Cransberg Says

Energy Sustainability - July 10, 2008

“Energy sustainability is an important and growing challenge for Australian business and our success in this will impact on our ability to sustain and grow Alcoa’s operations, and to compete in global markets.”

Managing Director Alan Cransberg outlined the future business risks associated with what he termed an ‘energy constrained world’ in his address to the Australian Institute of Company Directors held on 10 July in Perth.

Focusing on energy sustainability and highlighting how WA has been experiencing a serious gas shortage in recent years, where supply has failed to meet growing demand, Mr Cransberg said reducing energy use and improving efficiency were vital for Alcoa.

“Given the business and environmental case, energy is a major focus for our business,” he said.

“Energy is a key business cost, particularly for the aluminium industry where it accounts for almost 24 per cent of the cost of making alumina.

“As such we monitor energy use as part of our daily, weekly and monthly management plans and we require all our locations to undergo a stringent self-assessment process to identify gaps in performance.”

Mr Cransberg said engaging employees to assist in identifying areas where energy efficiency levels could be improved was also integral to Alcoa’s future sustainability.

He outlined the company’s Employee Suggestion Scheme which encourages and rewards employees for their improvement ideas.

“For example, operators at our Kwinana refinery power house identified major improvements that delivered over $1 million in energy savings.

“Needless to say they received a significant bonus for their efforts,” he added.

During his address to the Melbourne-based audience, Mr Cransberg highlighted the need for a national energy security strategy to ensure Australia’s energy future for the next 50 to100 years.

He outlined how a 2050 vision should embrace economic importance, the social benefits to communities and households of energy supply and environmental concerns.

“We need long term strategies to promote competition and diversity of supply and this means having a broad mix of different fuel sources and suppliers,” he said.

“As current events demonstrate, we also need a strategic energy reserve such as that maintained by the United States and China, which would need to be underpinned by a reservation policy to ensure the needs of local industry and households are met.”

Continuous advances in technology were also vital to Alcoa’s energy strategy and with six smelters in Australia, compared to over 80 in China, Mr Cransberg was clear that Australia’s technological advances would have the ability to lead improvements on a global basis.

The Australian Institute of Company Directors - July 10

The Australian Institute of Company Directors July 08

“Energy sustainability is an important and growing challenge for Australian business and our success in this will impact on our ability to sustain and grow Alcoa’s operations, and to compete in global markets.”

Managing Director Alan Cransberg outlined the future business risks associated with what he termed an ‘energy constrained world’ in his address to the Australian Institute of Company Directors held on 10 July in Perth.

Focusing on energy sustainability and highlighting how WA has been experiencing a serious gas shortage in recent years, where supply has failed to meet growing demand, Mr Cransberg said reducing energy use and improving efficiency were vital for Alcoa.

“Given the business and environmental case, energy is a major focus for our business,” he said.

“Energy is a key business cost, particularly for the aluminium industry where it accounts for almost 24 per cent of the cost of making alumina.

“As such we monitor energy use as part of our daily, weekly and monthly management plans and we require all our locations to undergo a stringent self-assessment process to identify gaps in performance.”

Mr Cransberg said engaging employees to assist in identifying areas where energy efficiency levels could be improved was also integral to Alcoa’s future sustainability.

He outlined the company’s Employee Suggestion Scheme which encourages and rewards employees for their improvement ideas.

“For example, operators at our Kwinana refinery power house identified major improvements that delivered over $1 million in energy savings.

“Needless to say they received a significant bonus for their efforts,” he added.

During his address to the Melbourne-based audience, Mr Cransberg highlighted the need for a national energy security strategy to ensure Australia’s energy future for the next 50 to100 years.
He outlined how a 2050 vision should embrace economic importance, the social benefits to communities and households of energy supply and environmental concerns.

“We need long term strategies to promote competition and diversity of supply and this means having a broad mix of different fuel sources and suppliers,” he said.

“As current events demonstrate, we also need a strategic energy reserve such as that maintained by the United States and China, which would need to be underpinned by a reservation policy to ensure the needs of local industry and households are met.”

