On September 8th, 2010, the People’s Partnership announced that it was cancelling a $600 million project to build a 125,000 tonnes-per-year aluminum smelter. This never happened.
“In addition to the health and environmental risk, there is also serious concern as to Alutrint’s viability and the optimal use of our gas. This project shall cease,” the then Finance Minister Winston Dookeran said during a presentation of the 2010-2011 national budget.
Brazilian conglomerate Votorantim Group has a 40 percent stake in the proposed 125,000 metric-tonnes-per-year aluminum smelter complex while the Trinidad and Tobago government held the remaining 60 percent.
ChinaExim Bank was providing a credit facility of $400 million for construction of the project.
The cancellation of the Alutrint smelter complex effectively ended a court battle over the project.
The Environmental Management Authority had issued a Certificate of Environmental Clearance to Alutrint for the project. But a court quashed the certificate after anti-smelter groups and individuals filed for judicial review, claiming the EMA’s decision was based on inadequate and flawed information.
EMA’s appeal of that ruling was rendered moot by the decision taken on September 8th, 2010.
An examination a Cabinet note of July 16, 2010, on the economics of Alutrint, revealed the plant would have been profitable if it was completed. But the Cabinet note revealed that the cost of energy to the smelter was outweighed by the benefits the country would reap.
In terms of gas utilisation:
Alutrint would have paid US$0.85 per mmbtu.
“The Alutrint smelter will consume 46.5 million cubic feet a day which represent 1.1 per cent of total daily natural gas consumption. This 1.1 per cent includes natural gas consumed by the power plant for Alutrint’s power requirements. “When compared to other gas based industries, the Aluminum industry presents a favorable investment (in terms of Capex) per unit quantity of gas utilised, as well as a high direct employment and industry-competitive return on investment. The aluminium industry is unique in terms of its potential for expansive downstream industries. Returns on investment normally increase notably with the incorporation of downstream industries,” the note stated.
In terms of the environmental and health impact:
“Alutrint has reduced and/or mitigated the environmental risk levels from these effluents and waste products by the provision of the buffer zone, the design of the smelter, use of imported prebaked anodes and export of the spent pot liners. The company attained the environmental standards set by the EMA, including the HF standard on one microgram, for the initial proposal for the one pot line. However, with two potlines the company will be unable meet the HF standard of one microgram. This will jeopardise the project and the proposed joint venture with Votorantim.”
How would it have benefitted Trinidad and Tobago?
a) The creation of 700 direct jobs with the potential of 2100 indirect jobs (Community) and 7000 jobs (downstream),
b) Downstream development,
c) Gas utilisation: energy monetisation for local business development,
d) Transfer of technology: the Chinese technology is one of the most advanced in the aluminium industry. T&T would have benefitted from using the most efficient and cleanest technologies in aluminium smelting.
e) Infrastructural development: port, road networks, education and health facilities
f) Potential Caricom linkages: supply of input material (alumina from bauxite); also markets for aluminium value added products and
g) International Export Market: leveraging access to external markets through international partners (shareholders) eg Latin America and China.
The costs for project termination fell into two categories:
1. Separation costs for current employees of Alutrint: US$0.5 million
2. To engineering, procurement and construction contractor, China National Machinery and Equipment Import and Export Corporation (CMEC), for termination:
a. Amounts payable for any work carried out: US $7 million
b. Cost of plant and materials ordered for the works delivered to CMEC: contingent liability
c. Any other cost or liability which in the circumstances was reasonably incurred in the expectation of completing the work-contingent liability
d. Cost of removal of temporary works and contractor’s equipment from the site and return of items to China: US$1 million
e. Cost of repatriation of CMEC’s workers employed in connection with the works at the date of termination: US$1 million
3. Project agreement with Votorantim: US$5.7 million
4. Joint Venture with Sural: no cost but subject to litigation
5. Loan agreement with EXIM Bank of China: estimated cost was to be provided by Ministry of Finance
1. Land lease to National Energy Corporation: US$1.9 million
2. Electricity purchase obligation to the Trinidad Generation Unlimited: US$33 million ($209 million)
3. Rental of pier and storage facilities: US$9.6 million
Total cost of obligations: US$44.5 million
National Energy Corporation
Tasked with the providing the infrastructural requirement for the Alutrint project, the NEC has financial exposure in the sum of $922 million as follows:
1. Loan from National Gas Company for development of Union Estate: US$58million
2. Loan from NGC for establishment of port, storage and handling facilities at La Brea: US$82 million
3. Debt to Housing Development Corporation for construction of houses for Square Deal households: US$5.6 million
Of 18 contracts signed, two have been completed and 16 are affected:
1. Memorandum of Understanding GORTT/ People Republic of China: no direct cost impact
2. Shareholder’s Agreement GORTT/Sural: The Government is seeking to terminate agreement with Sural, price is under negotiation
3. Buyer’s Credit Loan Agreement: GORTT/China EXIM Bank
4. Government Concessional Loan Agreement: GORTT/China EXIM Bank: This agreement expired at the end of May 2010 and an application was made to extend the term of the concession for a further six months. A response was being awaited.
