Alcoa 2003 Annual Report Download - page 56

The completed and committed hydroelectric construction projects that Aluminio participates in are outlined in the following tables.
Completed projects
Date
completed
Investment
participation
Share of
output
Debt
guarantee
Debt
guarantee
through 2013
Machadinho 2002 27.23% 22.62% 35.53% $106
Aluminio committed to taking a share of the outputofthe
completed Machadinho project for 30 years at cost (including cost
of financing the project). In the event that other participants in this
project fail to fulfill their financial responsibilities, Aluminio may be
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required to fund a portion of the deficiency. In accordance with the
agreement, if Aluminio funds any such deficiency, its participation
and share of the output from the project will increase proportionately.
These projects were committed to during 2001and2002,and
the Barra Grande project commenced construction in 2002. In the
third quarter of 2003, approximately 20% of thelong-term financing
for the Barra Grande project was obtained, of which Aluminio
guaranteed 42.20% based on its investment participation. The plans
for financing the other projects have not yet been finalized. It is
anticipated that a portion of the project costs will be financed with
third parties. Aluminio may be required to provide guarantees
of project financing or commit to additional investments as these
projects progress.
During the second quarter of 2003, the participants in the Santa
Isabel project formally requested the return of the performance
bond related tothelicense to construct the hydroelectric project.
This project has been terminated.
Aluminio accounts for the Machadinho and Barra Grande hydro-
electric projects on the equity method. Its total investment was $136
and $88 at December 31, 2003 and 2002, respectively. There have
been no significant investments made in any of the other projects.
Alcoa of Australia (AofA) is party to a number of natural gas
and electricity contracts that expire between 2004 and 2020. Under
these take-or-pay contracts, AofAisobligated to pay for a minimum
amount of natural gas or electricity even if these commodities are
not delivered. Commitments related to these contracts total $262
in 2004, $249 in2005,$235in2006,$210in2007,$201in 2008, and
$2,018 thereafter. Expenditures under these contracts totaled $266
in 2003, $178 in 2002, and $179 in 2001.
Alcoa has standby letters of credit related to environmental,
insurance, and other activities. The total amount committed under
these letters of credit, which expire at various dates in 2004 through
2009, was $258 at December 31, 2003.
N. Other Income, Net
2003 2002 2001
Equity income $138 $72 $118
Interest income 38 46 61
Foreig n currency translation losses (81) (30) (11)
Gains on sales of assets 37 52 114
Other income 142 39 27
$274 $179 $309
The changes in equity income for all years presented were primarily
due to Alcoa’s investment in Elkem. The gains on sales of assets
in 2003 and 2002wereprimarily associated with dispositions of
office space and other smaller noncore business assets. The gains
on sales of assetsin2001wererelatedtothesalesofThiokol,
Alcoa Proppants, Inc., and Alcoa’s interest in a Latin American cable
business. The increase in other income in 2003 is primarily due
to a $105 gain from insurance settlements of a series of historical
environmental matters in the U.S. and anincreaseinthecash
surrender value of employee life insurance.
O. Cash Flow Information
Cash payments for interest and income taxes follow.
2003 2002 2001
Interest $352 $329 $418
Income taxes 303 583 548
The details of cash payments related to acquisitions follow.
2003 2002 2001
Fair value of a ssets acquired $ 275 $1,944 $184
Liabilities assumed (80) (666) (24)
Minority interests acquired 224 ——
Stock issued (410) ——
Cash paid 91,278 160
Less: cash acquired —25 1
Net cash paid for acquisitions $9 $1,253 $159
P. Segment and Geographic Area Information
Alcoa is primarily a producer of aluminum products. Aluminum
and alumina represent approximately two-thirds of Alcoa’s revenues.
Nonaluminum products include precision castings, industrial
fasteners, vinyl siding, consumer products, food service and flexible
packaging products, plastic closures, fiber-optic cables, and electrical
distribution systems for cars and trucks. Alcoa’s segments are
organized by product on a worldwide basis. Alcoa’s management
reporting system evaluates performance based on a number of
factors; however, the primary measure of performance is the after-
tax operating income
(ATOI) of each segment. Nonoperating items
such as interest income, interest expense, foreign currency trans-
Committed projects
Scheduled
completion date
Share of
output
Investment
participation
To t a l e s t imated
projectcosts
Aluminio’s share
of projectcosts
Performance
bond guarantee
BarraGrande 2006 42.20% 42.20% $471 $199 $ 5
Serra doFaca˜o 2006 39.50% 39.50% $223 $ 88 $ 4
Pai-Quereˆ 2008 35.00% 35.00% $273 $ 96 $ 2
Estreito 2009 19.08% 19.08% $589 $112 $10