Alcoa yesterday ended its participation in the Aroaima Bauxite Company (ABC) when it signed an agreement to sell its 50 per cent interest to the Guyana government for US$1.

But the door has been left open for Alcoa's re-engagement in the company, as government has agreed to the conversion of the US$68 million debt, racked up by ABC under Alcoa/Reynolds management, into non-voting preference shares.

Alcoa's disengagement brings to an end, again, foreign participation in the bauxite industry. Prime Minister Sam Hinds believes that the terms under which they disengaged signalled positively government's "ability to make arrangements in difficult times to allow businesses to continue."

When the Prime Minister disclosed information about the agreement last month, he had said that it was intended that the Alcoa's non-voting shares would have been sold to the government for US$1 before December 31. But yesterday, at a ceremonial signing of the agreement at the Office of the Prime Minister, Wight's Lane, this was not part of the agreement.

Prime Minister Hinds said in remarks after the signing that "the preference shares to be issued to RII will enable RII to receive some benefit in the extremely unlikely event of sudden changes which enable ABC to be profitable enough to distribute dividends or if ABC is liquidated and assets sold and funds are available for equity holders after paying all liabilities."

Stabroek News has ascertained that the Alcoa's preference shares carry no interest and are not cumulative.

Asked if this was a 'back-door arrangement' to allow Alcoa to come back if things improve, the Prime Minister said "I wouldn't say that. I would say that they made some generous arrangements here and if the bauxite should turn to gold we will be willing to re-negotiate under the changed circumstances."

And as regards the US$1 sale of the preference shares that he had announced, Prime Minister Hinds said those were things that would be worked out during next year.

The conversion of the debt according to the Prime Minister, "allows ABC to achieve annual savings in interest cost of approximately US$5 million." Also, citing other instances of Alcoa's generosity, he said that the transfers of Alcoa's assets in SMS/Green Construction and of various assets it leased for ABC at no cost to the company "have a value in excess of US$5 million"

The Prime Minister declined to disclose the savings that would come through the reduction of the payment to the contractors, with whom discussions are in progress about "equity participation and cost reduction and their ability to be strategic partners in the on-going operation [of ABC]."

He said too that the ABC was in discussions with the union representing its workers on the terms of their employment for next year.

While again declining to give the amount of savings being sought through reduction of the wage bill, the Prime Minister said that the company and government were aware of the concern expressed by workers about the reduction in their incomes as a result of the reduced hours they were now working. He said that the reduced hours were put in place because of the reduction in demand. Last month some of the Aroaima workers picketed the Office of the Prime Minister to have ABC declare them redundant so that they could receive redundancy benefits under the collective bargaining agreement concluded with their union.

Prime Minister Hinds signed the agreement on behalf of the government and Larry Grace, on behalf of Alcoa. As a result of the agreement, among other things, the new ABC next year should have a cash-neutral operation if it achieved reductions of US$10 million as a result of savings in interest payments from the conversion of US$68 million debt to preference shares; a net working capital, including cash, in excess of US$12 million and equipment to produce two million tonnes of bauxite to provide it with the ability to react positively to any increase in demand.