Continuous advances in technology were also vital to Alcoa’s energy strategy and with six smelters in Australia, compared to over 80 in China, Mr Cransberg was clear that Australia’s technological advances would have the ability to lead improvements on a global basis.

Energy Management June 08

“As a major energy user, the aluminium industry has long recognised that energy efficiency and sustainability go hand in hand. Alcoa was one of the early leaders in the industry on climate change and continues to champion this debate globally.

“In 1998, Alcoa set itself a voluntary target to cut our global direct greenhouse emissions by 25% by 2010 compared to 1990. We achieved this in 2003 and have in fact reduced emissions by 33% from a 1990 baseline.”

Alcoa Managing Director Alan Cransberg, joined other Perth industry leaders for a panel discussion on energy management at the Federal Government’s Energy Efficiency Opportunities (EEO) Workshop on June 5, 2008.

Over 100 executives representing industry, academia, government and business attended the workshop to learn more about managing and encouraging energy efficiency, the Emissions Trading Scheme and the future challenges and opportunities these bring.

“At Alcoa, energy efficiency gains are achieved through a combination of a strong operational focus, investing in new technology, accountability and reporting”, he said.

Mr Cransberg explained that empowering and rewarding employees through methods such as Alcoa’s Employee Suggestion Scheme was one way of profiling and creating efficiency improvements at a local level.

“For example, operators at our Kwinana refinery power house identified major improvements in the steam to the B-aerator process that delivered over $1 million in energy savings. They received a recognition bonus under the Scheme for their efforts.

However, Mr Cransberg went on to say that these individual and team efforts must be accompanied by investment in new technology to encourage further environmental gains.

“Alcoa has proven time and again globally that we are prepared to invest significantly in new technology. In Australia for example, Alcoa and Alinta have partnered to build gas fired cogeneration power units at Alcoa’s alumina refineries.  The plants produce both electricity and heat from the same fuel source. Alcoa uses the heat as steam for the refineries while Alinta sells the electricity into the grid. Cogeneration is around 75% energy efficient, compared with 30-50% for other power plants operating in WA.”

Mr Cransberg also stated his belief that to achieve success any business strategy must be underscored and held accountable through disciplined and effective corporate governance practices.

“We monitor energy use as part of our daily, weekly and monthly management plans.  As Managing Director, I’m directly responsible for reviewing performance on an ongoing basis. We require all our locations to conduct a stringent self-assessment process to identify gaps in performance. We ensure energy is a key focus when developing and managing new capital projects. Improving energy use is also a key focus of Alcoa’s R&D program.

“We value transparency and accountability at Alcoa and see this as one of the major benefits of the EEO program’s reporting structures. In addition, we publicly report our performance through the Greenhouse Challenge Plus program and Alcoa’s annual Sustainability Report, the most current version of this is available on the front page of our website,” he said.

Recognising the global nature of climate change and the need for industry to take a leading role in furthering debate, Mr Cransberg detailed Alcoa’s involvement in initiatives such as USCAP where Alcoa joined eight major companies in calling on the United States to enact legislation to significantly cut greenhouse emissions. Alcoa is also a member of the Asia Pacific Partnership on Clean Development and Climate.

In conclusion, Mr Cransberg confirmed that Alcoa absolutely supports the introduction of an emissions trading scheme in Australia but added that it will be critical for any scheme to support greenhouse improvements while ensuring ongoing investment and job creation.

“There are challenges ahead for Australia in tackling climate change, but this is a global problem and I firmly believe that by working collaboratively towards a solution we can also continue to promote ongoing investment and growth in our great Australian industries”, he said.

ETS and the Aluminium Industry May 08

“While the future for aluminium is strong, Australian industry is facing significant challenges and, across the country, manufacturers are under immense pressure because of rising costs.”

Alcoa of Australia’s Managing Director, Alan Cransberg, used his address at the AWU Aluminium Industry Delegates conference on Thursday 22 May to highlight the challenges facing Australia’s manufacturing industries.

