Alcoa 2014 Annual Report Download - page 44

Alumínio has a 42.18% interest in Energética Barra Grande S.A.(BAESA), which built the Barra Grande hydroelectric
power plant in southern Brazil.
Alumínio also has a 34.97% share in Serra do Facão Energia S.A. (SEFAC), which built the Serra do Facão
hydroelectric power plant in the southeast of Brazil, which began commercial generation in July 2010. Alumínio’s
share of the Serra do Facão output is currently being sold into the market.
Alumínio is also participating in the Estreito hydropower project in northern Brazil, through Estreito Energia S.A. (an
Alumínio wholly owned company) holding a 25.49% stake in Consórcio Estreito Energia, which is the owner of the
hydroelectric power plant.
Consortia in which Alumínio participates have received concessions for the Pai Querê hydropower project in southern
Brazil (Alumínio’s share is 35%). Development of this concession has not yet begun.
Europe – Electricity
Alcoa’s smelters at San Ciprián, La Coruña and Avilés, Spain purchase electricity under bilateral power contracts that
commenced on January 1, 2013. The contracts for San Ciprián and Avilés smelters each have a four-year term
(expiring December 31, 2016). The contract for the La Coruña smelter, which expired on December 31, 2014, has been
extended for an additional year (expiring December 31, 2015).
Prior to the establishment of power supply under the bilateral contracts, Alcoa was supplied under a regulated power
tariff. On January 25, 2007, the European Commission (EC) announced that it had opened an investigation to establish
whether the regulated electricity tariffs granted by Spain comply with European Union (EU) state aid rules. Alcoa
operated in Spain for more than ten years under a power supply structure approved by the Spanish Government in
1986, an equivalent tariff having been granted in 1983. The investigation was limited to the year 2005 and it is focused
both on the energy-intensive consumers and the distribution companies. It is Alcoa’s understanding that the Spanish
tariff system for electricity is in conformity with all applicable laws and regulations, and therefore no state aid is
present in that tariff system. On February 4, 2014, the EC announced a decision in this matter stating that the electricity
tariffs granted by Spain for year 2005 do not constitute unlawful state aid. Due to the high cost position of the La
Coruña and Avilés smelters, combined with rising raw material costs and falling aluminum prices, in early January
2012, Alcoa announced its intentions to partially and temporarily curtail its La Coruña and Avilés, Spain smelters. The
partial curtailments were completed in the first half of 2012. As a result of a modification to the load interruptibility
regime currently in place in the Spanish power market, in the first quarter of 2013, Alcoa restarted a portion (25,000
mpty combined for Avilés and La Coruña) of the capacity previously curtailed in the first half of 2012 to meet the
requirements of the modified interruptibility regime. See the Management’s Discussion and Analysis of Financial
Condition and Results of Operations section for more information.
A competitive bidding mechanism to allocate interruptibility rights in Spain was settled during 2014 to be applied
starting from January 1, 2015. The first auction process to allocate rights took place in November 2014, where Alcoa
secured 275MW of interruptibility rights for the 2015 period for the San Ciprián smelter. A second auction process
took place in December 2014, where Alcoa secured an additional 100MW of interruptibility rights for the 2015 period
for the San Ciprián smelter (20x5MW), 120MW for the La Coruña smelter (24x5MW) and 110MW for the Avilés
smelter (22x5MW).
Alcoa owns two smelters in Norway, Lista and Mosjøen, which have long-term power arrangements in place that
continue until the end of 2019.
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