Summary
This 8-K filing from Alcoa Inc. (now Howmet Aerospace Inc.) on November 20, 2009, announces the temporary idling of production at its aluminum smelters in Fusina and Portovesme, Italy. This decision stems from a European Commission ruling that Italy's extension of an electricity tariff after 2005 did not comply with EU state aid rules, requiring Alcoa to refund a portion of the benefit received. The curtailments will increase Alcoa's total global smelting system idleness to approximately 24%. The company anticipates a pre-tax charge of $300 million to $500 million in the fourth quarter of 2009 related to these actions, with most or all of the charge not impacting cash flow. Investors should monitor the outcome of Alcoa's appeal against the European Commission's decision and the broader impact on global aluminum supply and pricing.
Key Highlights
- 1Alcoa Inc. is temporarily idling two Italian aluminum smelters (Fusina and Portovesme) due to a European Commission decision.
- 2The European Commission ruled that Italy's electricity tariff extension after 2005 violated EU state aid rules, requiring a refund.
- 3This action will bring Alcoa's global smelting system curtailments to approximately 24% of total capacity.
- 4Alcoa expects to incur a pre-tax charge of $300 million to $500 million in Q4 2009 related to these curtailments.
- 5Most, if not all, of the anticipated charge is not expected to impact the company's cash flow in Q4 2009.
- 6Alcoa is appealing the European Commission's decision regarding the electricity tariffs and state aid.