Aughinish Alumina might not face any disaster due to the second round of EU sanctions but is at risk of ownership dilemma

The Irish Government has declared that the parent companies of Aughinish Alumina are apparently not going to be hit by the next round of US sanctions in spite of the decision taken by Brussels to impose penalties on oligarch Oleg Deripaska.  

EU’s retributive measures against Mr. Deripaska, a billionaire from Russia, are constantly keeping the Co Limerick-based company under high pressure. But its mother unit, Moscow-based Rusal and its majority shareholder EN+ seem ready to avoid sanctions at this time.

“We do not believe that the company Rusal and its majority shareholder EN+ will face any restrictions in the forthcoming round of sanctions,” the Department of Enterprise said last night in response to questions.

“The State continues to engage with the company as it works on the development of plans for the long-term future development of the company.”

The Aughinish Unit extracts alumina from imported bauxite and ships it to smelters in France and Sweden where aluminium is produced. This makes the plant’s operation very important for the entire European economy.

Mr. Deripaska, who was hit by US sanctions in 2018, is again being penalized for being a confidant to the Russian President, which has compelled him to dissolve his majority stake in the business.

“We are not going to comment on what may happen to Oleg Deripaska,” the department said. “The factual position is that he previously had to surrender his majority holding in the company and he can’t receive any benefit from his minority holding.”

But three of the people familiar with the discussion held said there is an extensive growing concern as to what will happen to the refinery if European sanctions against Deripaska frighten the company’s business counterparts. Thus, the Irish unit is very fearful of being linked to Russia. 

The possibility of detaching Aughinish Alumina from its parent organisation is still under scrutiny but is possibly a move which would resuscitate some form of sale or active intervention from the Government.

Although the decision making process would not be that easy since the Irish Government also is answerable to those 400 workers who are at utter confusion about the validity of their positions until this entire fiasco settles down. Various people with knowledge about the company are concerned about Aughinish’s environmental liabilities. In response to the same question, Environmental Protection Agency (EPA) exclaimed that any new owner would have to set aside a large sum of money for the purposes of waste management and accidents on site.  

“If the ownership changes, the new owners must have financial provisions in place covering the liabilities identified in the closure plan and the (environmental liability risk assessment),” said the EPA. “An application for a transfer of licence must be jointly submitted with the new owners and assessed by the agency before it can be completed.”

The current closure plan agreed in 2018, as reported by the EPA, was estimated at €24.64 million. €14 million of which would be for the restoration of the bauxite residue (red mud) deposit area at the site and ‘aftercare considerations’.

The remainder was for closing, decommissioning and sanitization of the alumina processing plant. A separate assessment conducted to evaluate the risk costs, amounted to €1.23 million.

“The closure plan and environmental liabilities are covered by two financial instruments. One is a secured fund in a bank account in Ireland, current value approximately €14 million. The other, covering the remainder of the costs liabilities, is a parental company guarantee provided by Rusal.”

Minister for Foreign Affairs Simon Coveney repeated for the reporters that Mr Deripaska was now a Rusal minority shareholder, adding that the Government “will work Aughinish Alumina and their management team and board to try to protect employment” at the plant.

“But of course we will act in a way that’s consistent with the sanctions that the EU imposes on Russia as well,” he said.