Gov’t Seeks Private Sector Participant to Rescue Valco

Government has begun moves to revamp operations of the Volta Aluminium Company (VALCO) to make it vibrant again, as the company, since 2013 has recorded consistent losses.

This has meant negative profit margin and return on equity, with the liquidity position of VALCO, worsening every year.

The under-performance can largely be attributed to the hitherto, uneconomical one cell line operation which has negatively affected production volumes; insufficient and erratic power supply; globally uncompetitive power price charged the Smelter, whereas electric power is a core component in VALCO’s production; and a long depressed Aluminium Metal Price (LME) as VALCO is a price taker.

Nevertheless, interventions, including the smelter technology upgrade project and introduction of private sector participants in the ownership of VALCO are some immediate measures being considered by government.

While VALCO is supposed to be the anchor of Ghana’s integrated aluminium industry project, its current operational capacity of 20 percent is simply not enough to ensure that the envisaged full supply chain is achieved.

The company, which currently consumes 70 megawatts of power yearly, will require about 350 megawatts to operate at full capacity, which would enable it  produce 200,000 metric tonnes of primary aluminium annually.

Meanwhile, VALCO has partially energized its second potline out of the five installed, to double output from the current 40,000 tonnes to 80,000 tonnes with a resultant associated expected revenue of US$160 million.

While a full restart of the second potline, is said to be only 60 percent complete, the company nevertheless now already employs some 180 direct personnel and is behind the employment of 900 indirect personnel in the downstream and allied industries.

The 80,000 tonnes expected output according to government, will represent 40 percent utilization of the 200,000 tonnes per annum installed capacity of the smelter, enough to, at least, break-even and keep the smelter alive as it readies itself to serve as an off-taker for alumina to be refined.

VALCO can rake in an estimated US$500 million for the economy annually when it operates at full capacity.

The company, at full capacity, can also generate another estimated US$300 million annually through power purchases from the Volta River Authority, Value Added Tax (VAT) revenues, the VALCO Fund, property rates, port charges and local purchases, among other revenues that stand to be generated.

At full capacity, VALCO can offer employment opportunities to about 23,000 people, directly and indirectly.