Alcoa Sign Long Term Power Contracts for Australian Aluminum Smelters

Alcoa of Australia Limited and Loy Yang Power today announced new base-load electricity contracts to power Alcoa's aluminum smelter at Point Henry, Geelong, and the Portland aluminum smelter to 2036.

The contracts take effect in 2014 for the Point Henry (Geelong) smelter and in 2016 for the Portland facility.

Alcoa of Australia's Managing Director Alan Cransberg and Loy Yang Power Chief Executive Ian Nethercote agreed today's announcement is a landmark for the future of both companies as well as for the Victorian and Australian economies.

"Energy security in the form of long-term, base-load agreements is vital to aluminum smelters and the jobs they provide worldwide," said Mr. Cransberg.

"The contracts we signed today provide a platform for Alcoa's current and future investment in regional Victoria."

The contracts are for approximately 820MW of load and, with future expansion options, could represent more than half of Loy Yang Power's generation output.

"Loy Yang Power and Alcoa both operate vital national economic assets, and this contract will ensure that we continue to help power Australia's ongoing economic growth," said Mr. Nethercote.

"We are particularly pleased with the agreements as they support two of our key business objectives - to deliver an efficient and profitable business as well as building a sustainable future in a carbon constrained world," he added.

As part of the new contracts, the parties have signed a carbon reduction agreement which provides the opportunity to work together on a joint approach to reducing greenhouse gas emissions.

"Through the talent of our people and innovative technologies, we have reduced the direct greenhouse gas emissions at our smelters by 61% per tonne of production since 1990. The carbon reduction agreement signifies an exciting new opportunity to build on that success in partnership with Loy Yang Power," said Mr. Cransberg.

"The carbon reduction agreement is consistent with Victorian and Australian government goals of a balanced and collaborative approach to facilitating Australia's transition to a lower carbon economy."

Mr. Nethercote said the agreement would underpin Loy Yang Power's existing commitment to reduce its carbon footprint while supporting the economic and social viability of the Latrobe Valley community.

"We look forward to working with Alcoa to identify key projects to achieve CO2 reductions from our operations," said Mr. Nethercote.

Mr. Cransberg said the 20-year agreements are globally competitive, allow Alcoa to respond to market conditions, and provide an option for growth.

"Our smelters are valuable long-term assets that are well positioned to take advantage of an improving global aluminum market. We are committed to overcoming challenges like high foreign exchange rates, and are extremely proud of the opportunity to build on our foundation of 47 years in regional Victoria."

Mr. Nethercote said the contracts provided Loy Yang Power with business certainty and was a vote of confidence in the company's ability to continue to deliver a reliable electricity supply to meet Victoria's growing energy needs.

"These contracts are an important part of our business future and will require us to continue to strive for ongoing improvements and efficiencies in order to maintain business success in an extremely competitive market. The contracts and a strong commitment to continuous improvement are key elements in providing a secure future for the business, existing employees and those that follow," said Mr. Nethercote.

Combined, Alcoa of Australia and Loy Yang Power employ over 2500 people in Victoria, largely in regional areas.

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