Alcoa 2015 Annual Report Download - page 153

On November 19, 2009, the EC announced a decision in this matter stating that the extension of the tariff by Italy
constituted unlawful state aid, in part, and, therefore, the Italian Government is to recover a portion of the benefit
Alcoa received since January 2006 (including interest). The amount of this recovery was to be based on a calculation
prepared by the Italian Government (see below). In late 2009, after discussions with legal counsel and reviewing the
bases on which the EC decided, including the different considerations cited in the EC decision regarding Alcoa’s two
smelters in Italy, Alcoa recorded a charge of $250 (€173), which included $20 (€14) to write off a receivable from the
Italian Government for amounts due under the now expired tariff structure and $230 (€159) to establish a reserve. On
April 19, 2010, Alcoa filed an appeal of this decision with the General Court of the EU (see below). Prior to 2012,
Alcoa was involved in other legal proceedings related to this matter that separately sought the annulment of the EC’s
July 2006 decision to open an investigation alleging that such decision did not follow the applicable procedural rules
and requested injunctive relief to suspend the effectiveness of the EC’s November 19, 2009 decision. However, the
decisions by the General Court, and subsequent appeals to the European Court of Justice, resulted in the denial of these
remedies.
In June 2012, Alcoa received formal notification from the Italian Government with a calculated recovery amount of
$375 (€303); this amount was reduced by $65 (€53) for amounts owed by the Italian Government to Alcoa, resulting in
a net payment request of $310 (€250). In a notice published in the Official Journal of the European Union on
September 22, 2012, the EC announced that it had filed an action against the Italian Government on July 18, 2012 to
compel it to collect the recovery amount (on October 17, 2013, the European Court of Justice ordered Italy to so
collect). On September 27, 2012, Alcoa received a request for payment in full of the $310 (€250) by October 31, 2012.
Following discussions with the Italian Government regarding the timing of such payment, Alcoa paid the requested
amount in five quarterly installments of $69 (€50) beginning in October 2012 through December 2013.
On October 16, 2014, Alcoa received notice from the General Court of the EU that its April 19, 2010 appeal of the EC’s
November 19, 2009 decision was denied. On December 27, 2014, Alcoa filed an appeal of the General Court’s
October 16, 2014 ruling to the European Court of Justice (ECJ). Following submission of the EC’s response to the appeal,
on June 10, 2015, Alcoa filed a request for an oral hearing before the ECJ; no decision on that request was received. On
January 26, 2016, Alcoa was informed that the ECJ had dismissed Alcoa’s December 27, 2014 appeal of the General
Court’s October 16, 2014 ruling. The dismissal of Alcoa’s appeal represents the conclusion of the legal proceedings in this
matter. Prior to this dismissal, Alcoa had a noncurrent asset of $100 (€91) reflecting the excess of the total of the five
payments made to the Italian Government over the reserve recorded in 2009. As a result, this noncurrent asset, along with
the $58 (€53) for amounts owed by the Italian Government to Alcoa mentioned above plus $6 (€6) for interest previously
paid, was written-off. A charge of $164 (€150) was recorded in Restructuring and other charges for the year ended
December 31, 2015 on the accompanying Statement of Consolidated Operations (see Note D).
As a result of the EC’s November 19, 2009 decision, management had contemplated ceasing operations at its Italian
smelters due to uneconomical power costs. In February 2010, management agreed to continue to operate its smelters in
Italy for up to six months while a long-term solution to address increased power costs could be negotiated. Over a
portion of this time, a long-term solution was not able to be reached related to the Fusina smelter, therefore, in May
2010, Alcoa and the Italian Government agreed to a temporary idling of the Fusina smelter. As of September 30, 2010,
the Fusina smelter was fully curtailed (44,000 metric-tons-per-year). For the Portovesme smelter, Alcoa executed a
new power agreement effective September 1, 2010 through December 31, 2012, replacing the short-term, market-based
power contract that was in effect since early 2010. This new agreement along with interruptibility rights (i.e.
compensation for power interruptions when grids are overloaded) granted to Alcoa for the Portovesme smelter
provided additional time to negotiate a long-term solution (the EC had previously determined that the interruptibility
rights were not considered state aid).
At the end of 2011, as part of a restructuring of Alcoa’s global smelting system, management decided to curtail
operations at the Portovesme smelter during 2012 due to the uncertain prospects for viable, long-term power, along
with rising raw materials costs and falling global aluminum prices (mid-2011 to late 2011). As of December 31, 2012,
the Portovesme smelter was fully curtailed (150,000 metric-tons-per-year).
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