Alcoa expands another aluminum plant

Alcoa (AA-N) has announced plans to invest $1 billion to expand one of its aluminum plants in Quebec.

The Pittsburgh, Pa.-based company and the Quebec government have signed a memorandum of understanding to expand capacity at Alcoa’s plant in Deschambault, east of Quebec City, to 570,000 tonnes from 250,000 tonnes.

The plan is expected to create some 6,500 direct and indirect jobs during the construction period.

Alcoa is committed to creating at least 1,250 jobs, mostly in the Quebec aluminum processing industry, and more than 250 jobs for the expansion of the Deschambault plant. The Deschambault plant currently employs 550 workers. The company would face stiff penalties for failing to meet its commitment.

Alcoa intends to ramp-up the expansion project in early 2006, though CEO Alain Belda says the overall aluminum market will determine the timing of the project. The plan also calls for startup in 2008, and the expanded plant would be running at full steam by 2013.

The proposed deal also includes certain tax exemptions and an interest-free loan for up to $260 million. Hydro-Quebec will provide the 500 MW of electricity at the regulated industrial power rate.

In December 2002, Alcoa announced it would spend $1 billion upgrading its smelter in Baie-Comeau, Que. The plan is aimed at boosting annual production to 547,000 tonnes from 437,000 tonnes, and is slated to begin in late 2003.

The 8-year plan at Baie-Comeau is expected to create 5,850 direct and indirect jobs, with Alcoa committing to employing at least 1,476 workers at the smelter.

For its part, the Quebec government will provide a $170-million interest-free loan and grant the project a 10-year corporate tax break. The deal also includes preferential corporate rates on electricity and an additional 25 years of water rights for the McCormick hydro plant, which supplies a portion of the smelter’s energy.

Combined with the Becancour aluminum plant, also in Quebec, the two expansion projects will bring Alcoa’s capacity in Quebec to 1.4 million tonnes a year.