By Reed Kramer
Washington, DC

Negotiations are taking place this week in Ghana to resolve an ongoing dispute between the government and an American mining company that is complicating an otherwise cooperative relationship between two countries with long historical ties.

The disagreement, involving Houston-based Kaiser Aluminum and its Ghanaian subsidiary, Valco, has led to a suspension of all lending to Ghana by the Overseas Private Investment Corporation (Opic), a U.S. government agency that provides political risk insurance and loans to American businesses investing abroad.

"Ghana is being seen as not acting in a commercially reasonable manner that would ensure investor confidence," OpicPresident Peter Watson stated in a letter to Ghana's ambassador in Washington early this year. As a result of Ghana's actions, he said, "All applications for investment support in Ghana will remain under review." Watson, who refused several requests for an interview, said through a spokesperson this week that the agency "is accepting applications but not acting on them at the current time."

This week's negotiations in Ghana involve the Kaiser corporate vice president and general counsel, Edward F. Houff, and a ministerial team led by Ghana's energy minister, Dr. Paa Kwesi Nduom. Riva Levinson, who represents Kaiser Aluminum in Washington, said the company is "hopeful that a commercially negotiated deal can be reached."

The talks are being closely monitored in Washington, where the dispute has received high-level attention at a number of agencies, including the Treasury, State and Commerce Departments and the office of U.S. Trade Representative Robert Zoellick. At issue is the price and availability of electric power for the aluminum smelter at Tema operated by Valco, the Volta Aluminum Company, which is owned by Kaiser (90%) and Alcoa (10%).

Kaiser Aluminum first invested in Ghana shortly after the country gained independence from Britain in 1957. Since aluminum processing requires a large volume of affordable electricity, the investment was made feasible by construction of the huge Akosombo Dam on the Volta River, built with U.S. government assistance in what was regarded in Washington as a Cold War counterpoint to the massive Soviet-built Aswan Dam in Egypt.

Part of the current disagreement centers around the 50-year Master Agreement that was signed in 1962, when Kaiser began operations in the country. Although the agreement remains in effect, the government argues that the Power Contract contained in the Agreement has expired and that renewal is subject to Parliamentary approval. The government has sought to garner international support for its stance by publishing its position paper in various media, including allAfrica.com (see The Position of Ghana on the Arrangements with Valco.)

Ghana says Valco is paying 1.1 U.S. cents per kilowatt-hour, while the cost of producing electricity in the country has risen to 6.5 cents. Kaiser disputes the government's cost calculation and says the price of 3.0 cents that Ghana is demanding would push the cost of producing aluminum above the world market price.