Jamalco fire recovery plan to cost $3b now, more later
THE RECOVERY from a fire at the Jamalco alumina plant will cost nearly $3 billion in local currency, initially, just to get it back to half capacity by next June, according to majority owner Noble Group.
In late August the alumina plant was ravaged by fire, resulting in production being severely hampered. The LNG-fired power plant that supplies the complex was spared any damage and continues to operate at full capacity.
“The capital required is estimated at US$19 million ($2.8 billion) and the production is estimated to resume by the end of June 2022,” said Noble.
Jamalco expects to return to full capacity by September 2022, which requires the use of two digesters, that is, silos that process bauxite; and the rental of gas turbines to improve the power plant’s reliability.
Also, the company indicated that it would embark on a long-term recovery strategy involving building a new gas-fired powerhouse to replace the rented equipment. The powerhouse contains boilers and equipment enclosed within a warehouse.
“Option analysis will be undertaken to determine whether the new powerhouse should be Jamalco-owned or outsourced and the capital required,” said Noble. The timeline for the completion of the buildout is the first quarter of 2024.
LNG POWER PLANT
The powerhouse is separate from the LNG power plant built by New Fortress Energy, NFE, an American supplier of natural gas which is in the process of finalising a sale and leaseback arrangement for the asset, through Sagicor Group and related entities.
“The NFE CHP Plant suffered no damage, is fully operational, and is supplying full capacity power to the JPS grid,” said Sagicor Group Jamaica President and CEO Christopher Zacca.
“Sagicor Investments is finalising the last bits of documentation surrounding our groundbreaking US$285 million NFE CHP transaction,” he added. “Once this is done, we will be hosting prospective investors and the finance press to an investor briefing to launch the offering to the capital markets locally and internationally.”
Sagicor Group has taken a US$100-million stake in the plant under the sale and leaseback transaction, and is in the process of structuring the financing for the other US$185 million on behalf of New Fortress.
Zacca said Sagicor feels “very good” about the power plant transaction, its structure, and the partnership with New Fortress.
“We look forward with confidence to the future of these two vital national assets, the Jamalco refinery and the NFE CHP plant,” he said.
Jamalco’s management was not reached for comment.
Noble Holdings is working with its partner in the Jamalco refinery, government-owned Clarendon Alumina Production, to implement the fire recovery plan.
Jamalco was insured up to US$250 million for the damage from fire, said Noble. The fire and reconstruction programme, it added, won’t delay plans to take Jamalco public and list on the Jamaican stock market.
“Both Noble Holdings and the Jamaican Government intend to use the reconstruction period to advance the process of Jamalco’s incorporation,” said the Hong Kong-based company, which holds 51 per cent interest in the Jamaican refinery.
Just before the fire, Jamalco had doubled its revenue after benefiting from higher commodity prices during the first half of the year, moving from US$6.8 million at half-year 2020 to US$16 million during the first half of this year.