Alcan and B.C. Hydro sign new power agreement

Alcan and B.C. Hydro sign new power agreement
CanWest News Service, 17-Aug-2007

News Release, Alcan, 16-Aug-2007

News Release, BC Hydro, 16-Aug-2007

Energy deal boosts Alcan's smelter plan
Nathan Vanderklippe, Financial Post, 17-Aug-2007

Alcan and B.C. Hydro sign new power agreement

VANCOUVER -- Alcan Inc. has signed a new contract for the delivery of its surplus power to B.C. Hydro until the end of 2034, the company announced yesterday.

Hydro boss Bob Elton said the deal will help achieve the B.C. government's goal of energy self-sufficiency by 2016.

Unlike an agreement thrown out last December, Elton said it includes a longer-term contract, lower prices, extra capacity, and more flexibility to schedule energy into higher-value peak-use periods.

Alcan said the deal also takes the company one step closer to modernizing its Kitimat smelter and making it one of the three largest in North America.

Details of the agreement are to be filed with the B.C. Utilities Commission next month and are expected to be publicly disclosed as part of the approval process.

"Until the full text of the contract is released, no one other than B.C. Hydro and Alcan can say whether it is a fair deal," David Austin, counsel for the Independent Power Producers Association of B.C., said yesterday. "There was no competitive bid process."

Last December the utilities commission quashed a $2-billion, 20-year deal between B.C. Hydro and Alcan as too expensive for the 1.6 million Hydro customers who would have to pay for it.

The commission said Hydro shouldn't have agreed to paying Montreal-based Alcan the same rate for power from its 50-year-old Kemano hydroelectric station that it offers new power developments.

The Kemano station powers the Kitimat smelter but also generates significant profits through the sale of electricity to Hydro.

The commission suggested Alcan's rate be reduced to reflect its lower electricity production costs.

Details of the previous agreement were only disclosed after the City of Kitimat, which has frequently accused Alcan of favouring electricity sales over aluminum production, convinced the commission that an open review was in the public interest.

Nathan Vanderklippe
Financial Post
August 17, 2007

VANCOUVER - Eight months after the B.C. Utilities Commission swatted down a "sweetheart" long-term electricity purchase agreement between BC Hydro and AlcanInc., the two sides have come to a new agreement that will see the province buy more power and over a longer period of time -- but at a cheaper rate -- from the aluminum producer's hydro facilities in Kitimat, B.C.

BC Hydro refused to disclose the new agreed-upon power rate, but a spokeswoman said it is lower than the initial offer and "based on the market price."

The new agreement runs to 2034, a decade longer than the previous deal, which the utilities commission ruled was too rich and not in the best interest of the province's ratepayers. It would have seen BC Hydro pay 71Ct a kilowatt hour for electricity that, according to critics in Kitimat, costs 5 cents a kilowatt hour to produce. The hydro comes from Alcan's 50-year-old Kemano dam, which was built to power the company's electricity-hungry smelter in the northern B.C. town.

The two sides said they would not release further details on the deal until it has been filed with the utilities commission, likely in early September.

If the commission approves the deal, it will complete two of three requirements for a planned US$1.8-billion expansion to Alcan's Kitimat smelter, said company spokeswoman Colleen Nyce.

Although not yet approved by the company's full board, the expansion would boost the Kitimat smelter's output by 40% and make it one of the three largest on the continent.

The company completed the first of its three requirements in May, when it signed a five-year labour contract with the CAW union, and is weeks away from achieving another -- full environmental permitting -- said Ms. Nyce. Alcan has already received written approval for what it is calling its Kitimat Modernization Project from provincial regulators and spoken approval from federal officials, who have told them the expansion will not trigger an environmental assessment. It is still waiting for written federal approval but, said Ms. Nyce, "we are anxious to get rolling with our project."

Officials with the District of Kitimat, who have loudly opposed Alcan's power sales on the grounds that the diversion of electricity is costing the company-built town much-needed jobs, declined to comment on the new deal until its full details are announced.

The district spent yesterday in negotiations with Alcan aimed at putting an end to a bitter legal battle it has waged against the company in recent years over the power sales. Neither the district nor Alcan would comment on those talks, citing a self-imposed media blackout.