VALCO Cannot Survive On IGF Alone – GIADEC CEO

The Chief Executive Officer (CEO) of the Ghana Integrated Aluminium Development Corporation (GIADEC), Mr Reindorf Twumasi Ankrah, has dismissed claims that the Volta Aluminium Company Limited (VALCO) can survive on its internally generated funds (IGF), describing such assertions as unrealistic given the company’s current financial position.

According to Mr Reindorf Ankrah, VALCO is currently operating at about 20 per cent of its installed capacity, a situation that continues to result in persistent losses and threatens the company’s long-term viability.

The CEO of the GIADEC explained that VALCO recorded negative cash conversion throughout the review period, largely due to an excessively high level of trade payables, which averaged 478 days.

This, he noted, poses a significant risk to the company’s operations and overall financial health.

“As of 2021, VALCO’s deferred income tax stood at about US$49.9 million, while trade payables were recorded at US$165.9 million.

“A recent audit has since revised the trade payables figure to about US$220 million, meaning the company’s debt is growing by roughly US$14 million every year, ”

Mr Reindorf Ankrah said.

The CEO of the GIADEC further disclosed that VALCO’s asset base has been steadily declining, falling sharply from US$296 million in 2016 to US$267 million in 2020, a trend he described as worrying for a company expected to anchor Ghana’s aluminium value chain.

He revealed that discussions to dilute some of VALCO’s shares to attract a strategic partner began as far back as 2022, with the aim of injecting about US$600 million into the company to restore operations, modernise facilities and expand production.

Under the proposed arrangement, shares would be split between government and private investors at a ratio of 30:70, although Mr Reindorf Ankrah expressed hope that the state could secure an additional five to 10 per cent stake.

Currently, GIADEC, as the supervising authority, owns 100 per cent of VALCO’s shares.

Mr Reindorf Ankrah noted that VALCO’s debt-to-equity ratio, which exceeds 5:1, breaches the thin capitalisation rule under the Income Tax Act, 2015 (Act 896), placing the company in a state of debt distress and high financial risk. He warned that continued debt repayments would pose serious liquidity challenges.

“Ghana is better off holding a significant stake in a thriving VALCO than owning 100 per cent of a loss-making entity due to lack of investment,” he stated.

The CEO of the GIADEC stressed that a strategic investor would have its own capital at risk and would, therefore, ensure efficiency, improved governance and a turnaround in the company’s fortunes.

He added that the much-needed US$600 million capital injection could not be provided by government, particularly in the absence of sovereign guarantees backed by IMF-supported financing.

Comparing VALCO’s estimated valuation of about US$113 million with its total debt of approximately US$290 million, Mr Ankrah said the company is technically bankrupt and that the current practice of borrowing to sustain loss-making operations is unsustainable.

He disclosed that in 2022, VALCO and GIADEC jointly presented a memorandum to Cabinet seeking approval to attract strategic investors to inject the required US$600 million to retrofit, expand and modernise the company. Cabinet subsequently approved the proposal.

Mr Ankrah assured the public that government has no intention of selling VALCO outright, but is only seeking strategic investors to revive the company. He emphasised that no jobs would be lost under the new arrangement.

On the contrary, he said investors would be required to significantly expand VALCO’s operations, with plans to create about 30,000 direct and indirect jobs within five years, as part of efforts to reposition the company as a key driver of industrial growth in Ghana.

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