Alcoa and Chelan PUD Reach Agreement in Principle for Long-Term Power for Wenatchee Smelter.

Business Editors

PITTSBURGH & WENATCHEE, Wash.--(BUSINESS WIRE)--June 13, 2001

Alcoa Inc. (NYSE:AA) and the Chelan Public Utility District (PUD) announced today that they have reached an agreement in principle that will provide long-term power for Alcoa's Wenatchee, Washington aluminum smelter and other Chelan PUD customers in the future.

As part of this agreement, Alcoa will idle its Wenatchee smelter for approximately 15 months starting July 1, 2001 and enable the PUD to acquire additional power supplies to serve Alcoa's and other Chelan PUD customers' needs in the future. Wenatchee will maintain a workforce slightly over 400 employees while the plant is idled.

Under this agreement, the Wenatchee smelter will return the power it would have used to the Chelan PUD. The PUD will then sell that power at market rates and use that revenue to acquire up to 400 MW of additional power to serve Alcoa and other PUD loads in the future. Final size of the new resources and length of the idle period will depend on prevailing market power prices. Power sales revenue will also be used to cover a major portion of the Wenatchee facility's financial losses during the production curtailment.

The impact on Alcoa's earnings during the idle period will not be material.

The Wenatchee smelter's planned operating rate was 95,000 metric tons per year (mtpy) in 2001; total capacity is 220,000 mtpy. Alcoa plans to restart 95,000 mtpy of capacity at Wenatchee at the end of the idled period.

Subject to negotiation of further details, Alcoa will purchase power from the Chelan PUD through 2036, and Chelan will receive 100 MW of new resource after 2011 for its other local loads. Alcoa may elect to resell a portion of the power to others, including its other Northwest facilities, as long as specified employment levels are met at the Wenatchee smelter.

"While it is always difficult to idle capacity, this arrangement will allow us to do the best we can for our workers, communities and other stakeholders during the limited shutdown period," said Al Renken, Alcoa vice president and president of Alcoa Primary Metals. "This agreement with Chelan will provide a long-term power source for Alcoa's Wenatchee smelter and its employees."

"This arrangement with Alcoa allows us to acquire additional power supplies to serve Chelan County loads in the future and maintain Chelan County employment at no cost to the Chelan PUD or its other ratepayers," said Roger Braden, Chelan PUD General Manager. "It is a win-win arrangement for the PUD, Alcoa and its employees, the community and our customers."

The contract is subject to approval by Alcoa and the Board of Commissioners. The Board of Commissioners will be considering the agreement at public board meetings in June.

Certain statements relate to future events and expectations and as such constitute forward-looking statements involving known and unknown risks, uncertainties and other factors that may cause actual results to be different from those expressed or implied in the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include uncertainties regarding the outcome of the energy crisis in the Western United States and the other risk factors summarized in Alcoa's SEC reports.