Alcan Inc. (TSX:AL) has signed a deal for the design and engineering of a new high-voltage substation that will provide power for planned expansion of its aluminum smelter in Kitimat, the company announced Thursday.
Financial details of the agreement with ABB Group were not disclosed.
The Kitimat works modernization project was announced last August still needs final approval by Alcan’s board and remains subject to environmental approvals and a new long-term energy agreement with B.C. Hydro.
The company said the announcement showed its commitment to the Kitimat operation.
In May, Alcan’s hourly employees in Kitimat ratified a five-year collective agreement, a key condition to modernize the smelter.
More than 61 per cent of the 1,300 production and maintenance workers represented by the Canadian Auto Workers local voted to ratify the deal.
Alcan has been steadily reducing its workforce in Kitimat, currently at 1,550, down from 2,500.
Modernization of the smelter would increase its production by more than 60 per cent, the company has said, from its current 245,000 tonnes per year to about 400,000 tonnes per year, however it would also reduce the employee count further to about 1,000.
The contract for the substation comes as Alcan closes in on a deal with the B.C. government and B.C. Hydro for a long-term power purchase agreement.
Late last year, the B.C. Utilities Commission refused to ratify a long-term power purchase agreement between B.C. Hydro and Alcan Inc. because the utility made a mistake in its calculations and failed to prove the benefits would offset the costs.
The regulator’s approval of the agreement between the utility and aluminum producer was one of three conditions set by Alcan for the final go-ahead of the upgrade.
The tribunal said in reasons for its ruling that B.C. Hydro made a mistake in the price that it used as a benchmark to establish the cost effectiveness of the agreement and failed to show the benefits of the deal would offset additional costs.
On the TSX Thursday afternoon, Alcan closed up $1.30 at $89.80
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