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Alcan and Landsvirkjun reach agreement on electricity price

December 15, 2006

This agreement also represents official confirmation that the two companies' negotiating committees have reached agreement on a price for the electricity to be supplied. Although the final text of the supply contract between Alcan and Landsvirkjun is not yet available, there are plans to complete it during the coming weeks. While no date has yet been set, the intention is to submit the electric-power agreement to the boards of Alcan Inc. and Landsvirkjun for their approval some time next year.

Rist and Sophusson also signed an agreement between Alcan and Landsvirkjun on distributing costs for the next stage of preparations for hydropower projects in the South Iceland river Neðri-Þjórsá.

At its meeting this morning, the Landsvirkjun board of directors agreed to authorise the company's managing director to launch the tender process for designing the Neðri-Þjórsá hydropower plants. It is essential to start this work immediately so as to meet the commitment to deliver electricity by the specified date, because if the current schedule is adhered to, the expansion to the aluminium smelter in Straumsvík is intended to enter into full operation by the beginning of 2011. Alcan's power purchases from Landsvirkjun for the plant expansion will amount to approximately 2300 GWh a year.

According to the agreement between Alcan and Landsvirkjun, Alcan will pay two-thirds of the cost of these preparations, an amount to be repaid in full to Alcan if the expansion project goes through. Alternatively, Alcan will have a limited right to repayment if electricity from these hydropower projects is sold to other customers within a specified period of time.

Rannveig Rist, Alcan general manager, and Friðrik Sophusson, managing director of Landsvirkjun, after the signing ceremony attended by representatives of Alcan and Landsvirkjun

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