Govt, VALCO Talks Breaks Down

The Ministry of Energy has announced that mediation with representatives of Kaiser Aluminum and Volta Aluminum Company (Valco), its Ghanaian subsidiary, which operates an aluminum smelter in Tema, Ghana has broken down. A press release from the Ministry said the government would soon announce the consequential actions following from the breakdown of mediation.

A high-powered Ghana government delegation led by the Minister of Energy Mr. Kan Dapaah, traveled to the US capital, Washington, DC for the mediation, which started on Monday, January 6, 2003 under the supervision of the eminent American Jurist, Judge Steven Schwebel, one time president of the International Court of Justice at the Hague, Holland.

Other members of Ghana delegation were the Nana Akufo Addo, Attorney General and Minister for Justice, Dr Charles Wereko Brobby, Chief Executive of the Volta River Authority, Mr. Alan Kyeremanten, Ghana's Ambassador to the US, and other officials together with its lawyers from the prestigious US law firm, Le Boeuf, Lamb, Greene & MaCrae.

Valco's operations in Ghana have in recent years been subsidized to the detriment of the commercial viability of the Volta River Authority and this situation, according to the Ministry of Energy, is no longer tenable. "After 35 years in Ghana, Valco continues to insist that it should be treated in a unique category and allowed to pay rates for power that are far below the cost of providing that power in Ghana. It costs the Volta River Authority 6.5 US cents/kWh to produce electricity from its system. The ordinary Ghanaian pays 7.8 US cents/kWh. Up till today, Valco has been paying 1.1 US cents/kWh and has resisted efforts make it pay a more realistic price reflecting the current costs of producing power in Ghana."

The release said the current level of the Volta Lake, which historically has been used to supply power to Valco, is so low that it can no longer meet Valco's power demands without posing significant threats to the safety and integrity of the Akosombo hydroelectric plant. Ghana's power system now comprises a significant thermal component because hydro energy is no longer sufficient to meet the needs of Ghana and Valco together. Today more than 65% of Ghana's power generation comes from thermal sources that burn light crude oil at great cost.

"Valco has failed to see the new realities and insists that power be sold to it today at rates that pretend that Ghana's power is produced exclusively from cheap hydro sources, as it was when it first started operations in Ghana about 35 years ago. The power contract between VRA and Valco, which regulates the sale of power to Valco, expired in 1997 and it has still not been possible to conclude the negotiations of new one."

The Mediation formed part of the attempts to reach a new agreement on a new power contract.

The release said Ghana recognizes Valco's role as long-term investor in Ghana and in this light was prepared to allow more time for the mediation to succeed, but regrettably, this was not possible.