The Hindu Business Line : Alcan parts ways with Hindalco

Parting ways
The project has been facing debilitating delay right from the beginning.
Analysts see this as a reason for Alcan's decision to pull out.

Mumbai April 13 Alcan, the world's second largest aluminium producer, has decided to part ways with the Aditya Birla group company Hindalco in their joint venture alumina project in Orissa. The joint venture company, Utkal Alumina International Ltd, is setting up a Rs 4,400-crore bauxite mine and alumina refinery project in Orissa.

The project has been facing debilitating delay right from the beginning. Analysts see this as a reason for its decision to pull out. Alcan, which holds 45 per cent in Utkal Alumina, on Friday announced its decision to sell its interest in the company.

Sources in the Birla group said Hindalco, which holds the remaining 55 per cent stake in the joint venture company, has the first right of refusal as per the agreement. Hindalco is exploring the possibility of exercising the option to buy out Alcan's stake in the company, the sources said.

Weighing options

Recently, Hindalco bought out aluminium sheet producer Novelis, which was spun out of Alcan, for $6 billion. In a statement issued in Montreal, Alcan said it has already taken initial steps leading to the sale process and expected to wrap it up during the second quarter of 2007. "We have carefully weighed the opportunity and risk presented by the Utkal project and, given the constraints within the governance structure that limit Alcan's ability to participate in key decisions, we believe that we have acted in the best interests of all our stakeholders," the company said.

The project will, however, continue to benefit from an Alcan technology supply agreement.

Project delayed

Sources close to the development said, apart from Alcan's inability to participate in key decisions, the delay that the project was experiencing is another reason for its decision to exit.

The joint venture was established in 1992 to set up a 1.5 million tonnes alumina refinery in Doragurha, Rayagada district of Orissa, sourcing bauxite from the rich reserves of Baphlimali in Rayagada.

Delay has been dogging the project right from the beginning due to protests from the local people against mining activities in that region and failure to get necessary government clearances in time.

While land acquisition has been completed, the company is in the process of rehabilitating and re-settling displaced persons. The pile foundation work for precipitation is on, while the company intends to wrap up mines detailed engineering by March 2009.