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January 10, 2003

Alcoa Approves Building New 320,000 mtpy 'Fjaroaal' Aluminum Smelter in Eastern Iceland


Project is Key Element in Alcoa's Primary Metals Strategy; Fjaroaal Plant will Strengthen Economy in East Iceland

Alcoa (NYSE:AA) today announced that its Board of Directors has approved plans for the construction of a 322,000-metric ton Fjaroaal aluminum facility in Eastern Iceland. Alcoa's Fjaroaal aluminum facility is part of the most extensive single investment in the history of Iceland, and is scheduled to begin production in 2007. The facility is being designed to be the most environmentally friendly aluminum production facility in the world. The cost of the Fjaroaal aluminum facility will be approximately $1.1 billion over the next four years.

Alcoa's Fjaroaal aluminum operations -- Fjaroaal means "Aluminum of the Fjords" in Icelandic and derives from the local municipality, Fjaroabyggo, or "Municipality of the Fjords" -- will provide approximately 450 jobs and generate approximately 300 additional full-time equivalent positions in service-related industries, for a total of 750 new jobs. Construction of the aluminum plant in East Iceland is part of an overall economic plan by the government of Iceland to improve living standards from health care to infrastructure to communications -- not just for the region, but also for all of Iceland. Those new jobs will help strengthen and diversify the economy of East Iceland, which has seen declining employment and out-migration as traditional jobs in fisheries and farming have declined. The project will create hundreds of construction jobs in the region, helping fuel economic growth. Smelter construction is scheduled to begin in early 2005.

"The Fjaroaal plant is an important element of Alcoa's growth strategy in primary metals," said Alain Belda, Alcoa Chairman and CEO. "Across our entire primary metals portfolio, we are taking action to move our production assets down the cost curve while maintaining return on capital targets. As we explore new projects around the world, we will continue to reassess our existing smelting portfolio, particularly in the United States, where escalating energy and labor costs have made many smelters less globally competitive.

"There are unique environmental challenges presented by Iceland's nature, and we promise to exercise best discretion in our interaction with it," said Belda. "We expect that our unrivalled experience along with new technologies that we have developed will be well utilized to ensure that the project has minimal impact on the environment and the eco-systems supporting it. We look forward to working with the people of Iceland and their elected representatives to secure governmental approvals for this project. We are also pleased that Landsvirkjun has decided to move forward with their power project."

The new Alcoa Fjaroaal aluminum plant is estimated to have less significant environmental impacts than a design previously proposed for the same location:

  • Annual production level of the Alcoa Fjaroaal plant will be approximately 25% below that planned under the previous proposal.
  • Alcoa will not have on-site disposal of spent pot lining (SPL), a by-product of the aluminum production process.
  • Alcoa is investigating designs to meet its goal for zero process water discharge.
  • Finally, carbon anodes, required continuously by the plant, will not be manufactured in Iceland, thereby eliminating a major source of sulfur dioxide (SO2), nitrogen oxide (NOX) and hydrocarbon (PAH) emissions from the site.

The project will comply with all air and water quality standards of Iceland and the European Union directives scheduled to take effect in 2005 and 2010. In some areas, designed performance of the Alcoa plant goes beyond compliance. Carbon dioxide (CO2) emissions will be 25% below the earlier plan, and PFC emissions (another greenhouse gas) will be 40% less. Emissions of nitrogen oxide (NOX) will also be 80% less. Alcoa is committed to working closely with East Iceland communities to minimize disturbance during the construction and operating phases.

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 as a single solution to customers. In addition to aluminum products and components, Alcoa also markets consumer brands including Reynolds Wrap(R) aluminum foil, 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 127,000 employees in 38 countries. For more information go to

Note to Editors: Some Icelandic characters have been changed to English characters for transmission purposes only.