On December 21, 2017, Alcoa and Invitalia, which is an Italian
government agency responsible for managing economic development, reached an agreement to transfer ownership of the Portovesme smelter (permanently closed in 2014) in Italy from the Company to Invitalia. As part of this agreement, Alcoa and the
Italian government have settled certain pre-existing matters, including an energy tariff dispute that has been subject to ongoing litigation and a groundwater remediation project.
The energy tariff dispute refers to Italian Energy Authority Regulation 148/2004, on which a hearing was scheduled for May 2018, and relates
to both Alcoas Portovesme and Fusina (permanently closed in 2013) smelters. At the end of 2015, ParentCo recorded a charge to establish a partial reserve of $40 million (34 million) in this matter (the U.S. dollar amount reflects the
effects of foreign currency movements since 2015), which Alcoa Corporation assumed on November 1, 2016. See Note M to the Consolidated Financial Statements included in Alcoas Quarterly Report on Form 10-Q for the period ended
September 30, 2017 for a full description of this matter.
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As a result of this agreement, Alcoa expects to reduce the previously established reserve for the
Italian Energy Authority Regulation 148/2004 matter by $22 million (pre- and after-tax, or $0.12 per diluted share) in the fourth quarter of 2017. Additionally, Alcoa will retain previously accrued asset retirement obligations, which may be reduced
upon Invitalia reaching certain milestones related to the future of the Portovesme smelter. Expected future cash outlays over the next five years related to this agreement total between $40 million and $50 million, including $10 million in 2018.
The carrying value of the assets related to the Portovesme site were previously written down to zero as a result of ParentCos
decision in 2014 to permanently close the smelter.
Amounts related to this agreement are still being finalized. Additional details will
be provided in Alcoas Annual Report on Form 10-K for the year ended December 31, 2017.
The information in Item 8.01 of
this Current Report on Form 8-K is being filed in accordance with the provisions of General Instruction B.1 of Form 8-K.
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Forward-Looking Statements
This Current Report on Form 8-K contains statements that relate to future events and expectations and as such constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include those containing such words as anticipates, believes, could, estimates, expects,
forecasts, intends, may, outlook, plans, projects, seeks, sees, should, targets, will, would, or other
words of similar meaning. All statements that reflect the Companys expectations, assumptions or projections about the future, other than statements of historical fact, are forward-looking statements. Forward-looking statements are not
guarantees of future performance and are subject to known and unknown risks, uncertainties, and changes in circumstances that are difficult to predict. Although the Company believes that the expectations reflected in any forward-looking statements
are based on reasonable assumptions, it can give no assurance that these expectations will be attained and it is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks
and uncertainties. Such risks and uncertainties include, but are not limited to: (a) the inability to complete the closure, demolition and/or remediation activities as planned or within the time periods anticipated, whether due to changes in
regulations, technology or other factors; (b) changes in preliminary accounting estimates due to the significant judgments and assumptions required; and (c) the other risk factors disclosed in Alcoas Annual Report on Form 10-K for
the year ended December 31, 2016 and other reports filed with the Securities and Exchange Commission. The Company disclaims any obligation to update publicly any forward-looking statements, whether in response to new information, future events
or otherwise, except as required by applicable law.
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