Damco Aluminum Delfzijl Coöperatie seeks refuge in green electricity but Covid-19 creates uncertainty

Karel Oldenburger, General Manager, commented “If those piles have just been produced and lifted out, they have another dangling point. That is aluminium at its best.”

Oldenburger has been working at Damco Aluminum Delfzijl Coöperatie, or Aldel for more than a decade. He has the experience of bankruptcies in 2013 and 2017 and the 304 melting furnaces were largely turned off.

The post-bankruptcy as recent as in 2017, one of the most important employers in East Groningen seemed to be closing its doors permanently.

The company will be celebrating its 40^th Anniversary next year.

Production has now been scaled up to 225 ovens that are in daily use - at least for the corona crisis.

A party such as Aldel, which is at the front of the chain, is now also beginning to notice the consequences. "We see orders from the car industry falling, resulting in a huge drop in turnover," said financial director Eric Wildschut, "And if the turnover falls, we cannot ignore the financial support that the government offers."

Moreover, more and more countries are closing their borders, and Aldel is also bothered by that. "We see long lines for the German-Polish border. We also have our trucks in there. ”

Australian McNamee, who was sent by a year and a half ago from York to Delfzijl said "Aldel has not always been well managed in the past. York saw opportunities to do better, especially in reducing costs and to contribute to global environmental goals. ”

The latter statement needs some explanation. Aldel is a major consumer of energy and emitter of carbon dioxide. Five years ago, the company consumed 1.7 billion kWh of electricity per year, almost 1.5% of total electricity consumption across the Netherlands. The power consumption accounts for about 40% of the operating costs.

For years, Aldel was able to make agreements with the government about a fixed low electricity price, but now the price is determined by the market. Energy costs, in addition to low aluminium prices, were one of the causes that the company already went down in 2013. Competitors in Scandinavia and Germany, among others, paid less for their energy.

Aldel wants to change this now, says McNamee. York has now invested “more than 100 million euros”, including in the collection of solar and wind energy. The global price for aluminium is set at the London metal exchange. "Little price negotiation is possible for both raw materials and aluminium."

The company therefore mainly focuses on reducing production costs. The aluminium smelter must run on green energy within ten years. Operational director David Eisma: “We also want to capture carbon dioxide on our property and process it ourselves." Besides, Aldel will soon have to form a 'turntable' in the electricity network to absorb peaks. Eisma: "We will be flexible with production." If there is a lot of wind, Aldel will have a high production and vice versa less.

The green ten-year plan sounds ambitious, but in the meantime, there is an owner who wants to see something back from the millions invested. Ten years is an eternity for private equity concepts.

McNamee swears that it is "long term", but that there are "natural production goals" that "should ultimately lead to profit". He does not want to say how high those targets are, only that the profit margins are “in line with what is usual in this sector”.

Aldel suffered a loss of over 27 million euros in the first year under York. Although there are no precise figures for 2019, that year was also a loss, confirms financial director Eric Wildschut. “We are still increasing production. That was always the plan, but we had a fire last year and a leak in one of the ovens. ”

The plan was to have all 304 ovens in operation early this year, but there are now 225. McNamee: "It takes a little longer to get where we want to be."