You are here: HomeNews2003 01 08Article 31351

Business News of Wednesday, 8 January 2003

Source: afrol

Ghana's energy crisis hurts aluminium production

As electricity gets increasingly scarce in Ghana, the country's main energy consumer, the US-owned Valco aluminium smelter, is obliged to curtail its production. The dispute over reduced power allocations could however end up in court.

The state-owned Volta River Authority (VRA), Ghana's principal energy producer, had to give a reduced power allocation for 2003 to its main client, the Valco aluminium smelter. The reason given was a drought in parts of Ghana, which had significantly reduced the operating level of the Volta hydroelectric dam at Akosombo. Electricity supply to private customers also has suffered during the last months and remains insecure for 2003.

The Texas-based Kaiser Aluminium Corporation, which owns 90 percent of the Valco smelter, in a statement says that the reduced power allocation would support "operation of approximately one-and-one-half potlines at Valco, as compared to Valco's current power allocation that supports the operation of three potlines. As a result, Valco has begun the process of reducing its line level."

Kaiser has objected to this 2003 allocation and to a previous 2002 power curtailment and intended to "seek declaratory relief and the recovery of monetary damages in respect of the curtailments," the corporation, which currently is filed for Chapter 11 bankruptcy protection, informed.

Valco was scheduled to begin mediation with the VRA and the government of Ghana today, Kaiser says. In addition, Valco and Kaiser had filed for arbitration with the International Chamber of Commerce in Paris against both the VRA and the government of Ghana.

Valco has five potlines each having an annual production capacity of approximately 40,000 metric tonnes. Valco operated approximately four potlines in 2000 and 2001. In March 2002, the facility reduced the number of operating potlines from four to three because the VRA reduced the power allocation to the facility.

Curiously, the establishment of the Valco smelter had been one of the prerequisites for the Volta River Project in Ghana, which led to the Volta hydroelectric dam and the VRA.

As the hydroelectric project was realised in the late 1950s, energy consumption in Ghana was too small to justify the project. Then-President Kwame Nkrumah personally convinced the US administration of President Dwight Eisenhower to use his influence to have Kaiser invest in an aluminium smelter in Ghana. Kaiser was and is one of the leading American aluminium producers.

The Volta hydroelectric power plant has since then provided the Valco smelter with very low priced energy - a necessity for aluminium production. During the last decade, however, a run-down electricity network and an ever-growing number of private and corporate consumers have made electricity to grow scarce in Ghana.