Algoma Steel is diving into the green energy industry by teaming up with a German wind tower manufacturer in a value-added steel plate venture in Sault Ste. Marie.
The joint venture, to be known as SAIG Great Lakes Partnership, involves Schaaf Industrie AG as the 51 per cent majority partner.
The announcement was made in Sault Ste. Marie Feb. 10 and was attended by Minister of Northern Development and Mines Rick Bartolucci and Joe Cordiano, Minister of Economic Development and Trade.
When in full production, the $35-million project could employ as many as 140 people. The facility will be capable of building 180 wind towers annually for the North American market.
A tower-fabricating plant will be built on a 20- to 25-acre greenfield site west of the steel works on Baseline and Allen Side Road.
Construction of the 210,000-square-foot building will begin in late April, weather permitting.
Martin Pochtaruk, Algoma’s director of operations planning, says Algoma’s venture with the German wind tower company may seem unusual but it’s a comfortable fit for both.
For Schaaf Industrie, 70 per cent of cost is steel plate, the rest is other consumables such as paint, labour and energy. “For a wind tower manufacturer, the dream position is to be integrated into steel manufacturing.” For Algoma, it’s part of a long-range strategy to move toward value chain integration and to position the steelmaker as a world-class company.
Schaaf is not a manufacturer of wind power generators or blades, but sells their towers to major turbine companies such as RePower, Siemens and General Electric.
“That was what we sold for as the convenience for Algoma, because they’re bringing the customer base,” says Pochtaruk.
Schaaf Industrie AG has seven plants in Germany, France and the Czech Republic, and claims 13 per cent of European tower fabricating capacity. This is their first international joint venture.
Pochtaruk says Schaaf Industrie officials first came to Canada in the winter of 2004 to deliver a presentation at a Canadian Wind Energy Association meeting co-ordinated through the Canadian German Chamber of Commerce.
“They met a person from Sudbury they retained for two weeks who invited them to walk through Northern Ontario looking for a site to build ... positioned next to water. They didn’t know (of) the existence of a steel manufacturer.”
After a meeting in the Sault last April, the Schaaf delegation toured the steel mill, “and that was the end of their search.”
Negotiations for an agreement began in July and contact was made with the provincial government to find out what funding programs were available.
The Ontario government is chipping in with a one-time conditional grant of $1.75 million, along with a $3-million loan from the Northern Ontario Heritage Fund.
The steel plate used for tower construction can range from seven millimetres up to 75 millimetres.
To accommodate the German manufacturer, Algoma is investing $3 million in plate profiling equipment that will be installed in their welded beam facility.
Pochtaruk says for the 100-metre high towers to be structurally stable, the welded plate must be cone-shaped with a diametre of six metres at the base and four metres at the top.
Brenda Stenta, Algoma’s manager of corporate communications, says it opens up other opportunities for profiled plate apart from wind towers.
“It gives Algoma another opportunity to diversify and tap into other value-added markets down the road,” including the defense armour business.
Pochtarek says there is significant opportunity for growth in the fledgling North American wind market.
The total existing wind tower production capacity for North America is currently 650 towers, but that will grow by about 700, he says.
A factory is being set up in southern Ontario to produce 150, but he says there is still a 700-tower gap in annual supply.
Stenta and Pochtaruk caution that no job applications for welding, electrical maintenance, mechanical maintenance or painters will be accepted until the fall.
SIAG will initiate the recruiting process this fall through the Sault Ste. Marie Economic Development Corporation’s Team Sault Ste. Marie. They will hire the first crew as plant construction proceeds with production scheduled to begin in December.
“They will start with one crew and add subsequent crews at three month intervals until they reach (the) 140 level, which they set as necessary manning level at maximum production of 180 (towers annually),” says Stenta.
The tower sections will be shipped in wind farm sites mainly by water and road access.
By the fall of 2007, the facility should be operating at full capacity, around the clock.
“The manning levels will ramp up parallel with production,” she says.
SIAG is still shopping for a project manager. Algoma made a Request for Bids for building construction and received quotes from six major construction companies in Ontario cities including Sudbury, Sault Ste. Marie, Timmins, Thunder Bay and Toronto.
Established in 1996, Schaaf specializes in steel and plant construction as well as wind power technology including towers, girders, and all the related components.
Pochtaruk says if the winds in the Sault are favourable, Algoma may erect a few wind towers of their own to generate power for their operation.
The company is currently assessing the area’s wind profile for the next 12 months. They recently obtained a permit from Nav Canada to erect two 80-metre monitoring towers within weeks. One tower will be positioned in the Sault with another at Wawa, near the former Algoma Ore Division mine site.
Algoma would not disclose what possible revenues are to be derived from this joint venture.
