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Brazil - Hydro establishes 15-year ICMS tax framework for Brazilian operations

Norwegian aluminium producer Hydro said Friday it has established a new 15-year ICMS tax framework for its operations in the Brazilian state of Para.

Hydro's aluminium plant Albras, the alumina refinery Hydro Alunorte, and the bauxite mine Hydro Paragominas will be covered by the new framework.

"Our ambition is to develop robust and viable operations in Para and to be an enabler for sustainable growth in the region. To do this, we need stable and predictable framework conditions. We are pleased to have agreed on a long-term ICMS framework for Hydro's operations in Para," executive vice-president and head of bauxite and alumina at Hydro said.

ICMS is a value-added tax collected by Brazilian states.

The aluminium industry in Para has an ICMS deferral on intra-state purchases which expires Friday.

Hydro Paragominas, Hydro Alunorte and Albras have been subject to ICMS tax on diesel and since February 1, 2014, this included fuel oil.

Currently, this amounts to around Real 250 million ($80 million) on an annual basis.

Under the new ICMS framework, Hydro Paragominas and Hydro Alunorte will continue to pay ICMS on diesel and fuel oil, while other intra-state purchases will have a renewed deferral for the period.

Albras will pay ICMS on a 50% basis of electricity purchases, while other intra-state purchases will have a renewed deferral for the period.

ICMS tax paid by Albras on electricity is expected to be offset by increasing domestic sales of primary aluminium, at a sales price including ICMS, Hydro said.

Bauxite production at Hydro Paragominas is refined at the Hydro Alunorte alumina refinery.

Alumina from Alunorte is used as raw material in the primary aluminium plant Albras -- a joint venture between Hydro and the Japanese consortium NAAC (Nippon Amazon Aluminium).

Hydro also extends the value chain through selling 50,000 mt/year of liquid aluminium from Albras to local cable producer Alubar.

Albras is planning to high-grade its portfolio by upgrading 40,000 mt of its annual production capacity from standard ingot to primary foundry alloys for sale to the domestic market.

Hydro Paragominas has a capacity of 9.9 million mt/year, while Hydro Alunorte has identified measures to lift production beyond nameplate capacity (6.3 million mt/year), towards 6.6 million mt/year.

Albras has an annual production capacity of 460,000 mt/year.

Source: platts.com

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