Alcoa Receive the OK to Use Hydropower for Two of Its Smelters

Alcoa (NYSE:AA) today announced it hosted New York Governor David A. Paterson to celebrate finalization of a 30-year hydropower contract to supply the company’s two aluminum smelters in Massena, NY. The power agreement is contingent upon an upgrade of facilities by Alcoa.

Alcoa’s Massena Operations is the largest private employer north of Syracuse. This contract keeps the company’s $350 million annual economic impact and at least 900 jobs in northern New York. Alcoa has been operating in the North Country since 1902, and its two smelters in Massena have a combined output of 255,000 metric tons per year (mtpy).

In December, 2007, Alcoa and the New York Power Authority (NYPA) reached an agreement-in-principle on a hydropower contract. Since that time, both parties have worked out the detailed contract that both parties signed.

Under the terms of the contract, NYPA will supply power to the operations in Massena for a term of 30 years following the expiration of Alcoa’s current power contract in 2013, with the option to extend the contract for an additional 10 years under certain economic conditions.

In turn, following completion of feasibility and engineering studies to finalize exact costs and plans, Alcoa would invest a minimum of $600 million to modernize its operations. The modernization project would increase the smelting capacity at Massena to 278,000 mtpy and would provide significant environmental benefits, including a 70-percent overall reduction in greenhouse gases. The modernization is key to the long-term viability of operations.

Detailed planning for the modernization project is already underway. A final proposal for an investment decision will be submitted to the Alcoa Board of Directors when completed. If approved, the modernization is expected to be complete by 2013, with the vast majority of the costs to be in the outer years of the project. Approval of the project is the final step in the execution of the power contract between Alcoa and NYPA.

“Thanks to the support of Governor Paterson, our elected officials and the efforts of the NYPA team, we can celebrate the future of Alcoa in the North Country that is represented by this contract,” said Bernt Reitan, Alcoa Executive Vice President and Group President – Global Primary Products. “We believe in the future of the aluminum industry and Massena Operations. We believe we now have the foundation to present a proposal to modernize Massena Operations and make our facilities more cost-effective and sustainable.”

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