BlueScope May Build $1 Billion Co-Generation Plant in Stages

BlueScope Steel Ltd. (BSL), Australia’s largest steelmaker, may have to develop a stalled A$1 billion ($1 billion) co-generation plant in stages, citing capital constraints and government plans for a carbon tax.

The project, on hold since 2008, may be broken “into five or six smaller projects over a period of a decade or more,” Michael Reay, manager of corporate affairs of the Melbourne- based company, said in a phone interview. The company scrapped plans to construct the plant before a 2012 deadline and may build it stages, the Australian Financial Review reported today.

BlueScope, which reported a first-half loss, began a review of the project at Port Kembla in New South Wales state more than two years ago during the global financial crisis. The government plans to introduce a carbon price next year before moving to emissions trading as early as 2015.

“Our capital investments are currently restricted to ensuring operational security, there’s not a lot of other capital that we could invest,” said Reay. “The carbon tax is adding to the uncertainty.”

BlueScope shares fell 1.3 percent to A$1.915 at 1:54 p.m. local time in Sydney trading, taking losses so far this year to 15 percent.

A co-generation plant uses surplus gas from iron and steelmaking to produce electricity and steam. The company flagged in February 2009 that the plant may be built in stages.

To contact the reporter on this story: Elisabeth Behrmann in Sydney at ebehrmann1@bloomberg.net

To contact the editor responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net

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