Alcan to exit Utkal Alumina

Cites lack of control in joint venture with Aditya Birla group.

Alcan Inc has decided to exit Utkal Alumina International, its joint venture project with the Aditya Birla group. The Montreal-based company holds 45 per cent in Utkal Alumina, which is developing a bauxite mine and setting up an alumina refinery in Orissa.

Alcan said the Rs 4,500-crore project was too risky owing to its lack of control over it. The company hopes the stake sale will be over by June 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, believe that we have acted in the best interests of all our stakeholders," Jacynthe Cote, president and chief executive of Alcan's bauxite and alumina unit, said in a statement.

Although Alcan did not identify the buyer, industry sources said the Aditya Birla group flagship company Hindalco, which holds 55 per cent, would buy Alcan's shareholding. Sources in the Aditya Birla group did not comment.

If Hindalco buys Alcan's 45 per cent stake in Utkal, it will be another big investment by the Aditya Birla group, which is on a buying spree. Two months ago, Hindalco bought Atlanta-based Novelis Inc, a maker of rolled aluminium that Alcan spun off in 2005, for an enterprise value of nearly $6 billion (approximately Rs 26,000 crore). Essel Mining, a closely-held company of the group, is in the race to acquire the country's largest iron ore exporter, Sesa Goa.

The Utkal project will continue to benefit from an Alcan technology supply agreement. The project has been marred by controversy, with local residents opposing its construction on the plea that it will displace at least 200 families in three villages. Local critics have estimated that as many as 22,000 people could be affected.

Utkal Alumina was established in 1992 as a joint venture between Hindalco, Alcan and Hydro Norsk.

The initial shareholding was between Indal (now a part of Hindalco), which held 20 per cent, Alcan 35 per cent and Norsk Hydro 45 per cent. Norsk Hydro later sold its stake to the other two partners.