CAP lifted: Government no longer financing loss-leading entity

The Clarendon Alumina Production Limited (CAP) which has been a drain on the public purse for years, has been transformed into a self-financing entity which no longer has recourse to State funds.

Contributing to the Sectoral Debate in the House of Representatives last Wednesday, mining minister Phillip Paulwell said CAP has not been able to call on the Consolidated Fund since May of last year.

According to Paulwell, the self-financing status is largely due to new financing arrangements secured with the Noble Group.

The arrangement with the Nobel Group involves the forward sale of bauxite which, Paulwell said, is unlike the previous agreement as it "does not lock us in a losing cycle".

The Noble Group, the minister said, will provide US$120 million financing between 2013 and 2016, and buy alumina at improved prices.

CAP represents the Government's 45 per cent stake in Jamalco. The company has accumulated more than $26 billion in losses.

The Jamaica Public Bodies, tabled in Parliament last month, shows that CAP expects to record US$46.5 million in losses this fiscal year, a reversal from the US$345.1 million estimated profit for the last fiscal year when the company received a grant from the government to the tune of US$417.6 million.

In the meantime, Paulwell said Noble has also been working with Jamalco to address energy-efficiency problems for the medium and long term.

He said Jamalco will install a coal-fired energy solution by 2017/18, which will be critical to addressing the cost of its energy. The Public Bodies document targets the completion of the coal plant by the end of 2017.

The company said its strategic objectives will result in a 12 per cent improvement in revenue, predicated on increases in volume and average alumina price of four per cent and eight per cent, respectively.

Jamaica has told the International Monetary Fund (IMF) that CAP will not be divested by the 2013 year end as was originally agreed.

"We have had to adjust our strategy for the divestment of Clarendon Alumina Partners in light of the lack of interest from potential buyers for the company at this time," a supplementary letter of intent addressed to Christine Lagarde, the IMF's managing director, indicates.

Meanwhile, Paulwell said representatives of the Russian-owned company, UC Rusal, are due to visit Jamaica next month to discuss the future of its bauxite operations.

The Rusal representatives will be speaking with government officials about the future of their operations at the Alpart and Kirkvine plants which have been closed for five years.