Alcoa 2013 Annual Report Download - page 143

As of December 31, 2013, Alumínio’s current power self-sufficiency satisfies approximately 70% of a total energy
demand of approximately 690 megawatts from two smelters (São Luís (Alumar) and Poços de Caldas) and one refinery
(Poços de Caldas) in Brazil. The total energy demand has temporarily declined by approximately 260 megawatts due to
partial capacity curtailments of 131,000 metric-tons-per-year at both smelters combined.
In 2004, Alcoa acquired a 20% interest in a consortium, which subsequently purchased the Dampier to Bunbury
Natural Gas Pipeline (DBNGP) in Western Australia, in exchange for an initial cash investment of $17 (A$24). The
investment in the DBNGP, which is classified as an equity investment, was made in order to secure a competitively
priced long-term supply of natural gas to Alcoa’s refineries in Western Australia. Alcoa has made additional
contributions of $141 (A$176) for its share of the pipeline capacity expansion and other operational purposes of the
consortium through September 2011. No further expansion of the pipeline’s capacity is planned at this time. In late
2011, the consortium initiated a three-year equity call plan to improve its capitalization structure. This plan requires
Alcoa to contribute $40 (A$40), of which $29 (A$29) was made through December 31, 2013, including $12 (A$12)
and $12 (A$11) in 2013 and 2012, respectively. In addition to its equity ownership, Alcoa has an agreement to
purchase gas transmission services from the DBNGP. At December 31, 2013, Alcoa has an asset of $315 (A$354)
representing prepayments made under the agreement for future gas transmission services. Alcoa’s maximum exposure
to loss on the investment and the related contract is approximately $440 (A$500) as of December 31, 2013.
Purchase Obligations. Alcoa is party to unconditional purchase obligations for energy that expire between 2015 and
2036. Commitments related to these contracts total $159 in 2014, $157 in 2015, $145 in 2016, $150 in 2017, $149 in
2018, and $2,091 thereafter. Expenditures under these contracts totaled $163 in 2013, $161 in 2012, and $227 in 2011.
Additionally, Alcoa has entered into other purchase commitments for energy, raw materials, and other goods and
services, which total $3,319 in 2014, $1,802 in 2015, $1,628 in 2016, $1,552 in 2017, $1,838 in 2018, and $9,856
thereafter.
Operating Leases. Certain land and buildings, alumina refinery process control technology, plant equipment, vehicles,
and computer equipment are under operating lease agreements. Total expense from continuing operations for all leases
was $232 in 2013, $244 in 2012, and $255 in 2011. Under long-term operating leases, minimum annual rentals are
$198 in 2014, $165 in 2015, $135 in 2016, $103 in 2017, $80 in 2018, and $244 thereafter.
Guarantees. At December 31, 2013, Alcoa has maximum potential future payments for a guarantee issued on behalf of
a third party of $542. This guarantee expires in 2019 and relates to project financing for the aluminum complex in
Saudi Arabia (see Note I). In February 2013, a guarantee related to project financing for a hydroelectric power project
in Brazil was terminated as the outstanding debt of the consortium was repaid in full (see Investments above). Alcoa
also has outstanding bank guarantees related to tax matters, outstanding debt, workers compensation, environmental
obligations, energy contracts, and customs duties, among others. The total amount committed under these guarantees,
which expire at various dates between 2014 and 2022 was $370 at December 31, 2013.
Letters of Credit. Alcoa has outstanding letters of credit primarily related to workers’ compensation, energy contracts,
and leasing obligations. The total amount committed under these letters of credit, which automatically renew or expire
at various dates, mostly in 2014, was $333 at December 31, 2013.
Surety Bonds. Alcoa has outstanding surety bonds primarily related to tax matters, contract performance, workers
compensation, environmental-related matters, and customs duties. The total amount committed under these bonds,
which automatically renew or expire at various dates, mostly in 2014, was $170 at December 31, 2013.
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