Rio Tinto cans Sarawak aluminum smelter plan

March 28, 2012
Sarawak hydro project map

Mining giant Rio Tinto PLC has announced it has scrapped plans for a USD2 billion aluminum smelter project in the Malaysian state of Sarawak. According to Dow Jones Newswires, Rio Tinto decided to scrap the controversial smelter plans as negotiations with Cahya Mata Sarawak, controlled by the family of Sarawak Chief Minister Abdul Taib Mahmud, and the Taib-controlled Sarawak Energy failed to bear fruit.

Jacynthe Cote, chief executive of Rio Tinto Alcan, said "agreement on a long term competitive power supply contract couldn't be reached" with the Taib family businesses.

Rio Tinto's announcement is being seen by environmental and anit-corruption campaigners as a major blow to the Sarawak state government led by Taib, who consistently used the aluminum smelter to promote the 2.4-GW Bakun dam, Asia's largest hydropower dam outside China.

Since the recent completion of the USD2.4 billion mega-project, which has primarily been funded by loans from Malaysia's public pension fund, Sarawak has had a massive power glut.

Bakun has reportedly been running only one 150-MW turbine out of the three that are currently operational and another five turbines are due to be commissioned by next year. Sarawak's current level of peak electricity demand is, however, less than a gigawatt.

Although there are plans to for two other smelters – one involving GIIG Holdings and the Aluminum Corp of China, and the other a JV between 1 Malaysia Development and Abu Dhabi's Mubadala Development Company – Rio Tinto’s withdrawal makes plans to develop another 12 dams with an extra 7-GW of generating capacity even more unnecessary.

Plans to export Bakun's excess power to West Malaysia were scrapped long ago for economic reasons but about 50-to-100-MW will be sent over a new transmission cable to the neighboring Indonesian province of West Kalimantan.