Alcoa 2012 Annual Report Download - page 133

Baie Comeau, Quebec, Canada—In August 2012, Alcoa presented an analysis of remediation alternatives to the
Quebec Ministry of Sustainable Development, Environment, Wildlife and Parks (MDDEP), in response to a previous
request, related to known PCBs and polycyclic aromatic hydrocarbons (PAHs) contained in sediments of the Anse du
Moulin bay. As such, Alcoa increased the reserve for Baie Comeau by $25 to reflect the estimated cost of Alcoa’s
recommended alternative, consisting of both dredging and capping of the contaminated sediments. The ultimate
selection of a remedy may result in additional liability at the time the MDDEP issues a final decision.
Mosjøen, Norway—In September 2012, Alcoa presented an analysis of remediation alternatives to the Norwegian
Climate and Pollution Agency (known as “Klif”), in response to a previous request, related to known PAHs in the
sediments located in the harbor and extending out into the fjord. As such, Alcoa increased the reserve for Mosjøen by
$20 to reflect the estimated cost of the baseline alternative for dredging of the contaminated sediments. The ultimate
selection of a remedy may result in additional liability at the time the Klif issues a final decision.
Other. In addition to the matters discussed above, various other lawsuits, claims, and proceedings have been or may be
instituted or asserted against Alcoa, including those pertaining to environmental, product liability, safety and health,
and tax matters. While the amounts claimed in these other matters may be substantial, the ultimate liability cannot now
be determined because of the considerable uncertainties that exist. Therefore, it is possible that the Company’s liquidity
or results of operations in a particular period could be materially affected by one or more of these other matters.
However, based on facts currently available, management believes that the disposition of these other matters that are
pending or asserted will not have a material adverse effect, individually or in the aggregate, on the financial position of
the Company.
Commitments
Investments. Alumínio, a wholly-owned subsidiary of Alcoa, is a participant in four consortiums that each owns a
hydroelectric power project in Brazil. The purpose of Alumínio’s participation is to increase its energy self-sufficiency
and provide a long-term, low-cost source of power for its two smelters and one refinery. These projects are known as
Machadinho, Barra Grande, Serra do Facão, and Estreito.
Alumínio committed to taking a share of the output of the Machadinho and Barra Grande projects each for 30 years
and the Serra do Facão and Estreito projects each for 26 years at cost (including cost of financing the project). In the
event that other participants in any of these projects fail to fulfill their financial responsibilities, Alumínio may be
required to fund a portion of the deficiency. In accordance with the respective agreements, if Alumínio funds any such
deficiency, its participation and share of the output from the respective project will increase proportionately.
The Barra Grande project reached full capacity in 2006. Alumínio’s investment in this project is 42.18% and is
accounted for under the equity method. This entitles Alumínio to approximately 160 megawatts of assured power.
Alumínio’s total investment in this project was $159 (R$326) and $169 (R$314) at December 31, 2012 and 2011,
respectively.
The Machadinho project reached full capacity in 2002. Alumínio’s investment in this project is 30.99% and is
accounted for under the equity method. This entitles Alumínio to approximately 120 megawatts of assured power.
Alumínio’s total investment in this project was $95 (R$195) and $97 (R$182) at December 31, 2012 and 2011,
respectively. Alumínio has also issued a third-party guarantee related to its share of the consortium’s debt. Alcoa’s
maximum exposure to loss on this project is approximately $120 (R$240), which represents Alumínio’s investment and
guarantee of debt as of December 31, 2012.
The Serra do Facão project reached full capacity in 2010. Alumínio’s investment in this project is 34.97% and is
accounted for under the equity method. This entitles Alumínio to approximately 65 megawatts of assured power.
Alumínio’s total investment in this project was $98 (R$200) and $105 (R$196) at December 31, 2012 and 2011,
respectively. Alumínio previously issued a third-party guarantee related to its share of the consortium’s debt; however,
in October 2012, the lender released all of the consortium’s investors from their respective guarantees.
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