Wenatchee Smelter update

Wenatchee Smelter update

Alcoa has announced that it will make a $62.4 million payment under an electricity supply agreement for its smelter in Wenatchee, Washington, and will permanently close one of four potlines at the fully curtailed facility.

In connection with the planned payment on June 19, 2018, and the closure of the one potline, the Company will record an estimated charge of $73 million (pre- and after-tax), or $0.39 per share, in the second quarter of 2018.

The payment to the Chelan Public Utility District (Chelan PUD) was triggered by a recent decision of Alcoa management to not restart the Wenatchee smelter within the term provided in the amended electricity supply agreement. Under the agreement, which expires on October 31, 2028, Alcoa receives 26 percent of the electric generation from two Chelan PUD hydropower projects for the Wenatchee smelter.

During the smelter’s curtailment, Chelan PUD sells unused power on Alcoa’s behalf, and the proceeds are applied toward Alcoa’s costs under the agreement. Other than these monthly power transactions, there are no other required payments.

The potline planned for closure, Line 3 (capacity of 38,000 metric tons per year), has not operated since 2001, and the investments needed to restart that line are cost prohibitive. Three other lines at the Wenatchee site, with 146,000 metric tons per year, have been curtailed since December 2015. Another line at the Wenatchee site was permanently closed in 2004.

The closed portions at the Wenatchee site will be evaluated for potential redevelopment, which will not affect the status of the three remaining curtailed potlines.

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