Quebec Minister of Economy Defends Risk-Sharing Contracts with Aluminum Smelters in Montreal

2023-06-13 16:06:40

(Montreal) Risk-sharing contracts with aluminum smelters have paid off for Quebec, defends the Minister of Economy and Energy, Pierre Fitzgibbon, who however recommends another approach to support the industry in the longer term .

The risk-sharing contract formula provides that the electricity rate paid by aluminum smelters varies according to the price of aluminum. The idea was to offer an incentive that takes into account the volatility of the world aluminum market. These contracts were signed by previous governments and not by Hydro-Québec.

The approach has been criticized while aluminum market conditions have meant that Hydro-Québec has received less than the rate paid by other industries (Rate L) between 2015 and 2021.

Quebec is not a “Dollarama of electricity”, defends Mr. Fitzgibbon, who uses the expression which he considers unfair, especially since it is pejorative for the Montreal retailer which “is a very good company” , according to him.

“When we look at the productivity of aluminum smelters, even according to the previous modulation, it was profitable for Quebec,” replied the minister on Tuesday, on the sidelines of the unveiling of a new economic barometer designed by the firm BCF Avocats d’affaires et the consulting firm Quadra.

“That being said, to be transparent with the population, that all industries be priced at the same rate and that we make separate incentives by industry, I think it’s the right thing to do,” he adds. .

The agreement between Rio Tinto and Quebec, unveiled the day before, will bring the company back to Rate L from January 2026. The agreement might serve as an example when renewing the other risk-sharing contracts concluded with Quebec aluminum smelters. , said the Minister.

“There are a lot of existing contracts. So we will respect all the contracts that were signed by previous governments, he specifies. You have to go there gradually, it’s the first one you’ve done. »

Rather than betting on the variability of electricity prices, the Legault government granted Rio Tinto a forgivable loan of 150 million conditional on a certain threshold of jobs as part of an investment of 1.4 billion for the construction of 96 AP60 technology tanks in Saguenay. “It sends a message,” admits the minister.

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“The theory for me is that we should charge everyone the same rate, which is a rate that is governed by the Régie de l’énergie and that, if there are incentives to be given, we done separately at the Ministry of the Economy. Then everything is more transparent. »

Vital aid, according to the industry

Rio Tinto’s risk-sharing contract is of lesser importance in the company’s activities, since it has its own dams that meet 95% of its energy needs in Quebec. The situation is different for Alcoa and Alouette, which depend entirely on Hydro-Québec’s electrons. Both companies are due to renew contracts in 2029.

For the industry, it’s a tight deadline. Aluminum smelters need long-term visibility to estimate the profitability of their projects, underlines the president and CEO of the Aluminum Association of Canada, Jean Simard, in an interview later in the day. “Production is five times cheaper in China,” he adds.

Risk sharing using electricity rates “saved the day” for the Quebec aluminum industry in an environment of depreciated prices in the 2010s, argues Mr. Simard. “About forty aluminum smelters have closed elsewhere in the world. »

However, Mr. Simard is not closed to the idea of ​​reviewing the way in which this aid is deployed, even if the risk-sharing formula has proven itself, according to him. “What matters is that it maintains competitiveness. It is the principle that is important. »

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