Aughinish Alumina boss Damien Clancy tells Colm Ward he is confident that the plant can continue for at least another 25 years if the Government protects Irish competitiveness.

Limerick may be known as the heartland of Munster rugby, but over the past 25 years it has also developed an international reputation in a very different area - alumina production.

Aughinish Alumina, about 20 miles from the city, near Askeaton, has been producing alumina since 1983. It is now responsible for about 3.5 per cent of the global output of alumina and is recognised as the world leader in the industry.

Despite its long tenure in the area, the plant is still subject to a common misconception, one that the new managing director, Mr Damien Clancy, is eager to straighten out: alumina is not the same as aluminium. Rather it is a white, crystalline powder that is used to make the familiar metal.

"One of the big sources of confusion and false conclusions about Aughinish is the amount of aluminium problems we are causing. We don't make aluminium. It's not made in Ireland," he says.

Alumina is derived from bauxite, a red-coloured rock found most commonly in west Africa and Brazil. Every year, about three million tonnes is shipped to Aughinish's own port in the Shannon estuary where it is used to produce the alumina.

This in turn is shipped to aluminium producers in mainland Europe and elsewhere. Every year, the port handles about 300 ships, some weighing over 70,000 tonnes, making it one of the busiest in the State.

One of the plant's distinguishing features, according to Mr Clancy, is the productivity of its staff, which is about three times that of the industry average. A restructuring in 1993 reduced staff numbers to around 500.

To compensate for this, structures were introduced to increase productivity.

This was, and continues to be, successful thanks to a solid partnership with the three unions at the plant, the AEEU, TEEU and SIPTU.

Referring to the national social partnership currently being negotiated, he says that the company will honour any pay rises awarded. He feels, however, that increases in pay and other costs are eroding the competitiveness of Aughinish in the world market.

Aughinish regularly benchmarks itself against a similar plant near Hamburg in Germany. Wage inflation there is currently running close to 2 per cent, compared to 5 per cent in Ireland. He estimates that that difference has cost Aughinish about €5 million over the past five years.

"If that continues it will ultimately put us out of business." In other areas too, costs here far outstrip those in Germany. For example, the rates bill for the plant near Hamburg is €300,000 per annum, compared to the €2 million Aughinish pays to Limerick County Council.

The cost of energy is also critical to the future success of the plant. While energy costs make up 2 per cent of the operating costs for other industries, they account for 25 per cent in the case of energy-intensive industries such as Aughinish. There are two main issues concerning energy that Mr Clancy believes should be addressed.

The first relates to liberalisation of the market. "Electricity and gas liberalisation is a hot topic at the moment. Certainly, how it develops will be keenly watched by Aughinish. It's very important to us," he says.

The second issue that he will be monitoring closely is the implementation of the Kyoto agreement on global warming. This is an issue for all industries in Ireland, but it has particular relevance for energy-intensive industries.

It is essential, he says, that the Government works with industry to set clear targets and timeframes for the implementation of any measures to control emissions. This will allow energy-intensive industries to put the necessary measures and investments in place without jeopardising their business.

Similarly, it has to ensure that Irish compliance with Kyoto keeps pace with its European neighbours.

"The Government has to make sure that the country doesn't move too far ahead of its trading partners in the EU because the EU is already ahead of the rest of the world and if it moves too far ahead too quickly - in terms of enforcing any measures - what it will do is it will kill off a number of industries including energy-intensive industries," he says.

Since its establishment, the plant has undergone continuous improvements and enhancements, which have served to increase annual output from 800,000 tonnes initially to the current 1.5 million tonnes. Capital expenditure is €10 million per year and there are about 200 construction contractors on site at any given time.

One of the biggest investments to date is the combined heat and power (CHP) plant that is currently in development. On completion in 2005, this natural gas powered plant will produce both the electricity and the steam needed to power the entire Aughinish operation.

Any excess electricity produced will then be sold to the national grid. Again, however, the success of the enterprise is dependent on the Government taking action to recognise CHP, alternatively known as co-generation, as an environmentally-friendly energy source.

"Normally when you make electricity, people just take the energy - they make the electricity and they discard anything else. But if you have somebody who wants to make electricity from the energy and has a use for steam as well, it is extremely efficient and far more efficient than your normal system," he explains.

At the moment, CHP accounts for, on average, 10 per cent of electricity generated in the EU. In Ireland this figure is closer to 2 per cent. "In all other EU countries - for example, the UK, Denmark, Germany - CHP is treated as green energy and therefore it has certain promotional measures in place to facilitate its installation. We need those in Ireland as well," he says.

Despite having a relatively low profile nationally, Aughinish did make news in the mid-1990s following allegations that emissions from the plant were causing animal health problems on farms in the Askeaton area.

A report was carried out by the Environmental Protection Agency (EPA) that found no link between the plant and any human or animal health problems in the area.

"Aughinish has always maintained that it was neither the source nor the cause of any of the perceived problems on any of the farms and the Government-sponsored, EPA-led, independent report has conclusively confirmed that. So we consider the matter closed," says Mr Clancy.

However, he is disappointed that some farmers are continuing to raise the matter.

"The image that it is giving rise to is causing publicity which in turn is deterring industry from coming to the area, and that is costing jobs," he says.

The other major impediment to industrial development in the Mid-West region is the poor infrastructure in many areas. One of the advantages of having its own port is that Aughinish does not rely on the roads network to transport goods.

However, he says the company is "acutely aware" of the difficulties associated with getting in or out of the area and he believes that the catchment area for Shannon airport would be much greater if access was improved.

Being a Limerick native, Mr Clancy is well aware of the importance of the plant which, he estimates, generates about €75 million annually for the Mid-West.

He believes the parent company, Glencore, is satisfied with its performance and he is confident that, if the Government takes the necessary steps to protect Irish competitiveness, the plant can continue for at least another 25 years.

"Glencore is quite happy with the returns they have had from Aughinish in the last four years and the fact that we can now make a modest profit at what we hope is the bottom of the business cycle. So that is good news for Aughinish, for Aughinish employees, for the people in thegeneral area and for the shareholders."