In particular, these include the current escalating cost environment, the pressures of increased global competition and the critical need for any national emissions trading scheme to maintain investment and jobs in Australia.

“While the future for aluminium is strong, Australian industry is facing significant challenges essentially because of escalating industry costs,” said Mr Cransberg during his address to the AWU delegates in Newcastle.

“Rising raw material and construction costs, escalating labour costs, the high Australian dollar and increased overseas competition are contributing to the immense pressure that Australian manufacturers are currently experiencing.

“For industry and jobs to survive in Australia the whole way we do business needs to change and that means keeping costs down and continuing to find smarter and cleaner ways of making aluminium,” he added.

Since 2002 the aluminium industry has faced an increase in shipping costs by 400 per cent, in addition to a rise in the cost of essential commodities including caustic which has risen by 370 per cent, fluorspar which has increased by 170 per cent and calcined coke which has climbed by 110 per cent.

Climate challenges and the introduction of a national emissions trading scheme in Australia were also raised as areas for industry concern.
“Alcoa absolutely supports emissions trading but it will be critical for any scheme to support greenhouse improvements while ensuring investment and jobs,” he said.

“From a global greenhouse perspective, it’s critical that any scheme passes the fundamental test of reducing global emissions.

“For example every tonne of alumina Alcoa makes in Western Australia uses around half the energy and produces around half the greenhouse emissions than if it was made in China, and so it makes no sense to force investment and jobs offshore if this leads to higher global emissions.

“We need to ensure the competitiveness of Australian industry until such time that industry in China, India and Russia face similar carbon costs,” he added.

Alcoa is a major national employer, providing around a third of the aluminium industry’s workforce.

ETS and Energy Security on CNBC May 08

“We can make a tonne of aluminium in Australia with 60 per cent of the energy that is used elsewhere in the world, and if we don’t make the commodity here it will be made elsewhere with an adverse environmental outcome.”

Alcoa of Australia’s Managing Director Alan Cransberg addressed a global audience as part of CNBC’s debate show Questions for the Future , which was filmed in Perth on 22 April.

As a member of an expert panel of four, Mr Cransberg helped lead the engaging debate which focused on energy use in Australia and explored how the country should move forward with an emissions trading scheme.

Mr Cransberg was adamant that action was needed to curb C02 emissions, an issue which it was agreed would be on the international agenda for decades to come, but that recognition had to be given to the economic impact if the price of an Emissions Trading Scheme (ETS) was set too high.

“We must remember that we compete on a global stage,” he told the studio audience, which consisted of over 100 representatives from industry, government and the not for profit sector.

“Alcoa believes that raising energy prices will lead to a lose-lose situation. If we look at Australia’s economy, which is based heavily on the mining, manufacturing and the minerals sector, 80 per cent of our export income comes from those sectors and 80 per cent of this is reinvested back into Australia.

“These sectors employ around one million Australians in well paying jobs, many in regional areas, and these jobs wouldn’t be replaced easily if they were forced to shut as part of the efforts to curtail the nation’s greenhouse emissions.

“Alcoa thinks it important to consider the impact on the Australian economy of higher industry costs.  Raising energy prices will make our businesses uncompetitive compared to where they are at currently, and these businesses compete on a global environment.”

Mr Cransberg said it was essential for the economy to remain strong and robust, and while Alcoa was committed to taking action to stem emissions, the reality was that people would continue to consume energy in increasing amounts.

However there was no doubt that climate change was an issue that needed to be addressed and addressed urgently.

“Industry accepts climate change has to play a leading role within businesses, in fact it’s a business imperative,” he said.

“What we need to do is to make sure there is aggressive research and development to continuously improve our technology growth in the energy, manufacturing  and industrial sectors.

“Australia must also take a long term perspective of its industry and we very much need to boost the debate when it comes to preserving our energy resources, not only for this generation but for future generations.”

The Cleaning up Carbon episode on CNBC Questions for the Future will be aired throughout Australian, Asia and Europe on 6 and 7 May 2008.