Alcoa Unit Signs Gas Deal With Apache Energy Investors

SYDNEY--Alcoa Inc.'s Australian arm hopes to shore up more than a decade's worth of gas supplies for its alumina refineries through a deal with private-equity investors planning to buy Apache Corp.'s local energy unit.

The agreement will help safeguard the future of the aluminum giant's Australian business at a time when global resources companies are cutting costs to combat cooling commodity markets as China's economy slows, Alcoa's Australian joint-venture partner, Alumina Limited, said.

Earlier Thursday, Apache said it agreed to sell its Australian unit, Apache Energy Ltd., for US$2.1 billion in cash to a consortium managed by Brookfield Asset Management Inc. and Macquarie Capital Group Ltd.

Under a 12-year agreement struck with the consortium, Alcoa of Australia committed to an initial supply of 120 terajoules of natural gas a day, starting in 2020. Alcoa of Australia runs one of the biggest alumina-production networks in the world and is 60% owned by Alcoa, with Alumina Limited holding the remaining interest.

"This secures the competitiveness of our low-cost Australian refining business into the next decade and is a very positive achievement given the current tightness in Western Australian energy markets," said Alumina Limited Chief Executive Peter Wasow.

Alumina production is energy intensive, with fuel accounting for around a quarter of an operator's output costs.

The joint venture agreed to a pre-payment of US$500 million, Alumina Limited said in a regulatory filing. The first instalment of US$300 million will fall due when the Apache unit is sold, which is anticipated to occur in May, Alumina said. The remainder will be paid to the consortium in 2016.

Write to Rhiannon Hoyle at [e-mail]

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