Montreal, Canada — Late Friday, Alcan Inc. (NYSE, TSX: AL) received a decision following arbitration hearings held in December 2002 on a contractual dispute between Powerex (a subsidiary of BC Hydro) and Alcan. The arbitrator confirmed Powerex's claim for US$100 million. Under the circumstances Alcan expects to provide for this contingent liability in its fourth quarter results as a non-recurring charge. Alcan will report its fourth quarter earnings on January 21, 2003.
The dispute stemmed from a contract that Powerex claimed was terminated due to the bankruptcy of Enron Power Marketing Inc. (an affiliate of Enron Corporation) and for which Alcan retained certain liabilities. Given the strength of its defense, Alcan is surprised by the ruling and is reviewing the arbitrator's decision, in order to determine the extent of the Company's rights, obligations and future courses of action.
A standstill agreement currently is in effect where Alcan and Powerex have agreed that no action will be taken to set aside or enforce the arbitrator's decision pending discussions between the parties. One of the issues that will be discussed is the means by which the decision may be satisfied by the supply of electrical power.
Through its Kemano Power plant located in Northern British Columbia, Alcan produces approximately 800 MW of electric power, which is primarily consumed in its Kitimat, B.C. aluminum smelter. The amount of power under dispute is 167 MW for the year 2002 and 81 MW for the next 12 years.
Alcan is a multinational, market-driven company and a global leader in aluminum and specialty packaging with 2001 revenues of US$12.6 billion. With world-class operations in primary aluminum, fabricated aluminum as well as flexible and specialty packaging, Alcan is well positioned to meet and exceed its customers' needs for innovative solutions and service. Alcan employs 48,000 people and has operating facilities in 38 countries.
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