Alcoa secures new gas supply agreement to power its alumina refineries in Western Australia

Alcoa of Australia Limited has secured a new 12-year gas supply agreement to power its alumina refineries in Western Australia.

Commencing in 2020, the agreement is for an initial supply of 120 terajoules per day of natural gas. Combined with a number of smaller agreements, this means Alcoa of Australia has now secured approximately 75 percent of its Western Australian natural gas requirement to replace existing long-term contracts which expire at the end of the decade.

The agreement is conditional on a consortium comprising Brookfield Asset Management Inc. and Macquarie Capital Group Limited completing the acquisition of Apache Energy Limited’s Western Australian oil and gas assets from Apache Corporation.

As part of the gas supply arrangements, Alcoa of Australia will make a prepayment of US$500 million in two installments – US$300 million on financial close of the Apache asset sale in 2015 and US$200 million in 2016.

“This new agreement is significant in providing long-term energy solutions for our refining assets in Western Australia, and is great news for our employees, suppliers, customers and the communities where we operate,” said President Alcoa Refining and Managing Director, Alcoa of Australia, Alan Cransberg.

“Our refineries in Western Australia supply more than 8 percent of global alumina demand. Securing a low cost position for these facilities is closely aligned with Alcoa’s strategy of creating a globally competitive commodity business.”

Mr Cransberg said the Company would continue to pursue options to ensure 100 percent of its WA energy requirements are met.

“While this contract alleviates most of our medium term need, we continue to be very concerned about the ability of businesses in Western Australia to secure long term, internationally competitive gas supplies,” Mr Cransberg said.

“This is essential for industries like ours that add value through domestic processing and compete in a global marketplace. The availability of domestic gas remains a key issue for the future prosperity of Western Australia.”

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