TA mulls coal-gasification plant

9 September 2010

The diversified group controls a 51 percent shareholding in the loss-making ammonium nitrate production company, which operates one of the world’s biggest electrolysis plants but has been badly hamstrung by punitive electricity tariffs from State-run ZESA Holdings.

ZESA is billing Sable at about eight cents per kilowatt hour.
But experts say for Sable to remain viable, a special tariff of between three cents and about five cents per kilowatt hour would be appropriate.

Sable, whose fertiliser is used domestically, plans to produce 90 000 metric tonnes of ammonium nitrate this year, up from 40 000 tonnes the previous year.
TA Holdings executive chairman, Shingi Mutasa, told The Financial Gazette this week that his board has already agreed on the project.

Mutasa and his team are weighing between two options. They are studying the possibility of purchasing coal from existing mines before transporting it to Kwekwe for crushing into the gas, or assembling a coal-mouth gasification plant for processing coal before piping the gas to Sable.
Coal gasification offers the most versatile and cleanest way of converting the energy content of coal into electricity, hydrogen and other energy forms.

The project could mean TA, which has confined its interests to tourism, insurance, fertiliser production and financial services, will have to diversify into coal mining.

But the TA boss insisted the Zimbabwe Stock Exchange-listed investment firm will focus on its current scope of business and will have to approach coal mines to feed the gasification plant.
Interestingly, Mutasa’s Masawara Investment, an investment fund that was listed on the London Stock Exchange last month, has mining interests.

“What we have undertaken to do in the interest of this country is to establish a coal gasification plant within the next 48 months to help us produce ammonia for the ammonium nitrate plant,” Mutasa said.

“We are now investigating whether to produce the gas at the (Sable) plant or to pipe it from the mines. We probably have four or five mines that will supply us with coal. It will allow Zimbabwe to competitively price ammonium nitrate for the manufacture of such a key raw material (fertiliser) in agriculture. That will pay dividends in years to come. This is something that government and ourselves are united on,” said the TA boss.

Government controls a significant stake in Sable through the Industrial Development Corpo-ration.

It is likely that should Masawara be granted coal mining rights in Zimbabwe within the period of the construction of the gasification plant, coal mined from the project would be sent to Sable’s gas production plants.

Mutasa told The Financial Gazette he has a keen interest in gold and coal mining although he appeared to have reservations in entering the platinum sector.
“I like coal, I like gold,” the TA boss said.
“There are obviously other minerals like platinum etcetera but with the kind of capital that we have, we have to be realistic,” Mutasa stressed.

In the year ending December 31 2009, TA succumbed to a US$1, 4 million loss with the bulk of the losses coming from endemic inefficiencies at Sable.

Although Sable bounced back to profitability in the half-year ending June 30 2010 the group still estimates that the company would require US$45 million in the next four years in fresh capital injections.

But capital alone would not mean much hence management at the company is also pressing the government for a viable power tariff. A decade of economic turmoil, which forced the Zimbabwean economy to plunge by an estimated 50 percent, had serious implications on operations at Sable.

Capacity utilisation at Sable declined to 20 percent at the end of December last year. And Mutasa believes most of the losses Sable suffered emanated from the power-guzzling electrolysis plant.

“The swiftest way of controlling Sable’s losses would be to close the electrolysis plant and import ammonia feedstock,” the TA boss had suggested in a commentary accompanying the group’s financial results for the year ending December 31 2009.
“Unfortunately for Zimbabwe, there are not enough railway tank cars to permit Sable to import all the ammonia necessary to dispense with the electrolysis plant,” he said then.
Closing the plant would, however, present Zimbabwe with more headaches.

Halting ammonium nitrate production in Kwekwe would mean that the ailing steelmaker will not get the oxygen crucial for its operations while ferrochrome producer, ZIMASCO, will also be starved of oxygen.