Business

The man with a $100m cost saving plan for Boyne Smelter

Tamar Valley Power Station has a gas fired combined cycle power plant that cost $451 million and produces 210MW per annum.
Tamar Valley Power Station has a gas fired combined cycle power plant that cost $451 million and produces 210MW per annum. Aurora Energy

BOYNE Smelters Limited general manager Joe Rea put out a call to Gladstone Engineering Alliance members to come up with costs cutting measures --- 72-year-old Michael Fearns was listening.

The former president of the Gladstone Engineering Alliance has a plan that could save the smelter about $100 million a year. It would cost $451 million to implement and would protect it from changing electricity prices.

At the Gladstone Engineering Alliance annual industry update to contractors, engineers and other industry leaders, Mr Rea asked for them to help the smelter survive.

With aluminium prices sitting at about US$1500 a tonne, more than half of the 1995-2008 average of US$3402 a tonne, Mr Rea said profits for aluminium were gone and the commercial electricity prices were killing the business.

The smelter is a part owner of NRG Power Station in Gladstone and gets 810MW (81%) of its power from that station, but for the remaining 185MW (19%) it is forced to compete on the open market.

The 185MW is substantial and is enough energy to power every home on the Gold Coast for a year. Securing a good deal on that contract has been an issue for the smelter for many years.

In September 2013, it curtailed production by 8% for three months because the price of electricity meant it was running at a loss.

The price went down after the three months and production went back up, but the following September the smelter was facing another expensive summer for the extra 185MW of electricity.

Former GEA president Mr Fearns said if the smelter was to invest in a gas fired combined cycle power plant it would easily survive the next five years and many more to come. By his mathematics, the gas fired plant would cost $451 million, based on a gas fired plant in the Tamar Valley in Tasmania that produces 210MW. That plant started production in 2009 and produces 140MW through the gas turbine and a further 70MW in the steam turbine.

If the smelter pays for "(180MW) at the household rate of 22 cents a KWH, it comes to almost $350 million per annum," Mr Fearns said.

He said he didn't know the rate the smelter bought its power at but at half the household rate it still amounted for $175 million per annum, and $100 million per year would be a "feasible" saving.

But the smelter's $720 million upgrade of the carbon bake furnaces about four years ago has stopped the smelter from investing in Mr Fearns' idea.

"Securing a competitive (source of power for the 185MW) is top priority for us and wedded to that is remaining cash positive," a statement from the smelter to Mr Fearns read.

The $720 million upgrade that decommissioned two furnaces and built a new one improved the smelter's efficiency, but the "owners have not yet seen a return on that investment" and are unwilling to invest more.

But Mr Fearns said if the smelter looked at a bigger picture, the $451 million investment would save more money over the next five years and the smelter would be in a great position by the time the alumnium price increased again.

Why companies are looking for savings

 

Topics:  boyne smelter, gladstone engineering alliance, gladstone industry, industry




UPDATE: 'What the hell': Burnett predicts court battle with Coles

Matt Burnett expects Coles will take council to court over its decision.

MULTI-million dollar Coles shopping centre for Kirkwood rejected.

New Gladstone Ports Corporation CEO has been announced

Peter O'Sullivan has been announced as the new chief executive officer of GLadstone Ports Corporation.

The future of Gladstone Ports Corporation is in new hands

Latest deals and offers

Brian McFadden makes daughters pay for own Christmas gifts

McFadden makes his daughters pay for half their presents

Lady Gaga is a godmother

Lady Gaga has become a godmother to her friends' daughter

Will Turbo be taken off TV?

Memes about Turbo are flowing on Social media.

PEOPLE want Turbo taken off TV, but will Prospero Productions the ma

Police charge in after Lohan claims fiance tried to kill her

"You tried to kill me. You're a f*****g psycho".

Prince Harry regrets not talking about Diana's death

Diana, Princess of Wales, enjoys a ride on the Maid of Mist in Niagara Falls, Ont., in this Oct., 1991, with her sons Prince Harry, then 7, and Prince William, then 9.

The royal was 12 years old when his mother was killed

Oh Kim, be careful with the spray tan when breast feeding

Kim Kardashian West accidentally smothered North's face in fake tan

You can own this Queensland town for just $1

Yelarbon

Unprecedented auction of town's business centre with no reserve

Work starts on $15M Caloundra apartment building

Turning the first sod at the Aqua View Apartments site in Kings Beach are (from left) husband-and-wife developers Alex Yuan and Stella Sun with construction company Tomkins director Mike Tomkins and Councillor Tim Dwyer.

Developers excited about addition to Kings Beach skyline

72-year-old Coast developer set to start new project

GREEN LIGHT: The Cosmopolitan has been approved for development at Cotton Tree.

Meet the Canberran set to deliver another chapter for Coast suburb

Plans revealed for 1500-lot 'master-planned community'

Precinct will be bounded by Boundary St and Shoesmith Rd

Ecco Ripley sales run sparks prime release

MOVING IN: Sekisui House has announced the release of more residential blocks at Ecco Ripley.

Sekisui House is preparing to unveil more land at Ecco Ripley

The climb is slow but property on the way up

Michael Matusik, director of Matusik Property Insights.Photo Allan Reinikka / The Morning Bulletin

The improvement would be mild when compared to past cycles