Aluar

Environmental & Social Review Summary

This Environmental and Social Review Summary is prepared and distributed in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board of Director’s decision. Board dates are estimates only.
Any documentation which is attached to this Environmental and Social Review Summary has been prepared by the project sponsor and authorization has been given for public release. IFC has reviewed this documentation and considers that it is of adequate quality to be released to the public but does not endorse the content.

Project number	28305
Country	Argentina
Sector	Primary Metals
Department	Global Manufacturing & Services
Company name	ALUAR ALUMINIO ARGENTINO S.A.I.C.
Environmental category	B
Status	Active

Date ESRS disclosed	August 25, 2009

Previous Events	Invested: October 15, 2009 Signed: October 13, 2009 Approved: October 7, 2009

View Summary of Proposed Investment (SPI), click here

Overview

Category & Applicable Standards

Key Issues & Mitigation

Community Engagements

Client's Documentation

Overview of IFC's scope of review

The review of this project consisted of a document review, including the project’s technical, environmental and social reports and records; interviews with key personnel of the company; and a field visit to the aluminum smelter, thermoelectric plant and port at Puerto Madryn, the hydro-electric plant at Futaleufu.

The following management elements were assessed:

- Existing Environmental Management System;
- The client’s assessment of potential EHS & Social impacts of the expansion project;
- Labor issues and Human Resources policy;
- Health and Safety performance (accident records);
- Wastewater and effluent management;
- Solid waste management;
- Emergency Response Plans;
- Community engagement;
- Social issues;
- Management of Security forces

Project description

Founded in 1970, Aluar Aluminio Argentino S.A.I.C. (“Aluar” or the “Company”) is the only primary aluminum producer and the main semi-manufactured aluminum producer in Argentina. With an installed capacity of 410,000 tons per year (“tpy”) of primary aluminum, Aluar’s operations are mainly located in Puerto Madryn (Chubut Province), approximately 1,400 km south of Buenos Aires. Aluar also owns two plants with installed capacity of over 30,000 tpy located in the Buenos Aires province focused on the production of rolled and extruded aluminum products.

The Company is undertaking a corporate capital expenditure plan for the expansion of its primary aluminum production capacity by 45,000 tpy to 455,000 tpy by 2011 (the “Investment Program”).

Key environmental and social issues and mitigation

- PS 1 Social and Environmental Assessment and Management Systems:

Aluar has adequate organizational capacity to manage environmental, health, safety and social issues, comprised of Environmental Control, Occupational Health and Safety (“OHS”), and Community Relations Departments. These are staffed by of professionals with solid academic background and ample experience, including five staff in the Environmental Control Department, twelve in OHS, and four in Community Relations. Staff receive training to ensure continuing improvement. The Company undertook a thorough environmental impact assessment (“EIA”) of its expansion project and is implementing management actions designed to address the key issues identified in the EIA, including management of air emissions, particularly fluorine-containing compounds; management of solid wastes, with special emphasis on spent pot linings; elimination of wastewater discharges to the bay; and decontamination of PCB-contaminated transformers. Aluar regularly monitors its environmental performance and reports its findings to government authorities and other stakeholders.

Aluar plants have ISO 14001 certified environmental management systems designed to minimize environmental impacts of operations. In addition, the Aluar complex at Puerto Madryn has ISO 9001-2000, OHSAS 18001, and IDAM 17550 (Argentina’s risk management standard) certifications, and is working on an integrated management system to cover them all. The first integrated audit by BVQI has been planned for October 2010.

The Futaleuf� hydroelectric plant, which is 60% owned by Aluar, is also compliant with all national environmental requirements, and specifically with the ENRE 555 legislation of 2001, which requires the implementation of an environmental management program to deal with PCBs and other contaminants. The Futaleuf� EMS includes a policy, procedures and operational instructions consistent with ISO 14001 standards, and was independently certified by the accredited organization T�V Rheinland.

The finished product plant in Buenos Aires has comprehensive environmental, health and safety management systems, which are regularly audited by national and local authorities, and has all the necessary permissions and certifications regarding air emissions, liquid effluent, and solid waste management.

- PS 2: Labor & Working Conditions:

The current workforce at the Madryn site is 1330 plus construction workers, in addition there are 630 workers at the finished products plant in Abasto and 250 employees at the San Fernando offices in Buenos Aires. Free association is a feature of the company with two active unions at the smelter, the National Union for Metallurgy Workers (UOM), and National Union for Construction Workers (UOCRA).

