Action supports Company’s strategic priorities to reduce complexity
and drive returns
PITTSBURGH--(BUSINESS WIRE)--
Alcoa Corporation (NYSE:AA), a global leader in bauxite, alumina and
aluminum products, today announced that the Company and power provider
Luminant Generation Company LLC have terminated the electricity contract
tied to Alcoa’s Rockdale Operations in Texas. The smelter at Rockdale
has been fully curtailed since the end of 2008.
The termination of the contract, which had been set to expire no later
than 2038, was effective as of October 1, 2017.
While the Company sold surplus electricity since the smelter’s
curtailment, Alcoa’s cost of power under the contract exceeded the
related revenue.
The Company expects an annual improvement to net income and adjusted
EBITDA (earnings before interest, tax, depreciation and amortization) of
$60 million to $70 million as a result of the contract termination,
beginning in the fourth quarter of 2017.
“Reaching a resolution on the Rockdale power contract aligns with two of
our strategic priorities – to reduce complexity and to drive returns,”
said William Oplinger, Executive Vice President and Chief Financial
Officer. “It eliminates a complex, long-term contract tied to the
Rockdale location, and positions Alcoa for improved profitability and
higher returns.”
In accordance with the early termination agreement, Alcoa made a lump
sum payment of $237.5 million on October 10, 2017 and transferred
approximately 2,200 acres of related land and other assets to Luminant.
The Company will record a charge of approximately $250 million (pre- and
after-tax) in the fourth quarter of 2017 associated with the transaction.
In addition to the power contract, Alcoa and Luminant terminated other
related fuel and lease agreements effective as of the same October 1
date.
As a result of the early termination, Alcoa has initiated a strategic
review of the remaining buildings and equipment associated with the
smelter, casthouse and the aluminum powder plant. A decision on those
assets is expected by the end of 2017. Separately, the Company continues
to own more than 30,000 acres of land at the Rockdale site.
About Alcoa
Alcoa (NYSE: AA) is a global industry leader in bauxite, alumina and
aluminum products, with a strong portfolio of value-added cast and
rolled products and substantial energy assets. Alcoa is built on a
foundation of strong values and operating excellence dating back nearly
130 years to the world-changing discovery that made aluminum an
affordable and vital part of modern life. Since inventing the aluminum
industry, and throughout our history, our talented Alcoans have followed
on with breakthrough innovations and best practices that have led to
efficiency, safety, sustainability and stronger communities wherever we
operate. Visit us online on www.alcoa.com,
follow @Alcoa on Twitter and on Facebook at www.facebook.com/Alcoa.
Dissemination of Company Information
Alcoa Corporation intends to make future announcements regarding company
developments and financial performance through its website at www.alcoa.com.
Forward-Looking Statements
This press release contains statements that relate to future events and
expectations and as such constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include those containing such words as
“anticipates,” “believes,” “could,” “estimates,” “expects,” “forecasts,”
“intends,” “may,” “outlook,” “plans,” “projects,” “seeks,” “sees,”
“should,” “targets,” “will,” “would,” or other words of similar meaning.
All statements that reflect the Company’s expectations, assumptions or
projections about the future, other than statements of historical fact,
are forward-looking statements. Forward-looking statements are not
guarantees of future performance and are subject to known and unknown
risks, uncertainties, and changes in circumstances that are difficult to
predict. Although the Company believes that the expectations reflected
in any forward-looking statements are based on reasonable assumptions,
it can give no assurance that these expectations will be attained and it
is possible that actual results may differ materially from those
indicated by these forward-looking statements due to a variety of risks
and uncertainties. Additional information concerning factors that could
cause actual results to differ materially from those projected in the
forward-looking statements is contained in our filings with the
Securities and Exchange Commission. The Company disclaims any obligation
to update publicly any forward-looking statements, whether in response
to new information, future events or otherwise, except as required by
applicable law.
Non-GAAP Financial Measures
Alcoa Corporation’s definition of Adjusted EBITDA is net margin plus an
add-back for depreciation, depletion, and amortization. Net margin is
equivalent to Sales minus the following items: Cost of goods sold;
Selling, general administrative, and other expenses; Research and
development expenses; and Provision for depreciation, depletion, and
amortization. Adjusted EBITDA is a non-GAAP financial measure.
Management believes that this measure is meaningful to investors because
Adjusted EBITDA provides additional information with respect to Alcoa
Corporation’s operating performance and the Company’s ability to meet
its financial obligations. The Adjusted EBITDA presented may not be
comparable to similarly titled measures of other companies. The Company
has not provided a quantitative reconciliation of the aforementioned
forward-looking non-GAAP financial measure to the most directly
comparable forward-looking GAAP financial measure due primarily to the
variability and complexity in making accurate forecasts and projections,
as management cannot reliably predict all of the necessary components of
such GAAP measure.
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Alcoa Corporation
Investor Contact
James Dwyer, 412-992-5450
James.Dwyer@alcoa.com
or
Media
Contact
Jim Beck, 412-315-2909
Jim.Beck@alcoa.com
Source: Alcoa Corporation