UPDATE 1-Glencore offer for Alcoa Italy plant expected soon

Wed Sep 19, 2012 12:06pm EDT

* Glencore to shortly send letter of intent to buy Alcoa Italy plant

* Plant's closure could risk the jobs of 500 direct employees

By Lisa Jucca and Francesca Piscioneri

MILAN/ROME, Sept 19 (Reuters) - Swiss commodities trader Glencore is expected to present a letter of intent to buy U.S. aluminum maker Alcoa's Italian plant in coming days as the Italian government redoubles efforts to find a buyer for the smelter.

"Glencore has committed to present a letter of intent to Alcoa within 10-15 days," said Alberto Pili, an official at the Carbonia-Iglesias province where the Alcoa plant is located.

Alcoa, the largest U.S. aluminium producer, has decided to close down its plant in Sardinia, a move that puts at risk the jobs of 500 direct employees.

Its closure would be a heavy blow for the Mediterranean island which has a 15 percent unemployment rate, well above the national average.

Alcoa, which has decided to move part of its production in Italy, Spain and other countries to a big new plant in Saudi Arabia, has scheduled final closure of the smelter by year end.

Alcoa has committed to keep the plant ready to be restarted for a year after closure.

Earlier on Wednesday the government met with Glencore and regional representatives to discuss energy costs at the plant, one of the main reasons it has found it difficult to compete with global rivals.

On his way out of the meeting Sardinia President Ugo Cappellacci said he was hopeful for an offer by Glencore within 10 days.

"The government has provided a guarantee, requested by Glencore, to keep the power price at 35 euros (per megawatt hour) over 15 years," Pili said.

At the beginning of September the government wrote to Glencore to reassure it on power discounts for 15 years if it decided to buy the plant.

"If a solution can be found that benefits all parties, than Glencore would look to help," a source close to the company said.

A price of 35 euros/MWh would be significantly below the approximately 70 euros/MWh power would cost without subsidies but there are concerns it could be construed as state aid.

The EU Commission has previously asked Italy to recoup aid from favourable power tariff schemes.

Besides Glencore, Swiss industrial group Klesh and Italian wind power group Kite Gen Research have previously expressed an interest in the Sardinian plant.

But Kite Gen founder Massimo Ippolito told Reuters on Wednesday that an acquisition of the plant was not his company's main aim.

Kite Gen, which makes wind power technology, is ready to build a 300 megawatt wind farm close to the smelter to help power what is the biggest single corporate energy user in Italy.

"Alcoa sent us a very positive letter and is interested in our project. We have an appointment soon," Ippolito said.

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