Aluar has a human resources policy that informs employees on their rights under national labor and employment law, including their rights related to wages and benefits. This policy is explained to personnel during their induction to the Company and is made accessible to each employee upon taking employment. The Company is a party to a collective bargaining agreement with the workers’ unions, which explicitly address working conditions and terms of employment. Aluar maintains or exceeds legislated standards of worker salary and benefits, and ensures that government mandated deductions are properly done and remitted to the concerned agencies. The Company strictly enforces the minimum hiring threshold of 18 years as mandated by Law and follows all legislative requirements relating to hiring, including equal opportunity, and retrenchment. Employees at Aluar tend seek a career in the Company and remain in its workforce for many years (currently averaging 15 years). Aluar provides a grievance mechanism for workers and the workers’ unions, to raise workplace concerns. This mechanism, which is explained to personnel upon taking employment, involve different levels of management as appropriate in order to ensure prompt and effective attention.

The Aluar plant at Puerto Madryn is OHSAS 18001 certified. The Company emphasizes safety throughout its operations and the accident rate has fallen gradually in the past five years, with the aim of having zero accidents by 2012. The Company provides safety induction and ongoing training for all workers and visitors, and appropriate personal protective equipment is issued and used throughout. In general staff members were observed to follow Company safety policies. Through the corresponding contract, the Company requires construction contractors to follow safety requirements consistent with Aluar’s. A Company supervisor inspects the work to ensure that these requirements are complied with.

The workforce at the Futaleuf� hydroelectric plant is 41 and they receive the same treatment as the rest of the Aluar workforce. No labor disputes have been reported at the hydroelectric plant.

- PS 3: Pollution Prevention & Abatement:

The protection of the environment in the production of primary aluminum, places special attention to two main issues: the emission of gaseous effluents to the environment, and the disposal of solid waste. In order to minimize the impact of these issues, Aluar has incorporated up-to-date technology, to be able to produce aluminum without adverse impact on the environment. These control measures consist of:

Gas Treatment Centers: These installations retain gaseous and particulate fluoride emitted by the electrolytic cells and their efficiency is in the order of 99%. In these systems, fluoride is absorbed onto alumina (alumina, or aluminum oxide is the raw material required to obtain aluminum), and this alumina is used as raw material to feed the electrolytic cells, recycling the pot emissions. The treatment capacity of the Gas Treatment Centers is three million cubic meters of gaseous effluents per hour. Resulting fluoride and particulate emissions are below IFC and local guideline emission values. Aluar uses pre-baked anodes, manufactured in situ, in the electrolysis cells.

The pre-baked anodes allow the electrolytic bath to be sealed, allowing gas to be captured and treated at the gas treatment centers. Anode baking furnaces produce fluorides, vaporized organics and sulfur dioxide emissions that are controlled using dry scrubbers.

Air Monitoring. Aluar has installed an air quality monitoring network to evaluate the impact of fluoride emissions to the atmosphere throughout the Puerto Madryn region. Each of the ten air quality permanent sampling stations is made up by the following: a bubbling device that contains an absorption liquid which retains the fluoride that may be present in the atmosphere, a vacuum pump used to force the passage of air, and a gas meter to determine the volume of the air sampled. The results of this monitoring show that ambient air quality values measured are fully compliant with environmental quality guidelines.

Greenhouse Gas Emissions: In 2008 Aluar’s smelter at Puerto Madryn produced 2,283,700 tonnes of CO2 equivalent from its thermo-electric plants, and 627,300 as a result of its aluminum production. Aluar uses natural gas fired combined cycle gas turbines for electricity generation at Puerto Madryn, which is best available technology for this type of plants in terms of energy efficiency and GHG emissions. Similarly, the new reduction lines (C and D) and gas treatment centers are designed to minimize the production of GHGs. The perflurocarbon (PFC) GHG contribution from the old pot series (A and B) has been minimized by effectively managing anode effects through enhanced automatic control of the process and raw material feed rates. The project for GHG reduction at the Aluar plant is registered under the UNFCC Clean Development Mechanism for certified emission reduction credits.

Energy efficiency: All of the electricity generated in situ at the Puerto Madryn plant (585 MW) comes from natural gas-fired combined cycle gas turbines, which provides high energy efficiency, and the balance is supplied by the Futaleuf� hydroelectric plant. The electrolysis pots throughout the plant operate under high amperage low energy (HALE) regime to improve the efficiency of the reduction process and minimize energy consumption.

