Second smelter contract gets closer

Press, 15 August 1981, Page 7

Second smelter contract gets closer

PA Dunedin The formal contract for the Aramoana aluminium smelter could be resolved over the next month or so, the managing director of Fletcher-Challenge, Mr H. A. Fletcher, has said in Dunedin. In an interview, Mr Fletcher discussed the financing of the project and the progress so far in formal arrangements with the partners and the Government.

He said the partners — Alusuisse, Gove Alumina, and Fletcher Challenge — had defined the legal structure for the project and this was enabling the consortium to write the formal contract.

“We are going to be an unicorporated joint venture,” Mr Fletcher said, “and I am hopeful that over the next month final matters can be resolved.”

The delay in concluding contracts had been because

the partners wanted to give more consideration to some of the structure of the consortium and the relative position of the partners in relation to the quantities and type of aluminium product they would each take. He said Fletcher-Challenge would take 50 per cent of the output of the smelter, and of this more would be in the form of cast ingot and billet and less in the form of product from the caster two strip casting plant. “That had to be resolved before the power contract would be entered into and signed,” Mr Fletcher said. He expected some of New Zealand’s strip aluminium requirements to be supplied from the smelter, but it would be less than 10 per cent (of a nominal total annual production of 100,000 tonnes). Once the project got the “green light,” the company could then get down to questions of downstream use of the ingot and strip aluminium in New Zealand.

“It is really not practic-

able to get long-term contracts for this sort of thing at this stage, nor is it necessary to back the project,” Mr Fletcher said. “There will be no shortage of metal for downstream projects.” Each of the project’s partners would be responsible for financing its own share, he said. Fletcher Challenge would finance half the project and would have title over half the assets of the smelter (and of a lesser proportion in the early years of the caster two plant). “We believe we will finance our share just on the smelter and do the caster out of our internal cash flow," Mr Fletcher said. “We will finance the smelter on a non-recourse basis to Fletcher-Challenge. We would expect to get 60 per cent at least offshore. We then may raise the subordinated debt and then an equity contribution from normal funds of Fletcher Challenge, say, $l5O million, or $3O million a year for the next five years. “We are spending $4O to

$5O million on the Kawerau site each year at the moment and so we expect to find it out of our normal sources.”

Mr Fletcher said the consortium might take other New Zealand partners. It might decide it' did not want the whole of its half share, but it almost certainly would not have less than that. Mr Fletcher said he thought the smelter could easily be assimilated by Dunedin without any significant social impact.

"Dunedin could support two smelters," he said. “There will inevitably be some transfer of labour to the smelter from existing employment situations but I do not think that will be too painful.”

It would be more than offset by the injection of money into the community and resulting employment opportunities.