NEW YORK CITY (dpa-AFX) - Alcoa Corp. (AA) said that the company and power provider Luminant Generation Company LLC have terminated the electricity contract tied to Alcoa's Rockdale Operations in Texas. The smelter at Rockdale has been fully curtailed since the end of 2008.
The termination of the contract, which had been set to expire no later than 2038, was effective as of October 1, 2017.
Alcoa noted that while it sold surplus electricity since the smelter's curtailment, the company's cost of power under the contract exceeded the related revenue.
Alcoa expects an annual improvement to net income and adjusted EBITDA or earnings before interest, tax, depreciation and amortization of $60 million to $70 million as a result of the contract termination, beginning in the fourth quarter of 2017.
In accordance with the early termination agreement, Alcoa made a lump sum payment of $237.5 million on October 10, 2017 and transferred about 2,200 acres of related land and other assets to Luminant.
Alcoa will record a charge of about $250 million, pre- and after-tax, in the fourth quarter of 2017 associated with the transaction.
In addition to the power contract, Alcoa and Luminant have terminated other related fuel and lease agreements effective as of the same October 1 date.
Alcoa said that as a result of the early termination, it has initiated a strategic review of the remaining buildings and equipment associated with the smelter, casthouse and the aluminum powder plant. The company expects a decision on those assets by the end of 2017.
Separately, Alcoa continues to own more than 30,000 acres of land at the Rockdale site.
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