A new Board has been appointed at Clarendon Alumina Production Limited (CAP) with a mandate to chart a course for the resumption of production at the Jamalco refinery, which was halted following a fire at the facility in September.
The members are also required to continue work towards incorporating a new limited liability version of Jamalco, which the Government has been undertaking over the past four years.
This was announced by Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, in a statement delivered during Tuesday’s (November 30) sitting of the House of Representatives.
The nine-member Board is chaired by Port Authority of Jamaica (PAJ) Chief Executive Officer (CEO), Professor Gordon Shirley, and comprises persons with wide-ranging expertise encompassing engineering, finance, law, and management.
The other members are chartered accountant and advisor at the Office of the Prime Minister, Alok Jain; former Windalco Managing Director, Patrick McIntosh; Chief Business Development and Marketing Officer, JN Group, Dr. Dana Dixon; former CAP Managing Director, Winston Hayden; Civil Engineer, Moira Williamson; former head of the Inter-American Development Bank (IDB) Caribbean Office, Gerrard Johnson; Attorney-at-law, Roxaine Smith; and Senior Analyst at the Finance Ministry, Stephanie Abrahams.
They were appointed after the former Board was dissolved prior to CAP’s transfer from the Ministry of Transport and Mining to the Ministry of Finance.
Dr. Clarke said the fire at Jamalco, which damaged the powerhouse, represents a major threat to Jamaica’s economic recovery.
Noting that the facility has the capacity to produce 1.2 million tonnes of alumina, Dr. Clarke said the halt in output represents an annualised loss to the economy of approximately US$400 million, which, he emphasised, is “significant”.
Consequently, the Minister said the Board’s immediate priority is to work with CAP’s partner in the unincorporated Jamalco joint venture, General Alumina Jamaica, which is owned by the Noble Group, to get the plant up and running quickly, and reevaluate the strategic options for reconstructing the powerhouse.
CAP is a wholly owned government entity and has a 45 per cent interest in the unincorporated Jamalco joint venture.
Dr. Clarke said the targeted engagements at Jamalco require “detailed consideration” as the issues involved are “complex and technical”.
He maintained that Noble has the capacity to be “nimbler” than the Government, adding that “now, more than ever, when we are racing against the clock, we have to know how to use that to the advantage of the Jamalco joint venture and, ultimately, to CAP and the Government, with appropriate measures that provide necessary assurance”.
The Minister advised that the overall insurance claim of up to $250 million for the fire, which was submitted, covers business interruption, reconstruction, and exceptional costs.
Dr. Clarke told the House that the business interruption tranche allows for administrative expenses to be addressed while the power plant’s reconstruction takes place.
“There is the risk that if reconstruction takes longer than required, the cap for business interruption could be exhausted. We are, therefore, in a race against time. The shareholders of Jamalco – CAP and the Noble Group – will have to be smart, practical, businesslike, strategic and technically proficient,” he added.
Dr. Clarke said the Board will also be required to familiarise themselves with the extent of work already undertaken towards finalising the Jamalco incorporation process.
He noted that “substantial” progress has been made over the four-year period, adding that the legal arrangements to formalise the undertaking have been “substantially” agreed on, with the exception of a “handful of major items to be resolved”.
Dr. Clarke explained that under the unincorporated joint venture arrangement, there is no limited liability company called ‘Jamalco’.
Instead, CAP and Noble were required to contribute working capital on a monthly basis to acquire the inputs of production and, in return, receive their proportional share of alumina as output that they sell on the world market.
The Minister told the House that this arrangement has existed for more than 30 years, with Glencore and Alcoa preceding Noble as the Government’s partner.
He said notwithstanding this, the unincorporated nature of the venture in its current form represents an untenable fiscal risk to the Government of Jamaica and, as such, “has outlived its usefulness”.