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New Power Contracts Create a Platform for the Future AUSTRALIA--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
“Energy security in the form of long-term, base-load agreements is vital
to aluminum smelters and the jobs they provide worldwide,” said Mr.
“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
“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
“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.
Alcoa is Victoria’s largest exporter. The Point Henry Smelter has a
rated capacity of 190,000 mtpy and is wholly owned by Alcoa of Australia
Limited. The Portland smelter has a rated capacity of 358,000 mtpy.
Portland Aluminium is an unincorporated joint venture project between
Alcoa of Australia Limited (45%) (Alcoa), Eastern Aluminium (Portland)
Pty Ltd (10%) (EAPL), CITIC Nominees Pty Limited (22.5%) (Citic) and
Marubeni Aluminium Australia Pty Ltd (22.5%) (Marubeni) (“Portland Joint
Venture (PJV)”). Eastern Aluminium (Portland) Pty Ltd is a wholly owned
subsidiary of Alcoa of Australia Limited. Alcoa Portland Aluminium Pty
Ltd (Alcoa Portland) (also a wholly owned subsidiary of Alcoa) manages
the smelter. Alcoa of Australia is 60% owned by Alcoa Inc. and 40% owned
by Alumina Limited.
Loy Yang Power is the operator of the largest power station in the State
and Australia’s largest open cut brown coal mine. Loy Yang Power was
privatized in May 1997 as part of the Victorian Government's
privatization strategy. In April 2004, Loy Yang Power was purchased by
the Great Energy Alliance Corporation (GEAC).
GEAC consists of the following shareholders – AGL (32.5%), Tokyo
Electric Power Company (32.5%), Transfield Services Infrastructure Fund
(14%), Motor Trades Association of Australia (MTAA) Superannuation Fund
(12.8%), Westscheme (5.7%) and Statewide Super (2.5%). Its wholly owned
subsidiary GEAC Operations Pty Ltd holds all the shares in the members
of a Partnership which trades as Loy Yang Power partners. Loy Yang Power
partners own the power station and the mine and its trading and
marketing is undertaken by Loy Yang Marketing Management Company