Alcoa and IGNIS EQT progress toward strategic agreement to support future of Alcoa San Ciprián operations

On October 16, 2024, Alcoa Corporation and IGNIS Equity Holdings, SL (IGNIS EQT), the majority shareholder in the IGNIS Group of Companies, a vertically integrated energy company based in Spain, announced that they are progressing toward entering into a strategic cooperation agreement (the “partnership”) to support the continued operation of Alcoa’s San Ciprián operations.

Under the proposed agreement, Alcoa would contribute €75 million, and IGNIS EQT would make an initial investment of €25 million to fund the operations. Alcoa would continue as the managing operator of the San Ciprián operations, with IGNIS EQT holding 25 per cent ownership. Additionally, up to €100 million would be funded by Alcoa as needed for operations with a priority position in future cash returns. If further funding is required, both partners must agree, and the funding would be shared 75 per cent by Alcoa and 25 per cent by IGNIS EQT.

Alcoa has operated in San Ciprián for a number of years in a challenging economic environment, primarily due to the high cost of energy. Earlier in 2024, Alcoa launched a robust sale process while also working to identify solutions for the long-term viability of the operations.

Despite sharing information with 60 potential investors, no viable bid was made for 100 per cent of the San Ciprián operations. The potential partnership with IGNIS EQT emerged as an alternative for San Ciprián in which Alcoa can leverage its expertise in managing global aluminium operations, combined with IGNIS EQT’s strong knowledge of energy markets, to create value via market access and energy management services.

The proposed agreement is conditional upon delivering key areas of cooperation with San Ciprián’s stakeholders, including the Spanish National Government, the Xunta de Galicia, and San Ciprián employees and Works Councils. Key areas include:

• Materially higher CO₂ compensation support;
• Permitting power generation projects, especially those with existing agreements with San Ciprián;
• Support and approval for the residue storage area (RSA) capital project; and
• Flexibility within the current smelter Viability Agreement, including access to restricted cash for operating needs and deferral or substitution of capital project commitments.

"By partnering with IGNIS EQT, we will leverage our experience and expertise and, along with the necessary cooperation from stakeholders, improve the long-term outlook for San Ciprián," said Alcoa President and CEO William F. Oplinger.

Antonio Sieira, CEO of IGNIS EQT, stated, "We are delighted to work with Alcoa and to progress this strategic partnership. This agreement would allow for a viable solution for the San Ciprián plant and its workers. Alcoa is a world leader in the aluminium sector, operating with the best production standards."

"IGNIS is a leading provider of energy solutions for the decarbonisation of industrial facilities and an experienced renewable energy project developer. In addition, this is a step forward in the application of public decarbonisation policies promoted by Europe and the Government, which translates into a real benefit for the industrial sector."

Alcoa and IGNIS EQT will now focus on progressing the partnership to support the future of the San Ciprián operations.