5. Project Agreement: GORTT/Votorantim Metals: expired in September 2010. No direct financial exposure other than costs incurred during the period of the project agreement.
6. Engineering, Procurement and Construction Agreement: Alutrint/CMEC. This contract was signed on December 2005.
7. Technical Specification to EPC Contract (revised): Alutrint/CMEC–no cost impact
8. Basic Engineering and Equipment Procurement Review Agreement: Alutrint/China Metallurgy Industry Services Co: may have a cost impact but can’t be quantified at this time.
9. Certified Verification Agent: Alutrint/ABS Consulting: no cost impact
10. Chaguanas Office Building Lease: Alutrint/Online Technology: Contract terminated in February 2011
11.Import Duty Concession: GORTT/Alutrint: no cost impact
12. Gas Sales Agreement: Alutrint/National Gas Company of T&T
13. Land Lease Agreement: Alutrint/National Energy Corporation: annual lease rent US$ 1.9 million
14. Dock & Marine User Agreement: Alutrint/National Energy Corporation–these two combined result in an annual cost of $11 million by Alutrint to NEC.
15. Water Supply Agreement: Alutrint/Water and Sewerage Authority: no cost impact
16. Power Purchase Agreement: Alutrint/T&TEC /Trinidad Generation Unlimited: take or pay obligation of US$33 million a year.
As of January 2014, the Government was facing a US$100 million claim in the United States from the minority shareholder of the US$400 million Alutrint smelter plant—Venezuelan company Sural—as a consequence of the previous administration’s decision to cancel the smelter plant.
“This office has been advised that the minority shareholder in the Alutrint plant … is currently exercising its right under the contract to arbitration wherein it is making substantial claims against the Government of Trinidad and Tobago for its arbitrary cancellation of that contract. My information is that this arbitration is taking place in the United States and that the claims being made are well upwards of US$100 million, being prosecuted by high-quality lawyers of the minority shareholder,” said PM Keith Rowley.
As of October 2017, the Government had entered into a multimillion-dollar joint private-public sector initiative as it moves to revive the aluminium smelter project that had been shelved in September 2010.
The Government said that it is injecting TT$35 million (one TT dollar=US$0.16 cents) into the project with Alutech Limited, with Energy Minister Franklin Khan indicating that it would be a 60/40 arrangement.
Khan said that previous People’s National Movement (PNM) administrations had intended to get involved in the aluminium industry, adding that this was the rationale behind the aluminium smelter plant which was cancelled by the previous Government.
“However, we still feel we can salvage a downstream aluminium industry based on imported elements,” he said, noting that the aluminium industry was lucrative.
“Strange enough, over this time of depressed commodity prices, one of the few prices in the world that have not been depressed is aluminium and that is largely because of the motor car industry and aluminium wheels which have now become ubiquitous throughout the motor car industry,” he said, telling legislators that the scheme is a small investment.
PM Dr Keith Rowley told the Parliament’s Standing Finance Committee then that the State had been dealing with various claims made against it following the decision by the last Government to end the smelter plant project.
“There is some settlement with respect to the closure of the project where the minority partner would have had claims against the State.
“Those matters are still in negotiations; however, both parties have agreed to go forward and some of the settlement considerations would be taken into account.”
But Rowley told legislators, “This is not the end of it. We are in discussions with the Chinese Government with respect to settlement of another claim with respect to the closure and abandonment of the smelter project that is a much larger sum.”
He added that “the failures and the arbitrations and the liabilities we are dealing with… are as a direct result of the UNC shutting down the aluminium project which started with a smelter and down streaming”.
He said the smelter project was being financed by the Chinese Import/Export bank, noting “we have liabilities there”. He also said that equipment worth US$40 million “had been in a warehouse ever since”.
“What we are trying to do now is to restart the project so as to save the down streaming side based on imported inputs since we have killed the smelting side of it.”