Falconbridge considers building own power plant

The Kidd Creek division of Falconbridge is one step away from building its own hydro-generating station and Ontario Hydro one step away from losing its largest customer.

The division is trying to arrange financing for a $170-million power plant at its mine and mill complex, North America’s largest zinc producer. If successful, the all-electric operation would be able to significantly slash its $60-million annual hydro bill. Electricity accounts for about 20% of operational costs.

“The plant would generate 150-170 megawatts of power that would be sufficient to fulfil our needs,” Warren Holmes, president and general manager of the division, says.

Although the loss to Ontario Hydro would represent less than 1% of its total annual sales, it is the precedent the company would set that poses a more formidable risk to Hydro’s power monopoly, explains Tom Adams, an energy analyst with Energy probe.

“If one can prove they can make it on their own without Hydro, then the whole house of cards can come crashing down,” Adams notes. All types of other operations could start generating their own power,

he says.

The availability of affordable power from Ontario Hydro has been a growing concern at Kidd Creek since the late 1980s, according to Holmes. A 31% increase in the cost of that power during the last three years sparked the move toward self-sufficiency.

“The issue is not supply of power but rather the power supply at a reasonable price,” Holmes says. The company, he adds, is not keen on entering the power-generating business but the higher hydro costs are forcing Kidd Creek’s hand.

Holmes says cost-saving measures elsewhere in the plant have allowed Kidd Creek to offset hydro rate increases but there is a limit to how far the operation can go.

“Ontario Hydro will not be too happy about our moving off-line,” Holmes says. “It has been an excellent supplier of power and it has done an excellent job of working with us to save and conserve energy but it has done a terrible job in terms of prices. Ontario Hydro is not able to deliver the power at what we can generate it for.”

Although Hydro is sitting with more power on its hands than it knows what to do with, that has not always been the case and it has affected Kidd Creek operations.

“There had been months where we lost 15% of our production capacity because there was not enough power in the province,” Holmes says.

Ontario Hydro’s Paul Vyorstko, director of the Crown corporation’s non-utility generation arm, said that if Kidd Creek shifts away from Ontario Hydro, it should be concerned about backup supplies of power in case of power plant failure.

“If they are no longer a client, then they’re on their own,” he says. Holmes notes an electrical backup system is something that would be incorporated into any generating system.

The plant would use natural gas to generate steam which would power turbines. Steam, which is currently being generated by operations at Kidd Creek, could be incorporated into the power plant, according to Holmes.

An initial report on the feasibility of such a project is expected to be placed before Falconbridge’s board of directors within 12 weeks. Base metal producer Falconbridge is jointly owned by Noranda Inc. and Trelleborg of Sweden.