The hedge contracts will utilize approximately 820MW of Loy Yang A’s generation capacity and with future smelter expansion options, could represent more than half of Loy Yang A’s generation output. The contracts hedge the energy component of Loy Yang A’s power production and arrangements associated with the potential introduction of carbon trading.
Alan Cransberg, managing director of Alcoa of Australia, said: “Energy security in the form of long-term, base-load agreements is vital to aluminium smelters and the jobs they provide worldwide. The contracts we signed today provide a platform for Alcoa?s current and future investment in regional Victoria.”
The contracts are for approximately 820MW of load and, with future expansion options, could represent more than half of Loy Yang Power?s generation output.
Ian Nethercote, chief executive of Loy Yang Power, said: “Loy Yang Power and Alcoa both operate vital national economic assets and this contract will ensure that we continue to help power Australia?s ongoing economic growth.”
He added, “We are particularly pleased with the agreements as they support two of our key business objectives – to deliver an efficient and profitable business as well as building a sustainable future in a carbon constrained world.”
As part of the new contracts, the parties have signed a ‘carbon reduction agreement’, which provides the opportunity to work together on a joint approach to reducing greenhouse gas emissions.
Mr Cransberg, said: “Through the talent of our people and innovative technologies, we have reduced the direct greenhouse gas emissions at our smelters by 61% per tonne of production since 1990. The carbon reduction agreement signifies an exciting new opportunity to build on that success in partnership with Loy Yang Power.
“The carbon reduction agreement is consistent with Victorian and Australian government goals of a balanced and collaborative approach to facilitating Australia?s transition to a lower carbon economy.”
Mr Nethercote said the agreement will underpin Loy Yang Power’s existing commitment to reduce its carbon footprint while supporting the economic and social viability of the Latrobe Valley community.
He said, “We look forward to working with Alcoa to identify key projects to achieve CO2 reductions from our operations.”
Mr Cransberg said the 20-year agreements are globally competitive, allow Alcoa to respond to market conditions, and provide an option for growth.
Combined, Alcoa of Australia and Loy Yang Power employ over 2500 people in Victoria, largely in regional areas. The Point Henry Smelter has a rated capacity of 190,000mtpy and is wholly owned by Alcoa of Australia. The Portland smelter has a rated capacity of 358,000mtpy.
