Empowering Algoma Steel with energy.

While Algoma Steel searches for a new international partner to build wind towers, the Sault Ste. Marie steel-maker is investing $135 million in a co-generation facility.

[ILLUSTRATION OMITTED]

The company is forging ahead with a new high-efficiency co-generation power project to reduce their energy consumption.

With SIAG, their German joint venture partner to assemble wind towers in the Sault, undergoing corporate restructuring, Algoma has turned in another energy-related direction with plans to recover all of their waste off-gases to generate electricity.

Algoma's proposal to form a wholly-owned limited partnership, known as Algoma Energy LP, was accepted by the Ontario Power Authority (OPA) which signed a 20-year power purchase agreement.

Company spokesperson Brenda Stenta says the 70-megawatt power facility, scheduled for completion by late 2008, will supply both steam and electricity in reducing their power demand from the provincial grid by 50 per cent.

For amount of power Algoma generates, their remaining power needs will be covered by the OPA purchase agreement, Stenta says "which offers us the stability and pricing that we need in order to make a $135 millon investment."

The facility will be fueled by capturing blast furnance and coke oven gases. Previously, these gas were flared. Two new boilers of 1,400 PSI each will be installed to feed a steam turbine to an electricity generator.

"It's a much more efficient way of generating electricity," says Stenta, will also some environmental pluses in reducing their nitrous oxide emissions by 15 per cent. The same amount of power produced by a coal plant, she says, would reduce 300,000 metric tonnes of greenhouses gases.

Algoma is prepared to finance the co-generation project from cash reserves, but the company is exploring alternative financing.

No construction groundbreaking date has been set but Algoma is already ordering equipment for the facility, which will be operated by existing company utility personnel.

On the flip side, Algoma's plans to build a wind tower manufacturing plant is on indefinite hold.

Corporate restructuring by Algoma's European joint venture partner, SIAG (Schaaf Industries Corporation), has lead the steelmaker to prepare a "contingency plan" to search for alternative partners to build the $35-million facility.

Stenta says the ongoing SIAG restructuring issues could further hamper the German company's ability to proceed with their first North American fabricating facility.

SIAG is regarded as a leading supplier of wind turbines in Europe with plants in France, Germany and the Czech Republic.

Stenta says SIAG's rapid expansion in Europe has lead to some "internal restructuring." But Algoma has no indication of how long this process will last.

"We feel it's only pertinent that we start to look at some contingency planning," says Stenta, by exploring for other partners with similar expertise.

"Certainly the market conditions are ideal at this point and the longer you delay start-up, the further along the curve you are in the product market cycle."

Stenta wouldn't comment about the level of interest received from prospective companies.

"We're certainly not able to give any details but we have several potential partners that we're exploring." She also wouldn't comment either on the status of area contractors selected to build the facility as part of the original project team.

[ILLUSTRATION OMITTED]

Algoma first announced this value-added steel plate venture last February with plans to assemble 180 wind towers per year. The proposed $35-million tower fabricating plant would be built on a 20-acre greenfield site west of the steelworks on Baseline and Allen Side Roads. The operation would employ as many as 140 workers at full production.

SIAG would hold a majority interest (51 per cent) in the limited partnership. But groundbreaking didn't begin as planned in April on the 210,000-square-foot building.

Algoma CEO Denis Turcotte said last August that private financing was in place, a building plan was complete and they were ready to purchase equipment.

Stenta says Algoma hasn't yet given up on the SIAG Great Lakes Partnership, calling it a very viable business opportunity with a "phenomenal economic model" for wind power that's "only going to grow in North America."

The company was also considering defraying some of their operating costs by investigating in wind power. Nav Canada approval was recently given for Algoma to erect an 80-metre high meteorological tower on the southwest corner of their Sault property. The solar-powered tower will gather a year's worth of data charting wind patterns.

Algoma is working with a wind consultant to interpret the results and determine if there is an economic case.

They're also awaiting approval to erect a second tower in Wawa, 225 kilometres north of the Sault, where Algoma once operated an iron ore mine.

"Energy is certainly one of our greatest cost driver's, "says Stenta. "We're an energy-intensive operation and we're constantly searching for ways to reduce our consumption."

Stenta says Algoma has used off-gases from its coke making and steel making operations to fuel their boilers, says Stenta, but because of infrastructure limitations, the company is not able to capture all of their waste gases.

Based on the pricing formula in the OPA power purchase agreement, construction costs, and anticipated power generation, Algoma expects the co-generation plant will contribute $30 million in annual revenues when completed.

"Algoma would like to use more sustainable green sources of energy and wind power is the world's fastest growing energy source," says Stenta.

The steelmaker and Sault residents need not look very far than outside the city's northwestern limits where the turbine blades are already turning at the Prince Wind Farm.

Located in Prince Township on Lake Superior, the first phase of Brookfield Power Corporation's 66 towers reached commercial operation Sept. 21 and began producing 99 megawatts for the provincial grid.

By IAN ROSS

Northern Ontario Business