(Updates with Alcoa idling smelters, CEO comments)
MILAN/NEW YORK Nov 19 Alcoa Inc (AA.N) said on
Thursday it will temporarily idle operations at its two
smelters in Italy after the European Commission ordered the
U.S. aluminum producer to pay back most of the state aid it has
received in Italy since 2006.
Alcoa said it would appeal the ruling and was curtailing
operations at the smelters in Fusina and Portovesme because of
the uncertainty in obtaining future power supply and the
financial impact of the EC decision.
The EC did not say how much Alcoa has to repay.
"The EC's decision, which was not based on a complaint by a
competitor or any third-party, will effectively shut down
Italian aluminum production and make the European aluminum
industry less competitive in the worldwide markets," Alcoa
President and Chief Executive Officer Klaus Kleinfeld said in a
"This is a dark day for European heavy industry. The EC is
sending a signal to investors and workers that heavy industry
is no longer a priority," he said. "Particularly in today's
economic crisis, this decision is hard to understand. Skilled
and long-term jobs will be lost, facilities will be closed, and
companies in Europe will not be able to compete."
The price subsidy mechanism which Alcoa has enjoyed in
Italy since 2006 constituted "illegal state aid" and enabled
the company to sell its products at a lower price or at a
higher margin, the Commission said after an in-depth
investigation it opened in 2006.
"Price subsidies that result in artificially low energy
prices for selected companies waste taxpayers' money and
distort competition in the single market. Alcoa will have to
pay back most of the illegal subsidies," Competition
Commissioner Neelie Kroes said in a statement.
The Commission also ordered Italy to end the subsidies.
Without the tariff, Alcoa said, the two smelters, which
have a combined employment of approximately 1,000 and an
additional 1,000 indirect jobs and a combined capacity of
194,000 metric tons of aluminum per year, are not viable at
current Italian power rates.
A spokesman at Alcoa's Pittsburgh headquarters told Reuters
that Alcoa had already set an appeal in motion when the EC
notified the aluminum producer that the matter was being
"We launched an appeal to question whether they should do
that. After reading this report, we will appeal this decision
as well," Alcoa spokesman Kevin Lowery said.
While the EC ruled that Italy's "state aid" gave Alcoa
unfair competitive advantage, Lowery said it had been approved
by the EC in 1995 and was designed to help bring Italy's power
costs in line with energy costs in other EU countries.
Italy's Economic Development Ministry, which has been in
talks with Alcoa over the future of its Italian business, said
it had drafted new measures which would reduce electricity
prices for Alcoa's Portovesme plant on the island of Sardinia.
Such measures, including building new interconnection
lines, would help to "bring, in a short term, prices of
electricity supplies for a plant in Sardinia, close to average
prices paid by aluminium producers in Europe," the ministry
said in a document obtained by Reuters.
Alcoa promised the ministry not to close the plant, the
ministry said. Lowery said Alcoa never made that promise.
(Reporting by Svetlana Kovalyova; additional reporting by
Carole Vaporean and Steve James in New York; editing by
Marguerita Choy; editing by Carol Bishopric)