The company said the contract with Chelan PUD takes effect from 2011 and runs to 2028. The hydro plants that will supply the smelter are the 1,300MW Rocky Reach and 624MW Rock Island with 26% of their output in return for Alcoa covering the costs of production, delivery plus other costs and charges, said Chelan PUD.

Alcoa added that the deal will provide enough electricity to expand the capacity of the smelter. The new deal runs from the expiration of the present contract, which expires in three years.

Under the terms of the deal the company will also pay US$22.9M by mid-August towards a US$89M capacity reservation charge. The balance of the charge is deferred as long as the power facilities continue to operate, said Chelan PUD.

About a quarter of Alcoa’s overall smelter output is powered from its own resources, the balance under long-term power supply contracts. Negotiations continue for such supplies and Alcoa said it would be focusing next on talks with Bonneville Power Administration (BPA), also in Washington state.

While the Wenatchee smelter has a nameplate capacity of 184,000 tonne/year, it has been operating at just over half of that output. The new power supply contract will enable Alcoa to add a third potline to increase the output by 42% from 100,000 tonne/year to 142,000 tonne/year from 2012.

The Rocky Reach plant has 11 units and over the last 20 years had average annual output of 5,800 GWh. It began operating in 1961 with seven units and the additional four were commissioned over 1969-71.

Rock Island has 19 units and its average annual output of the last 20 years was 3,000GWh. Comprising two powerhouses, the first was built in 1933, its capacity expanded in the early 1950s and then the second was completed in 1979.

Alcoa added that a further boost to the local economy would come from the deal as the increased output from the smelter will create up to 80 jobs in the region. The company has been active in the county since 1952, said Chelan PUD.

In a statement, Alcoa’s president for US primary products, John Thuestad, said: “This agreement makes this facility more competitive and is an excellent outcome for everyone. Long-term, reliable and globally competitive power is essential, and the Chelan PUD, through long and arduous negotiations, has taken the steps to help this community and region for the next 20 years.”