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NLIS 4 July 29, 2002 (Mines and Energy) Government of Newfoundland and
Labrador and Lloyd Matthews, Minister of Mines and Energy, and Alan Renken, vice-president of Alcoa Inc. and president, Primary Metals, announced today that the Government of Newfoundland and Labrador and Alcoa Inc. will not be proceeding to detailed negotiations following the joint feasibility review of developing the Lower Churchill Hydro Project as a power supply for aluminum processing in the province. Minister Matthews stated: "Following extensive study over the past 10 months, we have concluded jointly that it is not economically attractive to develop the Lower Churchill as a power supply for aluminum processing in this province." The remote location and the potential distances from the hydro site to the proposed aluminum processing facilities are certainly major considerations affecting the cost of transmission and other infrastructure requirements affecting the project economic viability. "From government�s perspective, our objectives for the development of the hydro resource are that the development be economically viable in its own right, without requiring significant government financial assistance. Government also believes that the people of this province should retain ownership of the project, realize maximum economic and employment benefits, and ensure that the return to the province escalates as the price of electricity increases over time." In the context of the highly competitive world aluminum industry, in which the average power supply price is in the range of $18 US per megawatt hour, government and Alcoa Inc. were unable to reach agreement on these fundamental principles required to make the potential development economically viable and attractive for both parties. Projects on the Lower Churchill have a delivered cost of power which is in excess of average prices currently prevailing in the industry taking into account the significant transmission infrastructure required and the costs of building and operating a smelter in a new region. The operation of aluminum smelters requires secure, long-term, low-cost power. From government�s perspective it has been concluded that the power price is too low, the duration of the pricing arrangement is too long (75 years) and the amount of government financial assistance and backing (nearly $1 billion) required to make this a competitive operation do not meet government�s objectives for the development of this resource on a sound, business-like basis. Mr. Renken said: "Alcoa is currently considering projects all around the world, and the Lower Churchill proposal has many attractive features. However, at the moment, conditions do not warrant our proceeding with a new development project at this site. If conditions change, Alcoa would welcome the opportunity to build on the initial feasibility work done by the company, the Government of Newfoundland and Labrador and Newfoundland and Labrador Hydro." Minister Matthews acknowledged the significant time and resources invested by Alcoa in the feasibility review and noted that it was unfortunate that the outcome had not been more positive. "This has been a very valuable, informative process, and we have learned a lot about this globally competitive industry. However, it would not be responsible for either party to invest further time or resources in a venture that is unlikely to lead to a successful development that is in the best interest of the people of this province. "I would also like to make it very clear that this announcement does not mean that government has ruled out development of the Gull Island project. We have concluded that using Lower Churchill power to supply aluminum processing facilities in this province is not a viable development option at this time. Government remains committed, however, to development of this significant, renewable energy resource." Media contact:
2002 07 29 12:45 p.m. |
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