London Calling on a damnable deal

London Calling on a damnable deal

14th February 2008

Nostromo Research, London

Sarawak’s Bakun dam has proved to be one of the world's most calamitous hydro projects of recent years. Justification for removing around 10,000 Indigenous Penan, and flooding an area of rainforest the size of Singapore, was that the Malaysian state needed power to improve the lives of its people.

In reality, the Malaysian government had been scrabbling for some years to find commercial clients to absorb a massive potential surplus of electricity, before Bakun comes into operation in two years time.

It's now confirmed that the key buyer will be Rio Tinto which, last Monday, signed an MOU (memorandum of understanding) with a Malaysian power utility, presaging the take-up of around half Bakun’s available electricity, in order to power a massive aluminium complex.

Should we blame the world's second biggest mining company for exploiting power, gained at the expense of misery and environment destruction caused some years before?

Indeed we should. As London Calling commented two and a half years ago:

"Rio Tinto stated its interest in purchasing power generated from Bakun as far back as the late nineties (even hinting it may buy into a construction consortium)..[I]f Corporate Social Responsibility stands for anything, it must surely include ‘carried responsibility’ for the consequences of any schemes from which a company stands to profit. This is what ‘Life cycle assessment’ of a mineral's "chain of custody" is crucially about. "

See: http://www.minesandcommunities.org/Aboutus/londoncall52.htm

That argument is as compelling today as it was then. Now it remains to be seen whether BHP Billiton will also seal a deal to share in Bakun's dirty power - as was speculated in 2005.

Of course if, later this year, the Big Australian takes over Rio Tinto – at present the biggest aluminium producer on the planet – it can place moral responsibility for buying into Bakun, firmly on the shoulders of its UK rival.

Power-supply MOU for Rio Tinto Malaysia aluminium smelter

Rio Tinto has signed a memorandum of understanding with a Malaysian utility for power supply from its Bakun hydro-electric scheme for its proposed aluminium smelter on Borneo

Naveen Thukral, Reuters

11th February 2008

BINTULU, MALAYSIA

Mining and metals group Rio Tinto Plc/Ltd (RIO.L) (RIO.AX) advanced its plan to build a $2 billion aluminium smelter on Borneo island on Monday, signing a power-supply agreement with a Malaysian utility.

In a separate announcement, Malaysia also unveiled plans for a second, smaller smelter for Sarawak state on Borneo, backed by local aluminium fabricator Press Metal Bhd (PMET.KL) and costing around 2.5 billion ringgit ($774 million).

Both announcements were made in conjunction with the government's launch of a 30-year development agenda for Sarawak, which plans to use hydro-electricity as the platform for growing a range of power-intensive, heavy industries.

Rio Tinto and its local partner, Malaysian builder Cahya Mata Sarawak Bhd (CMSM.KL), proposed last year to build a smelter with initial annual production capacity of 550,000 tonnes and the potential to be scaled up to 1.5 million tonnes.

The pair have yet to complete a feasibility study on the project, but they said on Monday they had signed a memorandum of understanding with utility Sarawak Energy Bhd (SARA.KL) for the supply of power from Sarawak's Bakun hydro scheme.

Under the agreement, the smelter would look for between 900 megawatts and 1,200 megawatts of power from the 2,400-megawatt Bakun scheme, which is due for completion in 2010.

The memorandum was announced along with a string of preliminary deals at Monday's launch of the Sarawak Corridor of Renewable Energy (SCORE) by Prime Minister Abdullah Ahmad Badawi.

Salco, the Rio Tinto-Cahya Mata venture, plans to build the smelter in central Sarawak, near the port town of Bintulu.

The second, smaller smelter would be built at Mukah, further south, but there were few details on this new proposal. Press Metal is a minnow in the industry, making only 20.6 million ringgit in net profit in calendar 2006.

Sarawak's chief minister has said that Sarawak has room for two smelters as more power supply becomes available.

Sarawak is building one of the largest hydro power complexes outside China. In addition to Bakun, it plans to develop another 2,000 megawatts in hydro-electric capacity by 2013. (Editing by Mark Bendeich and Lincoln Feast)