Alcoa 2013 Annual Report Download - page 39

Iceland – Electricity
Alcoa’s Fjarðaál smelter in eastern Iceland began operation in 2007. Central to those operations is a forty-year power
contract under which Landsvirkjun, the Icelandic national power company, built the Kárahnjúkar dam and hydropower
project, and supplies competitively priced electricity to the smelter. In late 2009, Iceland imposed two new taxes on
power intensive industries, both for a period of three years, from 2010 through 2012. One tax is based on energy
consumption; the other is a pre-payment of certain other charges, and will be recoverable from 2013 through 2015. In
2012, Iceland extended the energy consumption tax though 2015.
Spain – Natural Gas
In order to facilitate the full conversion of the San Ciprian, Spain alumina refinery from fuel oil to natural gas, in
October 2013, Alumina Española SA (AE) and Gas Natural Transporte SDG SL (GN) signed a take or pay gas pipeline
utilization agreement. Pursuant to that agreement, the ultimate shareholders of AE, Alcoa Inc. and Alumina Limited,
have agreed to guarantee the payment of AE’s contracted gas pipeline utilization over the four years of the
commitment period in the event AE fails to do so, each shareholder being responsible for its respective proportionate
share (i.e., 60/40). Such commitment will come into force six months after the gas pipeline is put into operation by GN.
It is expected that the gas pipeline will be completed by January 2015.
North America – Natural Gas
In order to supply its refinery and smelters in the U.S. and Canada, Alcoa generally procures natural gas on a
competitive bid basis from a variety of sources including producers in the gas production areas and independent gas
marketers. For Alcoa’s larger consuming locations in Canada and the U.S., the gas commodity and the interstate
pipeline transportation are procured to provide increased flexibility and reliability. Contract pricing for gas is typically
based on a published industry index or New York Mercantile Exchange (NYMEX) price. The Company may choose to
reduce its exposure to NYMEX pricing by hedging a portion of required natural gas consumption.
Australia – Natural Gas
AofA holds a 20% equity interest in a consortium that bought the Dampier-to-Bunbury natural gas pipeline in October
2004. This pipeline transports gas from the northwest gas fields to AofA’s alumina refineries and other users in the
Southwest of Western Australia. AofA uses gas to co-generate steam and electricity for its alumina refining processes
at the Kwinana, Pinjarra and Wagerup refineries. More than 90% of AofA’s gas requirements for the remainder of the
decade are secured under long-term contracts. AofA is considering multiple supply options to replace expiring
contracts, including investing directly in projects that have the potential to deliver cost-based gas.
Energy Facilities
The following table sets forth the electricity generation capacity and 2013 generation of Company-owned facilities:
Country Facility
Alcoa Consolidated Capacity
(MW) 2013 Generation (MWh)
Australia Anglesea 150 979,732
Brazil Barra Grande 161 1,282,905
Estreito 159 1,299,578
Machadinho 119 1,323,214
Serra do Facão 64 173,331
Canada Manicouagan 132 1,161,285
Suriname Afobaka 156 1,091,246
United States Warrick 524 4,399,091
Yadkin 215 1,064,174
TOTAL 1,680 12,774,556
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