Alcoa 2009 Annual Report Download - page 109

I. Investments
December 31, 2009 2008
Equity investments $ 953 $1,885
Other investments 108 30
$1,061 $1,915
Equity Investments. As of December 31, 2009 and 2008, Equity investments included bauxite mining interests in
Guinea and Brazil, hydroelectric power construction projects in Brazil (see Note N), a smelter operation in Canada, and
a natural gas pipeline in Australia (see Note N). Also included in Equity investments as of December 31, 2009 was an
investment in a new joint venture in Saudi Arabia. Additionally, Equity investments as of December 31, 2008 included
a 45.45% investment in Sapa AB, a 50% investment in Elkem, and an 8.5% investment in Shining Prospect Pte. Ltd.
(SPPL).
In December 2009, Alcoa and Saudi Arabian Mining Company (known as “Ma’aden”) entered into a 30-year joint
venture shareholders’ agreement (automatic extension for an additional twenty years, unless the parties agree otherwise
or unless earlier terminated) setting forth the terms for the development, construction, ownership, and operation of an
integrated bauxite mine, alumina refinery, aluminum smelter, and rolling mill, in the Kingdom of Saudi Arabia.
Specifically, the project to be developed by the joint venture will consist of: (i) a bauxite mine for the extraction of
approximately 4,000 kmt of bauxite from the Al Ba’itha bauxite deposit near Quiba in the northern part of the
Kingdom of Saudi Arabia; (ii) an alumina refinery with an initial capacity of 1,800 kmt; (iii) a primary aluminum
smelter with an initial capacity of 740 kmt; and (iv) a rolling mill with initial capacity of 250 kmt, which may be
increased to 460 kmt. The refinery, smelter, and rolling mill will be constructed in an industrial area at Ras Az Zawr on
the east coast of the Kingdom of Saudi Arabia. The facilities will use critical infrastructure, including power generation
derived from reserves of natural gas, as well as port and rail facilities, developed by the Government of the Kingdom of
Saudi Arabia. First production from the smelter and rolling mill is anticipated in 2013, and first production from the
mine and refinery is expected in 2014.
The joint venture will be owned 60% by Ma’aden and the other 40% will be controlled by Alcoa through a special-
purpose vehicle (SPV). Through this SPV arrangement, Alcoa and Aluminum Financing Limited will each have a 20%
economic interest in the joint venture. Aluminum Financing Limited’s investment is in the form of subordinated,
participating convertible notes (the “Notes”), which have common equity rights in the SPV, issued by the SPV and will
be converted into permanent equity at a future date based on certain conditions as defined in the underlying SPV
agreement. The Notes contain put and call mechanisms under which Aluminum Financing Limited can require Alcoa
to purchase, or Alcoa can require Aluminum Financing Limited to sell, its 20% interest during a certain period as
defined in the SPV agreement. A portion of Alcoa’s 20% investment (related to the bauxite mine and alumina refinery)
will be indirectly owned through an affiliate of Alcoa World Alumina and Chemicals, which is 40% owned by
Alumina Limited.
Following the signing of the joint venture shareholders’ agreement, Alcoa paid Ma’aden $80 representing the initial
investment of the 40% interest in the project. This investment was included in Additions to investments on the
accompanying Statement of Consolidated Cash Flows. Aluminum Financing Limited’s 50% share of the $80 was
reflected as Convertible securities of subsidiary on the accompanying Consolidated Balance Sheet and in Contributions
from noncontrolling interests on the accompanying Statement of Consolidated Cash Flows. In 2010, Alcoa will be
required to pay, at a minimum, an additional $55 representing the 40% interest’s pro rata share of certain agreed upon
pre-incorporation costs incurred by Ma’aden before formation of the joint venture.
Capital investment in the project is expected to total approximately $10,800 (SAR 40.5 billion), subject to the
completion of detailed feasibility studies and environmental impact assessments. Of this amount, Alcoa and Aluminum
Financing Limited will each invest approximately $900 over a four-year period and are responsible for their pro rata
share of the joint venture’s project financing.
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