'We are well set up for the next decade' says Alcoa boss Alan Cransberg. Photo: Jason South
INDUSTRIAL giant Alcoa of Australia is set to expand further into the energy sector, continuing a trend for big power consumers to seek direct exposure to oil and gas explorers.
Just days after Fortescue Metals Group was revealed to be negotiating a stake in a shale gas explorer, Alcoa of Australia boss Alan Cransberg revealed his company had spent close to $200 million on exposure to local energy explorers and was likely to make further investments.
Energy security is a crucial issue for Alcoa, with the company's assets understood to consume 20 per cent of Victoria's electricity and about 24 per cent of Western Australia's gas supply. The company has enjoyed decades of cheap energy, thanks to government subsidies and has had almost 95 per cent of its carbon tax exposure waived, albeit temporarily, by the Gillard government.
Speaking in Melbourne, Mr Cransberg said Alcoa had exposure to three ASX-listed energy companies, with deals in place with Empire Energy, market darling Buru Energy and $31 million shale minnow Transerv. ''So far we have invested somewhere between $100 million and $200 million, it is a significant investment and we will continue to invest,'' he said.
''We'll continue to look at opportunities and the right investment, given we're a long-term player.''
Alcoa is not listed as a major shareholder in any of the companies and its exposure is understood to be in the form of funding to assist in infrastructure development.
Mr Cransberg said the investments were designed to reduce Alcoa's exposure to future rises in energy prices and to improve security of supply. ''We are well set up for the next decade, but in these sorts of areas you have got to start worrying about these things now,'' he said.
The investment in Empire will be the first to yield benefits, with gas to flow as early as January.
Alcoa has exposure to all three stages of the aluminium cycle, from bauxite mining to alumina refining and finally aluminium smelting.
The first two divisions are relatively robust but the smelters at Point Henry and Portland in Victoria are struggling, despite large subsidies from state and federal governments.
The persistently high Australian dollar and low aluminium prices almost forced the closure of Point Henry earlier this year, until a bailout deal with state and federal governments secured its future until 2014, albeit with the loss of 60 jobs.
Mr Cransberg said productivity improvements alone could not save the smelter, with currency and aluminium price movements set to be key determinants of its future.
Rio Tinto and BHP Billiton are both seeking to exit the aluminium sector and Mr Cransberg said Alcoa could be a suitor for some of those assets.
''If they've got assets they are trying to divest we will look at those assets,'' he said.