Alcoa: News: News Releases: Major Support for Development in the North Shore; ALCOA to Invest $1 Billion -- Can -- to Expand and Upgrade Its Baie-Comeau Aluminum Smelter

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December 16, 2002

Major Support for Development in the North Shore; ALCOA to Invest $1 Billion -- Can -- to Expand and Upgrade Its Baie-Comeau Aluminum Smelter

BAIE-COMEAU--(BUSINESS WIRE)--Dec. 16, 2002--Alcoa (NYSE:AA)

Alcoa will be investing $1 billion (Can) over eight years to make its Baie-Comeau plant a world-class smelter.
The Quebec government is showing its support for the project by providing financial support and a guarantee of additional energy supplies.
Alcoa and the Quebec government are negotiating terms to expand Alcoa's aluminum plant in Deschambault.

This morning, Quebec Premier Bernard Landry and Alcoa chairman and CEO, Alain Belda, signed a memorandum of understanding for the modernization of Alcoa's aluminum smelter in Baie-Comeau.

This major investment will ensure the competitiveness of Alcoa's facilities, which are of strategic importance for the North Shore, and the long-term maintenance of the majority of the existing jobs at the Baie-Comeau smelter. Construction and renovation work on the project will entail investments of $1 billion (Can) and the creation of 5 850 direct and indirect jobs over a period of 8 years. Work will begin by the end of December 2003, and the new facilities should be operational by 2010.

Mr. Landry said, "In supporting Alcoa's smelter in Baie-Comeau, the government of Quebec is ensuring the future of one of the most important engines of Quebec's economy. This new agreement, combined with the agreement for expanding the Alouette aluminum plant, announced last spring, means the region will see a total investment of $3.0 billion (Can) over the next years. These investments will provide jobs to more than 16 500 persons. We have not seen investments of this size in the North Shore region since the completion of the Manic hydro-electric project."

Mr. Belda stated that he is very pleased with the new agreement, which he sees as holding exceptional promise for the future. He said, "Beyond its content, this Memorandum of Understanding will create a strong partnership between Quebec and Alcoa. It points to an equally strong future by playing an integral role in our international development strategies. I would also like to thank the people of Baie-Comeau and the North Shore for their support of this project."

The project is eligible for the ten-year tax break that is available for major projects. It is also eligible for financial assistance under the FAIRE program, from which it will receive a $170 million (Can) interest-free loan.

Under existing regulations, Hydro-Quebec will provide 175 Mega Watts of power, required to expand facilities at the industrial power rate, commonly called the "L" rate. "Hydro-Quebec is an important partner in the economic development of Quebec. We are pleased to be associated with Alcoa within the framework of a win-win agreement which will allow us to supply this customer with hydro power at a competitive rate, but also beneficial to us," declared president of Hydro-Quebec, M. Andre Caille. The government has also agreed to renew, for an additional 25 years beginning in 2011, the water rights for the McCormick hydro-electric plant, which provides part of the Baie-Comeau smelter's energy supply.

For its part, Alcoa has agreed to employ a minimum of 1,476 workers at the Baie-Comeau smelter. The company will be subject to severe penalties if it does not keep this commitment.

Capacity Increase and Improved Environmental Protection

Through this modernization project, Alcoa will replace its current Soderberg production technology with a modern pre-bake technology, which will significantly improve the smelter's environmental performance. Alcoa will also maximize operations in its two units that are already using pre-bake technology. As a result of this work, annual production capacity will increase from 437,000 metric tons to 547,000 metric tons. This investment will eliminate the majority of plant PAH emissions and significantly reduce Greenhouse gas emissions.

Expansion of Alcoa's Deschambault aluminum plant

Mr. Landry and Mr. Belda also announced that negotiations for expanding Alcoa's aluminum plant in Deschambault continue.

Alcoa is the world's leading producer of primary aluminum, fabricated aluminum and alumina, 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, precision castings, and electrical distribution systems for cars and trucks. The company has 129,000 employees in 38 countries. For more information go to www.alcoa.com