Sale talks leave Alcan's future hanging in balance

THE owners of the Alcan plant in Northumberland are undertaking a review of its future with a sale believed to be one of the options under consideration.

The Alcan plant in Northumberland
The Alcan plant in Northumberland

THE owners of the Alcan plant in Northumberland are undertaking a review of its future with a sale believed to be one of the options under consideration.

Recent changes in legislation will see the plant at Lynemouth facing additional running costs of up to £40m-a-year by 2013 – wiping out its annual profits.

This has prompted its owners Rio Tinto Alcan to initiate a review of its future and the firm is considering a number of options one of which is believed to be a sale of the site.

It is also looking at possibilities including the conversion of the plant’s power station to wood power, rather than coal.

Late last week the 650 staff at the aluminium smelter and the adjoining power station were told by the company’s management that a review of its future was being undertaken.

Ian Lavery MP for Wansbeck, has also spoken to Lynemouth’s senior management, he said: “This is creating a fair amount of uncertainty. The plant has suffered a double whammy with the European emissions legislation and the new Carbon Floor Price.

“This is imposing huge cost burdens on producers like Alcan and is very unfair. Alcan have said before that everything is up for sale.

“They will find it difficult to run the plant while paying the new carbon floor price and emissions’ taxes. However there is the possibility of converting the plant to biomass.

“They are the largest, and one of the best employers in Northumberland, and we aim to give them all the support we can in determining the best way forward.”

Rio Tinto issued the following statement: “As a matter of course, Rio Tinto Alcan conducts strategic reviews of its portfolio of assets to ensure alignment with the overall business strategy of operating large scale, long life and low cost assets.

“Strategic business reviews look at such areas as: Market performance/direction; Products and services; Operational matters; Financial matters; Options for growth; Compliance with environmental legislation.

“Recently, Rio Tinto Alcan launched such a review of Lynemouth and is considering all options. At this time, no decision has yet been taken on any of the potential options.”

In recent months the power station which fuels the adjacent aluminium smelter has been hit by legislation which is set to increase running costs by 2013.

In April last year the European Court of Justice ruled the site must cut emissions from its coal-fired power station after a six-year legal battle.

In March this year the Budget announced measure to introduce a Carbon Floor Price, both of these measures are set to add an additional £50m a year to Alcan’s running costs.

Rio Tinto is looking at converting the coal-fire power station to biomass (wood) and this would be one way of avoiding the additional, annual regulatory costs. However this will come at a conversion cost of £50m.

Alcan was not prepared to elaborate further on the Rio Tinto statement.

However earlier this year John McCabe, corporate affairs director, at Rio Tinto Alcan, said: “If we do nothing it would be very difficult to see how there could be a long-term future for the plant. We are already a high-cost operation and as such we have an unsustainable long-term future if we don’t change how we operate.

“Almost one third of all our current running costs are the result of legislation. Doing nothing is not an option and the preferred method would be to convert to biomass.”

The Lynemouth plant was opened in 1972 and has been owned by multinational mining and mineral conglomerate Rio Tinto since 2007.

 
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