments in wind, solar and sea are still ongoing, but for them to be generally available and affordable, we are looking towards the next two decades or more.

Mr. Asante scoffs at the idea of using coal to generate electricity for aluminum smelting. That shows off not only ignorance but also prejudice not based on any sound economics or science. Aluminum smelting requires a lot of electricity. It is the electricity that helps convert the ore, through a complex chemical process to produce the final product. The source of the electricity does not therefore matter! It could come from a hydro-electric, a nuclear, a gas, an oil or a coal source!

The new thinking in powering industrial concerns that require massive electricity, where the main grid is insufficient, is the "Individual Company Initiative", where a company invests in its own generating system by producing power for its own consumption and selling the excess capacity produced. The Tema Oil Refinery (TOR) has taken such an initiative and by March 2008 hopes to be totally independent of both VRA and ECG, by generating its own electricity. Already, a big metal producing company, WAHOME, has expressed interest in buying up any excess power that TOR would produce.

The idea therefore of VALCO plugging into this new thinking is not as far-fetched as Mr. Asante would make Ghanaians believe.

To the specific issue of aluminum smelting using coal-generated electricity, there are many examples worldwide. A few would suffice here: In the US, ALCOA has plants in Texas and Indiana that utilize coal to generate electricity for aluminum smelting. The Warrick Smelter in Indiana produces up to 742 MW.

In the UK, ALCAN has two smelters in Lynmouth and Lochaber that utilize coal in their smelting. In Norway, ten aluminum smelters rely on coal produced electricity. Ironically, the aptly named Hydro Aluminium AS plant located at Sunndal 4 generates up to 1,070 MW from its coal-fired generators! If Ghana could generate even half of that in addition to Akosombo we wouldn't be in the fix we are today!

It is important for global warming and other environmental concerns to be taken into consideration when making investment decisions. Human progress is powered by electricity and until such time that mankind can come up with sustainable alternatives it is going to be water (rivers), oil, gas, coal, nuclear. It is an energy hungry world.

The Daily Graphic editorial which Mr. K.B. Asante seemed so incensed about actually was more well-informed, well-meaning and forward-looking than his clearly uninformed and vituperative outpourings.

VALCO is a national asset worth preserving. We must contribute arguments that would make it more efficient and profitable, not arguments that would malign, discourage and destroy. That is not the way to progress.

Link to allAfrica.com: Ghana: Valco - The National Asset Worth Preserving (Page 1 of 2)