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June 28, 2004
Alcoa Halts Modernization Project at Baie-Comeau
BAIE-COMEAU--(BUSINESS WIRE)--June 28, 2004--Alcoa (NYSE:AA) today announced that, despite several months of hard work and good-faith negotiations between the company and the Quebec Government, the parties have not been able to generate the conditions that could lead to an agreement. As a result, Alcoa will not implement its proposed plan to modernize its Baie-Comeau smelter.
"For many reasons, it was very difficult to make the decision not to go forward. First of all, we will not meet the expectations of our employees and the community who supported this project with a lot of hard work and determination. And, we will miss an opportunity to ensure the long-term survival of the smelter at a time when economic conditions are favourable," said Mr. Jean-Pierre Gilardeau, President of Alcoa Canada Primary Metals.
Mr. Gilardeau met with the leaders from the Baie-Comeau Smelter Modernization Coalition to inform them of Alcoa's decision. At the meeting, Mr. Gilardeau shared the company's admiration and appreciation for these leaders who rallied the community around the project. "I fully understand their disappointment, and I share it since we have spent the last three years working to make these projects a reality and launch expansion in Quebec."
"We could not reach an agreement on a formula that would have ensured long-term affordable energy for the Baie-Comeau modernization project," stated Mr. Gilardeau. "With energy representing more than 30% of our operating costs, we simply cannot invest a billion dollars in a project with the risk that energy prices will rise considerably over the life of that project," added Mr. Gilardeau. "Over 40-years, even with only moderate increases, energy would represent a 10-billion dollar cost."
The Baie-Comeau modernization project would have included replacing the Soderberg cells with a more modern technology and upgrading the Prebake sector.
Despite this situation, Alcoa intends to keep the Smelter in operation at least until 2010, as long as environmental requirements, energy availability and market conditions will allow. The eventual closure of the Soderberg cells would result in layoffs, but it is still too early to know to what extent.
Alcoa has recently announced other smelting growth projects around the world, including those in Iceland, Trinidad, Brazil, Bahrain, Brunei, China and Australia.
With more than 5000 employees and five billion dollars invested in Quebec in its three aluminum smelters and in its transformation plants, Alcoa has and is determined to maintain a strong presence in industrial Quebec. Very active in Quebec regions, the company will pursue its role of economic generator.
The modernization of the Baie-Comeau Smelter and the expansion of the Deschambault Smelter were the keystone of Alcoa Canada Primary Metals' expansion strategy, and it would have made Quebec the operational centre of gravity for Alcoa's North American aluminum production. With other planned investments in aluminum transformation and related sectors in the province, the implementation of this strategy would have resulted in total Alcoa investments of $3 billion in Quebec.
Alcoa is the world's leading producer and manager of primary aluminum, fabricated aluminum and alumina facilities, and is active in all major aspects of the industry. Alcoa serves the aerospace, automotive, packaging, building and construction, commercial transportation and industrial markets, bringing design, engineering, production and other capabilities of Alcoa's businesses to customers. In addition to aluminum products and components, Alcoa also markets consumer brands including Reynolds Wrap(R) foils and plastic wraps, Alcoa(R) wheels, and Baco(R) household wraps. Among its other businesses are vinyl siding, closures, fastening systems, precision castings, and electrical distribution systems for cars and trucks. The company has 120,000 employees in 41 countries and has been a member of the Dow Jones Industrial Average for 45 years and the Dow Jones Sustainability Indexes since 2001. More information can be found at www.alcoa.com