March 4, 2008 / 4:36 PM / 10 years ago

Alcoa in long-term power deal with Quebec

<p>In this file photo Alain Belda, chairman and CEO of Alcoa Inc. speaks to the media during a news conference in Montreal, Quebec, May 7, 2007. U.S. aluminum producer Alcoa Inc said on Tuesday it reached a new energy deal with the Canadian province of Quebec to supply power for its three smelters there through the year 2040. REUTERS/Shaun Best</p>

NEW YORK (Reuters) - U.S. aluminum producer Alcoa Inc said on Tuesday it reached a new energy deal with the Canadian province of Quebec to supply power for its three smelters there through the year 2040.

The contract covers the Alcoa smelters at Baie Comeau, Becancour and Deschambault, and will allow the company to invest $1.2 billion to upgrade and expand Baie Comeau’s annual production by 110,000 metric tons of aluminum to 548,000 metric tons.

Prior to the agreement, Alcoa’s three smelters in Quebec produced more than 1.1 million metric tons of aluminum per year, employing more than 3,600 people directly, the company said.

Quebec, which has major hydro-power operations, produces huge quantities of electricity, which is essential for aluminum smelting.

Alcoa said the three Quebec smelters will generate more than $1.8 billion in economic spin-offs annually in the province as a result of this agreement.

During the upgrade and expansion phase of the project, an estimated $540 million of added economic value will be created in Quebec over four years, Alcoa said.

Following construction, the operations will then generate -- onsite as well as for suppliers and subcontractors -- an added economic value of $470 million per year, supporting 3,900 jobs.

Initial engineering studies for the upgrade and expansion at Baie Comeau will begin this year, with the majority of the investment planned for the final stages of the project.

Alcoa expects the conversion and upgrading of smelting technologies at Baie Comeau as well as expansion of output to be completed by 2015.

The upgrade will also eliminate polycyclic aromatic hydrocarbon emissions and reduce greenhouse gas emissions at the plant by 40 percent, the company said.

Under terms of the agreement, power contracts to supply all three Quebec smelters as well as the energy for the expansion will be extended through the year 2040 at the regulated industrial rate. The deal is conditional on Alcoa upgrading and expanding production in Baie Comeau.

Alcoa will also receive financial support from the Quebec government in the form of a loan guarantee.

Editing by Jeffrey Benkoe

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