Friday, 3 February 2017

So why are the Turnbull & Andrews Governments giving, not loaning, almost a quarter of a billion dollars to Alcoa Corp?

Every blast furnace operator has exactly the same vulnerability - lose power and you lose your primary income producing asset.

But for some reason Alcoa Corp in Victoria was happily smelting along at 85% capacity with no back-up power supply when in early December 2016 along came a storm – a big bad storm like so many these days – and took out the power grid.

The pots that were operational when this happened ‘froze’ and the aluminium inside cooled and solidified.

When the power came back on the Portland plant was only able to work at one third capacity and has since been losing about $1million a day according to media reports.

The corporation stated that this plant will not come back online for at least eight months, that is August 2017.

The Age also reported on 6 January 2017 that:

The outage occurred with remarkable timing – just days after Alcoa's 30-year government-subsidised power contract ended and with power prices set to rise after the closure of the Hazelwood power station.

So it comes as no surprise that the Turnbull Government decided to give, not loan, this approx. 128 year-old New York based multinational company $30 million dollars to continue operating at Portland for another ten years.

The Victorian Government is handing over another $210 million to this corporation and AGL has agreed to a lower price electricity supply price for Alcoa.

Now as I write Alcoa shares on the New York Stock Exchange are $36.47 and rising, with company revenue for the last quarter at $2.5 billion, up 9 percent sequentially, reflecting higher volume in the Company’s rolled products business and higher alumina pricing and a cash balance of $853 million.

Meanwhile rumours are circulating that Alcoa is intending to close the Portland plant by 2020 regardless.

These facts got up the nose of one North Coast Voices reader and he discussed the matter with a mate.

This was the result……

“This was a predictable, preventable & foreseeable occurrence and all the damage was deliberately self-inflicted by management

Every telephone exchange, every ISP, every commercial Data Centre, even every mobile phone tower has backup power.

When the floods hit the Hunter Region of NSW & knocked out power in 2015/6 for a few weeks, the mobile phones kept working - because there weren’t just batteries, there were diesel generators and contractors signed up to refuel them. We know this because it was documented in the Telco community.

So do many more ‘ordinary’ businesses, even high-rise buildings. Not to mention airports & control towers, radio & TV stations and major plant like Oil Refineries.

Grid Power is not, and never has been, a 100% guaranteed service: if that’s a problem for your business, you need to mitigate that commercial risk.
Even if you’re a big factory or industrial site, there will be unplanned outages of the external power supply.
Even something as simple as a vehicle accident taking out a pole, an animal short-circuits

Good managers take out insurance against ‘threats’ to production/income, as an integral part of their formal Risk Management Strategy
This is not odd or extreme behaviour, certainly not in high-value industrial plant….

The Alcoa management right royally screwed over their owners and workers by failing to plan for the inevitable.
And somehow that is now the taxpayer’s responsibility?.....

If Alcoa are “losing $1M/day” from two thirds of its (electric) ‘pot lines’ being ‘frozen’ (the Aluminium set, or ‘froze’) how was unknown to the management?
Every blast furnace operator has exactly the same vulnerability - lose power and you lose your primary income producing asset.

The plant operators will know to the minute how long it takes to do orderly shutdown & startup of the entire production line.
This will be formally documented in fine detail, with many checks & contingencies included.

So why did the management deliberately decide to not ‘mitigate' against this extreme impact event and like thousands of large industrial plants around the country have enough on-site power generation to do a zero-damage shutdown?”

Remembering that Alcoa Australian Holdings Pty Ltd paid no tax and Alcoa Of Australia Limited paid minimal tax  in 2014-15, and probably paid even less last financial year, I think I agree with these two disgruntled men.

I don’t care that on 26 January 2017 The Australian reported that; The head of downsized US aluminium company Alcoa has given a commitment to finding a long-term power solution at its Portland aluminium smelter in the wake of Victoria’s $200 million power subsidy agreement, saying the smelter is “modern and competitive”. The comments were made in the company’s December quarter earnings call on Tuesday night, which discussed a strong result on the back of strong margins and sent shares of its Australian junior partner Alumina soaring 11 per cent to a two-year high.
Foreign-owned Alcoa Corp right royally screwed up and it’s not up to Australian taxpayers to take up the burden of smelter repairs in order to placate the company’s major shareholders.

I don’t care how many shares/units multimillionaire Prime Minister Malcolm Turnbull or members of his cabinet might hold in investment companies and banks on that list.

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