ALCOA'S BID FOR VALCO

UNCLAS ACCRA 002527 SIPDIS SENSITIVE DEPT PLEASE PASS COMMERCE RASHIDA PETERSEN TREASURY FOR ALEX SEVERENS OPIC FOR CONAL DUFFY E.O. 12958: N/A TAGS: ECON EINV EMIN ENRG GH EXIM OPIC SUBJECT: ALCOA'S BID FOR VALCO ¶1. (SBU) Summary. EconOffs met with Randy Phillips and Jeff Heeter of Alcoa December 14. Phillips and Heeter were in Ghana to follow up on Alcoa's proposal to purchase a larger stake in the Volta Aluminum Company(VALCO) and develop Ghana's bauxite reserves. The proposal also includes the construction of an alumina refinery adjacent to VALCO. Alcoa, which currently owns 10 percent of VALCO, also submitted a proposal to restart a portion of the VALCO smelter as soon as January. BHP Billiton (U.K.),RusAl (Russia),and Alcan (Canada) have also submitted bids. Phillips and Heeter expressed frustration with the process and its lack of transparency. Alcoa submitted a draft MOU in August, but has received minimal feedback from the International Aluminum Industry Committee set up to review the bids. GoG sources claim Alcoa's bid has the support of President Kufuor. End Summary. ¶2. (SBU) Dr. Charles Mensa, who chairs the review committee, met with Econ Officers December 26. He thinks Alcoa's proposal is the strongest and has the support of President Kufuor. Phillips and Heeter met the President before leaving for New York, and, according to Mensa, made a good impression. He said a decision could come as soon as January, but warned that some ministers favored the proposals from Alcoa's competitors. Moses Asaga, former Deputy Finance Minister and current ranking opposition MP on the Finance Committee, confirmed in a meeting with EconChief. The Minister of Finance Osafo-Maafo told Asaga that several members of the Cabinet oppose the President's preference for Alcoa. ¶3. (SBU) Phillips and Heeter said initial tests showed the bauxite in Ghana to be of good quality and of sufficient quantity to be mined profitably. The set up, with mine, refinery power and smelter is also attractive and fits in with Alcoa's preferred method of operation. They stressed, however, that all of the MOU's submitted propose to study the feasibility of bauxite mining and refining over the next 12 to 18 months. According to Mensa, the GoG sees this as a formality and fully expects the mine and refinery to be built. Mensa also said Alcoa breathed new life into its chances by bringing Phillips on board. During his meeting with President Kufuor December 16, Phillips made a personal impression on the President that helped erase the negative one created by his predecessor's handling of a similar meeting last year. Mensa went on to say that Alcoa still needed to improve its bid to stay competitive, but had no specific suggestions. Phillips complained that he had similar conversations with Mensa, and wondered aloud about the transparency of the process and Mensa's motivations. COMMENT -------------- ¶4. (SBU) Mensa's nebulous responses to Alcoa's questions may indicate the GoG's desire to improve its position by playing the various bids off against each other. The GoG intends to keep a significant equity stake in any deal to ensure the bauxite is mined. According to Mensa the GoG will not grant mining concessions for the same reason. Despite Alcoa's obvious enthusiasm, the foundation for a dispute may have been laid if the company decides the mine and refinery are unfeasible and still tries to hang on to any increased interest in VALCO No matter who wins the bid, the USD 1 billion-plus investment needed to bring Ghana's bauxite to VALCO would be the largest ever in Ghana. End Comment. YATES