Alcoa 2015 Annual Report Download - page 145

Capital investment in the project is expected to total approximately $10,800 (SAR 40.5 billion) and has been funded
through a combination of equity contributions by the joint venture partners and project financing by the joint venture,
which has been guaranteed by both partners (see below). Both the equity contributions and the guarantees of the project
financing are based on the joint venture’s partners’ ownership interests. Originally, it was estimated that Alcoa’s total
equity investment in the joint venture would be approximately $1,100, of which Alcoa has contributed $981, including
$29 and $120 in 2015 and 2014, respectively. Based on changes to both the project’s capital investment and equity and
debt structure from the initial plans, the estimated $1,100 equity contribution may be reduced. As of December 31,
2015 and 2014, the carrying value of Alcoa’s investment in this project was $928 and $983, respectively.
The smelting and rolling mill companies have project financing totaling $4,311 (reflects principal payments made
through December 31, 2015), of which $1,082 represents Alcoa’s share (the equivalent of Alcoa’s 25.1% interest in the
smelting and rolling mill companies). In conjunction with the financings, Alcoa issued guarantees on behalf of the
smelting and rolling mill companies to the lenders in the event that such companies default on their debt service
requirements through 2017 and 2020 for the smelting company and 2018 and 2021 for the rolling mill company
(Ma’aden issued similar guarantees for its 74.9% interest). Alcoa’s guarantees for the smelting and rolling mill
companies cover total debt service requirements of $142 in principal and up to a maximum of approximately $50 in
interest per year (based on projected interest rates). At December 31, 2015 and 2014, the combined fair value of the
guarantees was $7 and $8, respectively, which was included in Other noncurrent liabilities and deferred credits on the
accompanying Consolidated Balance Sheet.
The mining and refining company has project financing totaling $2,232, of which $560 represents AWAC’s 25.1%
interest in the mining and refining company. In conjunction with the financings, Alcoa, on behalf of AWAC, issued
guarantees to the lenders in the event that the mining and refining company defaults on its debt service requirements
through 2019 and 2024 (Ma’aden issued similar guarantees for its 74.9% interest). Alcoa’s guarantees for the mining
and refining company cover total debt service requirements of $120 in principal and up to a maximum of
approximately $30 in interest per year (based on projected interest rates). At December 31, 2015 and 2014, the
combined fair value of the guarantees was $3 and $4, respectively, which was included in Other noncurrent liabilities
and deferred credits on the accompanying Consolidated Balance Sheet. In the event Alcoa would be required to make
payments under the guarantees, 40% of such amount would be contributed to Alcoa by Alumina Limited, consistent
with its ownership interest in AWAC.
In June 2013, all three joint venture companies entered into a 20-year gas supply agreement with Saudi Aramco,
replacing the previous authorized gas allocation of the Ministry of Petroleum and Mineral Resources of Saudi Arabia
(the “Ministry of Petroleum”). The gas supply agreement provides sufficient fuel to meet manufacturing process
requirements as well as fuel to the adjacent combined water and power plant being constructed by Saline Water
Conversion Corporation, which is owned by the government of Saudi Arabia and is responsible for desalinating sea
water and producing electricity for Saudi Arabia. The combined water and power plant will convert the three joint
venture companies’ gas into electricity and water at cost, which will be supplied to the refinery, smelter, and rolling
mill. A $60 letter of credit previously provided to the Ministry of Petroleum by Ma’aden (Alcoa is responsible for its
pro rata share) under the gas allocation was terminated in June 2015 due to the completion of certain auxiliary rolling
facilities.
The parties subject to the joint venture shareholders’ agreement may not sell, transfer, or otherwise dispose of, pledge,
or encumber any interests in the joint venture until certain milestones have been met as defined in both agreements.
Under the joint venture shareholders’ agreement, upon the occurrence of an unremedied event of default by Alcoa,
Ma’aden may purchase, or, upon the occurrence of an unremedied event of default by Ma’aden, Alcoa may sell, its
interest for consideration that varies depending on the time of the default.
Other Investments. As of December 31, 2015 and 2014, Other investments included $193 and $153, respectively, in
exchange-traded fixed income and equity securities, which are classified as available-for-sale and are carried at fair
value with unrealized gains and losses recognized in other comprehensive income. Unrealized and realized gains and
losses related to these securities were immaterial in 2015, 2014, and 2013.
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