November 21, 2008

ArcelorMittal SA to fight power plant lawsuit

It is reported that ArcelorMittal South Africa will fight a legal summons from power developer EcoElectrica asking for damages after its JV power plant project with ArcelorMittal was canceled.

ArcelorMittal South Africa a unit of the world's largest steelmaker, ArcelorMittal said that there is no clear legal basis for the claim of damages with regard to the cancellation of a 120 MW co generation power plant project that would have sourced waste gas from ArcelorMittal's Vanderbijlpark Steel Works and then sold the electricity to state owned electricity company Eskom under a long term contract.

According to an ArcelorMittal spokesman EcoElectrica is seeking ZAR 27.1 million (USD 3.4 million) in damages.

ArcelorMittal in a statement said that "After an investigation, it was determined that the project would not be financially viable on the basis of the proposal made by EcoElectrica. EcoElectrica chose not to continue with the project development on terms proposed by ArcelorMittal South Africa and as a result no commercial agreement could be reached between EcoElectrica and ArcelorMittal South Africa.”

EcoElectrica in a statement said that the steelmaker canceled the project in order to register the same project with Eskom independently. ArcelorMittal then offered EcoElectica ZAR 2 million to purchase one of its consents and informed the entrepreneurs that it wished to pursue the project independently of EcoElectrica. "We were shocked to learn of Mittal's duplicity," said Chief Executive Vanessa Gounden, who claims Mittal used the due diligence process to secure key project information on the ZAR1.2 billion project.