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Quebec Hydro Deal Vital Amidst Alcoa Belt-Tightening by Staff Intl. Water Power & Dam Construction, January 7, 2009

Alcoa has announced plans to cut smelting output, reduce its workforce, sell four businesses and reduce capital spend to help counter the squeeze from the economic downturn - but said the recently signed hydro power agreement with Hydro-Quebec was a key part of its energy supply plans going forward.

Last month the aluminium producer and the Canadian utility signed a new power supply agreement through to 2040, covering additional power and renewal of existing contracts. Alcoa said the deal would benefit a quarter of its smelting production.

The agreements cover approximately 1.1M tonne/year, and the three smelters (Baie Comeau, Becancour and Deschambault) are to be supplied with a total of 2.1GW through to the end of 2040.

While the power supply deal gives Alcoa a solid footing to go forward it has had to undertake major belt tightening in other areas to help navigate the economic downturn.

The company is to cut smelter output by 750,000 tonnes/year, or 18% of its global output, cutting capex by half and 13,500 jobs are to go plus 1700 contractor posts. It also plans to sell four non-core businesses. Alcoa said the 'aggressive' steps were aimed to conserve cash, cut costs and improve relative competitiveness.

The cuts in smelter output have been increased by 135,000 tonnes/year and are to be fully implemented in the first quarter.

Alcoa said that 80% of its smelting capacity is now covered by re-powering agreements and self-generation through 2025, and added that it was pursuing other efforts across its portfolio.

Over recent months the company has also signed power supply deals with Bonneville Power Administration (BPA) and Chelan County Public Utility District (PUD).

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