Would Alcoa Inc. (NYSE:AA) Be Able To Renew Yadkin Damns
Recently Alcoa Inc. (NYSE:AA) reported that its Yadkin dams are delivering better revenues with annual generation of 964,216 megawatt hours of electricity during the 12 months period ended September 30, 2013. Platts, an energy information company estimates the revenues of around $30 million at an average wholesale price of $31.04 per megawatt hour.However the company resources did not comment on profitability from the sales of electricity generated or even the operating costs for the Yadkin River dams. The company is not disclosing its profit from power sales, however financial statements released in 2011 showed up profits between $7.3 million and $8 million, on average revenue of around $30 million a year, during 2008 to 2010.
Since closure of aluminum smelter in 2007, to which the dams were providing electricity, Alcoa is selling the electricity generated to commercial buyers. Recently the company is seeking a new federal license for up to 50 years to allow it or may be to a future buyer to continue the operations as well as to incur the expenses required for upgrades at these dams, estimated around $180 million. As per the company projections of $44 million in revenues per year, over 50 years the revenues could total to around $2 billion.
However there is an oppose on issuing a new federal license to Alcoa Inc. and in this situation, the Congress need to decide whether municipal body or state could take over the project after compensating Alcoa. State officials have also filed a lawsuit asking federal judge to rule riverbed ownership on which dams are constructed in favor of North Carolina. However the attorneys for the Alcoa’s operating subsidiary defended that even if North Carolina had any ownership rights, they were lost as state officials haven’t raised any claim until now and this lawsuit is just an attempt to hijack the dams to benefit from the revenue they generate.
However critics believe that upon having a renewed operating license, Alcoa could sell the dams as it last year sold its Tapoco Hydroelectric Projection the Little Tennessee and Cheoah rivers to Brookfield Renewable Energy Partners LP (NYSE:BEP) for about $600 million. The company sold all four generating stations and dams, over 86 miles of transmission line and about 14,500 acres of associated land under this transaction. Alcoa’s license for the Tapoco project was renewed for 40 years back in 2005.