Will Alcoa Sell the Yadkin Hydroelectric Project to the Chinese?
Among a recent list of "facts" Alcoa provided regarding its application to the Federal Energy Regulatory Commission (FERC) for a license to operate the Yadkin Hydroelectric Project was this statement which was more fascinating about what it did not say than what it did. Take a look:
"Fact: Ownership of the project has no bearing on the State's control over the waters of the Yadkin. Proponents of the bill have asked what will happen if the Chinese take over the Project via ownership of Alcoa. 'Any' owner is subject to the laws of North Carolina and the United States."
It is curious that there was no flat-out denial about the real possibility of the Chinese taking over the dams and powerhouses involved in the Project, which encompasses four reservoirs in Stanly, Davidson, Rowan and Montgomery counties. Very interesting, indeed.
Here is how that scenario can occur:
- Alcoa is in a precarious financial situation. It lost $497 million in the first quarter of 2009, and prices for aluminum, its main product, have fallen 26 percent in the same period due to high inventories of what already is in stock even while Alcoa has cut back production. "Alcoa reported a net loss for the first quarter of 61 cents a share, compared with net income for the year-ago period of $303 million, or 37 cents per share," wrote Robert Guy Matthews in The Wall Street Journal. "Revenue for the first quarter fell to $4.15 billion from $7 billion a year ago." (http://online.wsj.com/article/SB123913050560197877.html?mod=googlenews_wsj)
- To prop up its financial standing, Alcoa has partnered with the Aluminum Corporation of China, better known as Chinalco, a state owned leading aluminum manufacturer in China. The two firms announced in early April that they "intend to explore opportunities to expand their commercial relationship by identifying strategic ventures that will benefit from the companies' complementary strengths in bauxite, alumina, aluminum and fabricated products." (http://www.smallcapwatch.com/pressRelease.asp?ID=80164) Unlike Alcoa, Chinalco has been growing strongly this decade. By the end of 2007, Chinalco was the world's second largest alumina producer and the third largest primary aluminum producer. In 2008, Chinalco became a Fortune Global 500 company.
- With its growing financial clout and strength, should state owned company Chinalco purchase Alcoa, it will assume the license for the Project through simple transfer of ownership and will not have to undergo any application for review as Alcoa now faces with its application to FERC. The same applies if Chinalco just buys the Project's license instead of all of Alcoa.
That will mean that the Chinese can earn tens of millions of dollars annually for the duration of the license, which lasts 50 years. A Communist-controlled dictatorship will be making profits off hydroelectricity generated by the waters of the Yadkin, and there will be no legal way any North Carolinian can challenge that monopoly for decades. Is this really the sort of economic benefit Alcoa claims that will result for the region if it receives approval to continue ownership of the Project?
Alcoa's refusal to deny whether it may sell its license for the dams in the future, much less to say whether that firm will be friendly toward the interests of North Carolinians, is a telling comment in and of itself. The proposed Yadkin River Trust would not allow this to happen, because it will allow citizens of the state to assert their water rights and recapture what is rightfully theirs. Dams owned by foreigners will not do that, but if Alcoa receives a 50-year license for the FERC, there is a strong possibility it will occur. Since Alcoa has neither done nor said anything against it happening, any concerns about this issue are justifiable.
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