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March 1, 2006

Alcoa and Gov. of Iceland to Begin Feasibility Studies on a New 250,000 mtpy Renewable Energy-Powered Smelter in North Iceland; Smelter Could Be One of the First Geothermal-Powered in the World

REYKJAVIK & NEW YORK--(BUSINESS WIRE)--March 1, 2006--Alcoa (NYSE:AA) and the Government of Iceland have agreed to begin detailed feasibility studies for the development of a 250,000 metric ton per year (mtpy) aluminum smelter based principally on geothermal energy, at Bakki near Husavik in North Iceland. The agreement comes after Alcoa selected Husavik following an extensive joint public comparative study which weighed three prospective sites in North Iceland. The other sites were at Brimnes near Skagafjordur and Dynses near Akureyri. It is the first time that such an exhaustive public comparative study has been conducted for industrial site selection in Iceland.



Alcoa's final assessment factored in work by a joint committee comprising representatives of the three Municipalities, Invest in Iceland (a development agency of the Icelandic Government) and Alcoa, as well as consultants to the committee and to Alcoa. The assessment took into account a complete range of economic, social, and environmental factors covering site geology and topography, climate, coastal marine conditions, harbor facilities, transportation, power supply, community demographics, community acceptance, labor market, employment potential, aesthetics, archaeological importance, ecology, and other factors.

In announcing Bakki as the site chosen for further, detailed studies, Valgerdur Sverrisdottir, Minister for Industry and Commerce said the establishment of an aluminum smelter based on renewable hydro or geothermal energy in North Iceland was an essential element in the government's economic development strategy.

"It is essential that we use our clean and renewable energy sources to broaden and strengthen our economy through regional industrial development that will deliver stable, long-term, sustainable benefits. Aluminum smelting is an ideal industry for this purpose. We have seen the benefits that have flowed from such development in the south and west. Alcoa's Fjardaal smelter, which is currently under construction, is stimulating renewal in East Iceland. And now we need to seek similar development for the North," she said.

Bernt Reitan Executive Vice President Alcoa, and President Alcoa Global Primary Products said that Alcoa was delighted to have been chosen first to participate in the comparative site selection study, and now the detailed feasibility studies.

"This is not yet a decision to build a smelter," said Reitan. "This could conceivably be one of the first geothermal-powered smelters in the world, so we have a great deal of work ahead of us to prove the feasibility of this project -- particularly around the cost, and timing of delivery, of power -- but this is an outstanding opportunity to continue building our successful relationship with the Government and people of Iceland. It is a country where Alcoa's commitment to sustainable development is expected and embraced, the business environment is supportive and transparent, the Regional authorities welcome responsible development, and the workforce is highly educated and skilled in a wide variety of disciplines. We feel very much at home here," said Reitan.

If detailed feasibility studies prove the viability of the proposed smelter, it is not expected that ground would be broken before 2010.

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 129,000 employees in 42 countries and has been named one of the top three most sustainable corporations in the world at the World Economic Forum in Davos, Switzerland. More information can be found at www.alcoa.com