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Jamalco to press ahead with coal plant

Published:Friday | April 26, 2013 | 12:00 AM

Jamalco Refinery, the alumina joint venture between the Jamaican Government and Alcoa, aims to build the island's first major coal plant in order to lower the cost of alumina production, Mining Minister Phillip Paulwell indicated on Thursday.

The plant will lower the high cost of energy that currently threatens the viability of the bauxite/alumina sector, which earns the third-highest levels of foreign exchange for Jamaica.

Majority owner and managing partner Alcoa has signed a memorandum of understanding (MOU) on the matter with the Government, said Paulwell at his post-Budget presentation press conference.

Ministry's plans

Paulwell laid out his ministry's plans to lawmakers on Wednesday.

"For Jamalco, we are going to have an energy solution that is different from what we have now. The Cabinet has signed off and I have signed an MOU with Alcoa for them to pursue a coal option, and they are pursuing a bidding arrangement where they are seeking investors who will establish the plant and will do a take-or-pay contract with them," he told journalists at the Office of Prime Minister in Kingston on Thursday. "So that is a part of the mix and it is a requirement going forward," he said.

Tackle high costs

Financial Gleaner was unable to get specifics on the capacity or environmental safeguards planned for the plant, up to press time.

"If we do not get the price of energy down for the bauxite/ alumina companies, then our costs will continue to be high and we will continue to be losing market share, especially when there is a recession," said Paulwell, whose portfolio spans mining, energy, technology and science.

The shareholding in Jamalco includes 45 per cent for the Government, held via Clarendon Alumina Partners (CAP), and 55 per cent for Alcoa.

The venture has been a strain on Government with losses projected at US$18.8 million for this fiscal year ending April 2014 on revenues of US$185 million. The accumulated deficit stands at US$268.6 million (J$26.8 billion), according to the Jamaica Public Bodies report published by the Ministry of Finance this month.

"We will not be spending any more money on CAP. That is the arrangement with the IMF," said Paulwell in response to a query on the losses.

He added that there will be a new arrangement with Glencore Alumina, with whom Jamaica is locked into a forward-sale contract and previously tried to purchase Government's stake during the previous JLP-led administration.

Paulwell said the Glencore agreement would not involve Government selling its stake, but declined to give details on the arrangement.

"We do not want to go into the arrangement because the [Alcoa] board has to inform their shareholders in a timely way on these matters, and you do not want the details out in public because it would breach their shareholders agreement. So I do not want to go there. Just to say that the Government will still be in a position after this arrangement to contribute to the ongoing capitalisation works of Jamalco through the arrangement that we will be entering with Glencore," the minister said.