Just what are Alcan’s intentions? That is most likely the number one topic in Kitimat these days.
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Last weeks testimony before a B. C. Utilities board has left more questions on the table than it has answered, with a Hydro official admitting that a proposed new power sales deal does not necessarily bind Alcan to an upgrade of its smelter in the aluminum (for now) city.
For their part Alcan representatives testified that they are at the hearings because they still have a plan in place to build in Kitimat
"If we weren't planning to do anything with the plant, with the smelter, we would not be here,”
That answer in response to the questions over power sales to the province and the impact they may have on any upgrading of the Kitimat Works plant.
Yet the uncertainty continues in the long running drama, especially in the eyes of the District of Kitimat who have long been suspicious of Alcan’s motives.
Trafford Hall of the District, summed up their concerns with the thought that power sales seem to be the main focus of Alcan’s moves of late.
“The commercial incentives are not really there to build a smelter," Hall said.
"It's very concerning from a commercial standpoint for the community. Every time they've had a choice between metal and power sales, they've chosen power sales."
Added to the mix of late has been the fact that Alcan’s new owners, an Australian mining group known as Rio Tinto has itself been the target of a takeover bid, giving the drama of the northwest a very international flavour all of a sudden. And one that very well may be beyond the grasp of the BCUC, the Province of British Columbia and the people of Kitimat.
The Vancouver Sun published an interesting examination of the latest developments in the Saturday Business section of the Sun.
New Alcan-Hydro deal questioned
Kitimat's future uncertain after disclosure firm is no longer bound to modernizing smelter
Scott Simpson
Vancouver Sun
Saturday, November 24, 2007
The economic future of Kitimat grew more uncertain this week, based on testimony at a hearing into a new power sales deal between BC Hydro and Alcan.
Last weeks testimony before a B. C. Utilities board has left more questions on the table than it has answered, with a Hydro official admitting that a proposed new power sales deal does not necessarily bind Alcan to an upgrade of its smelter in the aluminum (for now) city.
For their part Alcan representatives testified that they are at the hearings because they still have a plan in place to build in Kitimat
"If we weren't planning to do anything with the plant, with the smelter, we would not be here,”
That answer in response to the questions over power sales to the province and the impact they may have on any upgrading of the Kitimat Works plant.
Yet the uncertainty continues in the long running drama, especially in the eyes of the District of Kitimat who have long been suspicious of Alcan’s motives.
Trafford Hall of the District, summed up their concerns with the thought that power sales seem to be the main focus of Alcan’s moves of late.
“The commercial incentives are not really there to build a smelter," Hall said.
"It's very concerning from a commercial standpoint for the community. Every time they've had a choice between metal and power sales, they've chosen power sales."
Added to the mix of late has been the fact that Alcan’s new owners, an Australian mining group known as Rio Tinto has itself been the target of a takeover bid, giving the drama of the northwest a very international flavour all of a sudden. And one that very well may be beyond the grasp of the BCUC, the Province of British Columbia and the people of Kitimat.
The Vancouver Sun published an interesting examination of the latest developments in the Saturday Business section of the Sun.
New Alcan-Hydro deal questioned
Kitimat's future uncertain after disclosure firm is no longer bound to modernizing smelter
Scott Simpson
Vancouver Sun
Saturday, November 24, 2007
The economic future of Kitimat grew more uncertain this week, based on testimony at a hearing into a new power sales deal between BC Hydro and Alcan.
Alcan's aluminum smelter is Kitimat's main employer, and an executive with the company said it is still planning a $2-billion modernization of the B.C. north-coast facility.
However, a Hydro official acknowledged this week in testimony before the B.C. Utilities Commission that a proposed new power sales deal will not bind Alcan to a smelter upgrade.
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An earlier, failed deal between Hydro and Alcan included a commitment by Alcan to undertake the modernization -- as well as a long-term power sales agreement involving surplus Alcan power that Hydro wants to buy and put onto the B.C. grid.
An earlier, failed deal between Hydro and Alcan included a commitment by Alcan to undertake the modernization -- as well as a long-term power sales agreement involving surplus Alcan power that Hydro wants to buy and put onto the B.C. grid.
The earlier deal committed Hydro to pay Alcan about $72 per megawatt for surplus power from the 50-year-old Kemano hydroelectric facility that Alcan uses to power the smelter.
At peak, Alcan would be selling enough power to light 200,000 homes.
The agreement was announced by Premier Gordon Campbell.
But the BCUC tore up that deal, ruling that Hydro was going to pay too much -- it costs Alcan only about $5 per megawatt to produce electricity at Kemano.
The revised deal, which was the subject of a BCUC hearing this past week, starts out with a standard payment to Alcan of $46 per megawatt for its steady electricity supply -- but goes up three per cent per year, and is accompanied by payments of $82 per megawatt beginning in 2010 for the last 15 per cent on each delivery of steady or "firm" power.
Hydro is looking for firm power as a means of augmenting run-of-river and other green electricity sources such as wind power, which are usually available only on an intermittent basis. .
Kitimat estimates the new deal commits Hydro to pay an average, in the near term, of about $60 per megawatt -- lower than the amount proposed in the previous contract.
In testimony before the BCUC, Alcan spokesman Paul Henning noted that the company already has a contract in place with Hydro that runs through 2015 -- and it is only because of the modernization scheme that the contract is being reopened.
"If we weren't planning to do anything with the plant, with the smelter, we would not be here," Henning said.
He said Alcan plans to have in place "a much bigger smelter" by 2012, and the existing contract simply doesn't leave the company with enough power for the modernized facility after it meets its commitments to Hydro -- although Alcan will continue to have surplus available for sale to Hydro.
But Kitimat Mayor Richard Wozney, in Vancouver for the hearing, said in an interview that he is troubled by the absence of a firm Alcan commitment to modernize the smelter.
Wozney said the deal proposed by Hydro and Alcan is "just basically a power sales agreement, and there is no commitment whatsoever by Alcan to build the modernization project. That is still the concern to us as a community."
Wozney noted that Alcan promised in 1998 to undertake a modernization to double the smelter's capacity, but never followed through.
This time around, there's nothing on paper to commit Alcan -- and the formerly Quebec-based company is now owned by an Australia-based multinational mining company that is itself a takeover target.
"Alcan is more interested, as far as we are concerned as a community, in doing power sales than they are in doing the modernization.
"We will have to wait and see if they are actually going to do anything.
"And of course [that is] complicated by the fact that Rio Tinto has taken over Alcan."
Kitimat district manager Trafford Hall said in an interview that the commercial incentives to build a smelter, as opposed to simply selling power, "are not really there."
Hall noted that earlier this year the district lost a B.C. Supreme Court case arguing that Alcan had a long-standing contractual obligation to use water from the Kemano River to generate electricity for aluminum.
Instead, the court ruled that the original 50-year-old contract between Alcan and B.C. allowed the company to use the water according to its own needs -- including eschewing smelter operations in favour of power sales.
"The commercial incentives are not really there to build a smelter," Hall said.
"It's very concerning from a commercial standpoint for the community. Every time they've had a choice between metal and power sales, they've chosen power sales."
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