Safe disposal of solid waste in specially designed landfills: Aluar built 10,000 m2 landfills within the premises of the plant, sufficient for 10-15 years disposal, at natural soil level and surrounded by a 1 m pit slope. Solid waste, especially spent pot lining that contains sodium fluoride, is deposited in these landfills. To avoid leachates reaching the ground water, the landfills are built with compact layers of different materials (calcareous soil, clay, fine sand) and a geo-membrane of synthetic material between layers that acts as a barrier to the liquid waste. Ground water is monitored permanently through a series of perforations around the landfill.

Hazardous Materials Management: Aluar is currently undertaking a program to eliminate PCBs in transformers throughout its operations by the end 2009 as required by the Law 25670 regulation. Of 200 transformers of different sizes at the Madryn plant, containing about 2,200 m3 of oil, only 27 small transformers with 15,000 litres in all have oil contaminated with PCBs. The Company is replacing the oil in all contaminated transformers and temporarily storing the contaminated material for eventual treatment or incineration. The Futaleuf� hydroelectric plant has completed the de-chlorination of oil in all its transformers and has programmed an audit to independently certify the decontamination to the authorities.

Wastewater: Given that the Puerto Madryn plant is located in an arid area, and adjoins a sensitive marine ecosystem, Aluar has a policy of zero-discharge of wastewater to the bay. The plant’s industrial and cooling water is recycled and sanitary effluent is treated and reused for watering gardens and lawns, only stormwater, which is segregated from the wastewater streams and other pollution sources, is allowed to reach the sea. The outlet of the rain trap to Golfo Nuevo is regularly monitored and complies with WBG guidelines.

- PS4 Community Health Safety and Security:

Aluar has a strict control of emissions that render them below the limits of Argentine and WBG guidelines requirements, thereby ensuring an adequate ambient air quality at Puerto Madryn. While the likelihood of a serious accidental release of chemicals is unlikely, the Company has adequate emergency preparedness and response measures in place that includes a timely and efficient communication with local authorities. Security is not a serious issue in Aluar’s operations as the Puerto Madryn area has a very low crime rate and no social conflict. No significant security issues have been report at the rolling and lamination plant in Buenos Aires. The Company has security personnel in both sites whose procedures are consistent with IFC’s PS4.

At the Futaleuf� hydroelectric plant, the company has implemented a robust emergency preparedness and response plans for fire and other in-situ emergencies, and for an unlikely dam rupture. The company undertakes regular monitoring of dam stability through piezometric readings and other measures, also keeping close tabs of meteorological conditions and seismic events that may cause concern. The emergency plan includes alarm systems, immediate evacuation of all personnel to a safe location atop a nearby hill, and speedy communication to downstream communities particularly the neighboring Trevelin and Futaleuf� villages across the Chilean border.

- PS6 Biodiversity Conservation and Sustainable Natural Resource Management

The sea surrounding the Vald�s Peninsula, and particularly the Golfo Nuevo, where Puerto Madryn is located, is a breeding ground for the southern right whale (ballena franca austral) and other marine mammals. The area also hosts 180 species of birds, 92 of moluscs, 42 of fish, and 14 species of reptiles. To protect this rich ecosystem, in 1983 (10 years after the Aluar plant started operations) the Chubut provincial government decreed the Vald�s Peninsula a Natural Reserve, and in 1999 UNESCO declared it a World Natural Heritage Site. Given the sensitivity of the area, Aluar has a stringent environmental policy and management programs to prevent potential impact in the area and a robust plan to respond to any environmental emergency. As discussed in the sections above, Aluar has minimal emissions to air and no effluent emissions, and therefore has negligible impact upon the marine environment. Aluar also keeps fluent communication with civil society and supports several NGOs involved with the protection of the Vald�s Peninsula natural habitat.

The Futaleuf� dam and hydroelectric plant were sited within Los Alerces National Park (declared as such by national decree in 1937). When the impoundment was filled in 1970’s it flooded an extensive area covered by forest – with protected tree species such as alerce, colihue, canelo and luma - and crossed by the Futaleuf� river rapids. After 35 years of operation, however, the reservoir is stable, the park is well protected and the area has become a popular destination for visitors and trekkers. The plant’s management fulfills the requirements of the electricity authority (CAMMESA), the dam safety authority (ORSEP) and the National Park Administration to ensure that the dam is run safely and the area of influence of the dam is protected. Among these requirements is to keep a minimum flow in the Futaleuf� river, which crosses the border into Chile, a couple of miles from the plant, and thence to the Pacific ocean. The plant also participates in the vigilance of forest fires, and their handling as appropriate.

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