Alcoa Corp, a global leader in bauxite, alumina and aluminium products, has announced decisions regarding smelting assets in the USA and Italy. The actions support the company’s strategic priorities to reduce complexity and to strengthen the balance sheet.
In the US, Alcoa intends to permanently close its Rockdale Operations site in Texas, which has been fully curtailed since the end of 2008. The site includes a primary aluminium smelter and casthouse, an aluminium powder plant and associated buildings and equipment. Alcoa’s strategic review of these assets, announced earlier this year, concluded that these operations have limited economic prospects. Separately, the company continues to market for sale more than 30,000 acres of land at the Rockdale site.
In Italy, Alcoa has reached an agreement to divest the Portovesme primary aluminium smelter, fully curtailed since 2012 and closed since 2014, to Invitalia, the Italian government agency that manages economic development. As part of the agreement, Alcoa and the Italian government have settled matters related to past energy tariffs, including the Italian Energy Authority Regulation 148/2004 matter, and a groundwater remediation project.
“We continuously evaluate our portfolio of global assets against many factors to optimize value,” said President and Chief Executive Officer Roy Harvey. “Achieving a resolution on these two assets further streamlines our company as we continue to execute against our strategic priorities.”
The company will record an estimated charge of $55 million (pre- and after-tax) in the fourth quarter of 2017 associated with the permanent closure of Rockdale. In addition, it will record an estimated $22 million (pre- and after-tax) reserve reduction in the fourth quarter of 2017 associated with a reserve established at the end of 2015 for the Italy matter.
The net earnings impact of the two actions is estimated to be a negative $0.18 per share in the fourth quarter of 2017. The company anticipates annual adjusted EBITDA benefits of approximately $3 million upon completion of the Rockdale decommissioning in 2022, and of approximately $4 million upon completion of the Portovesme divestiture in 2018.
Cash outlays for the Rockdale closure are expected to be approximately $53 million over the next five years, including holding and demolition costs, with approximately $16 million in 2018. Cash outlays for the Italy settlement, including the pre-existing 148/2004 matter and remediation reserves, are expected to be between $40 million and $50 million over the next five years, with approximately $10 million in 2018.