Energy Efficiency Program ALCOA LATIN AMERICA & CARIBBEAN U.S.& Brazil Industrial Energy Efficiency Workshop,

Energy Efficiency Program ALCOA LATIN AMERICA & CARIBBEAN U.S.& Brazil Industrial Energy Efficiency Workshop, Petrópolis RJ Brazil – August 2011 1

Agenda • ALCOA Profile • ALCOA Global Energy Intensity and GHG Strategy • Global Energy Efficiency Strategy • Deployment Strategy in Latin America • Initial Results • Projects in Development • Learning Process • Next Steps

Primary Metal Custumers Bauxite mine Rehabilitation of mined areas Transportation Packaging Transfor-mation Smelter B&C Recycling Industrial Electricity Aluminum Cycle Refinery Electrical Energy Hydro Power Energy

Alcoa is a Global Company – Operating Locations xxx locations xxx Employees xxx Countries

Aluminum has a vast application

Aluminum is an electro-intensive process

ALCOA Profile • ALCOA Global Energy Intensity • Global Energy Efficiency Strategy • Deployment Strategy in Latin America • Initial Results • Projects in Development • Learning Process • Next Steps

Leadership Commitment in Energy Efficiency Video with Rick Bowen President of Energy

Energy Intensity 2020/2030 Goals

ALCOA Profile • ALCOA Global Energy Intensity and GHG Strategy • Global Energy Efficiency Strategy • Deployment Strategy in Latin America • Initial Results • Projects in Development • Learning Process • Next Steps

Global Energy Group Rick Bowen President, Energy Global Energy Resources Simon Baker – Europe Richard Lamarche – Canada Tommy Hodges – Rockdale Ricardo Sayao – Latin America Paulo Miotto – Latin America Energy Efficiency Manager Mike Shaw - Australia Marc Pereira Vice President, Energy & Carbon Strategy Jim Nixon Vice President, Marketing & Trade Richard Notte Director Energy Services Micheal Padgett Finance Walt Brockway Manager - Global Energy Efficiency Mike Caufield Energy Specialist Greg Harrell Energy Specialist Lisa Schoch Human Resources Individual Asset Management US Hydro AngleseaPlant Dampier Bunbury Pipeline Warwick Power Plant Legal Max Laun US Jose Camino Europe

Roles and Responsibilities Direction Sponsors Coordinators Leaders Executors Corporate Management Business Unit Management Plant Management Department Level Management Regional SPA’s Business SPA’s Plant Energy SPA’s Provide Directions Set Targets Drive Actions Assess needs Coordinate Locations Interface with Business Identify Opportunities Engage Employees Carry out Actions

Energy Efficiency Journey We became focused on Energy Efficiency SRT - ENR Consultants were identified Global energy team formed Training was provided Assessments at Tenn and Warrick Year 2006 - 2008 2002 2003 - 2006 2009 Assessments performed At many locations Best practice sharing (BEEPS) Initial summit in Pittsburgh Summit at Kofem EMP team formed Canada team formed AWA team formed Regional and business programs matured Some assessment work with DOE continued EMP continued assessments Canada grew the energy team AWA became more focused EPS and GRP became focused Assessments at Massena and PTC Corporate energy meeting - Pittsburgh

Recent Activities Energy efficiency role Re-aligned with DOE Certification 2010 Year • Communications • Global energy efficiency team • Sharepoint site • Case studies • Benchmarking • Execution • Assessments • Training / resources • Tools • Capital solutions • Organization • Efficiency organization has been established • Reconnected with energy consultants • Identified new consulting resources • Collaboration with other internal resource groups • Management • Prepared presentations for business unit management and EC • Assisting with energy metric development • Benchmarking of other industries • 3 year plan • Appointed to ISO 50001 technical advisory group • Awards and recognition

Activities in Progress 2011 • Communications • Employee awareness and engagement • Expanded global team • Enhanced sharepoint • International benchmarking • Energy summit • Execution • Continue refinement of • assessment process • Facilitate assessments as • requested • Deploy best practices • Develop additional best • practices • Current energy project list • Assist with obtaining capital • funds • Organization • Additional Alcoa resources • Expand consultant network • Identify SPA’s • Management • Clear BU / Regional sponsorship • Energy reporting at business level • connection with sustainability enhanced • Location energy teams • Awards and recognition

12 steps are considered key for success Program Development Strategy • Commitment from the highest leadership • Plant management involvement • Steering and tactical teams. • SPA for each plant. • Communication with the plants • Schedule alignment with the global team and the plant staff. • Best technical resources internally and externally. • Employee participation • Pilot assessment • Adequate time (approximately 3 months) for the entire assessment process • Develop an action plan for implementation • Create a capital budget

Obtain support and commitment from the highest leadership • Guarantees of commitment from the presidents of the region and the energy group • Support contemplates forecasted expenses (previously approved jointly with each plant) • This commitment was recorded and sent by email to all plant managers • Cycle of identification/implementation/communication is guaranteed by informing the results and the project status to the leadership quarterly

Involve plant management in the development of the program • Discuss with plant managers what processes would be assessed – assurance of clear and appropriate interface with core processes and global technical teams • Avoid duplicating work by interacting with technical groups • Program was perceived as a technical support instead of “audit” • After the format of the program was revealed, many plant managers demonstrated interest in having some processes assessed by the energy team

Form specific steering and tactical teams • Steering team was formed with plant managers and energy members, responsible for: • defining the strategies and goals of the program • evaluate assessment results • establish budgets to implement projects • Tactical team formed with representatives of each plant, responsible for: • carrying out the steering team’s directions • preparing the assessments including participants, resources and logistic issues • assessment action plan preparation • follow-up of the implementation process

Appoint an SPA for each plant • SPA perceived as the “face of energy” in the plant • Responsible for making the assessment happen • Key factor for engaging plant’s people • Usually appointed by the plant manager, but does not necessarily represent the most engaged person on energy issues (attention to detect the actual SPA)

Ensure good communication with the plants • Communication was key to engaging all of the organization in the program • The communication team was involved formally, who is responsible for all channels of collective information inside Alcoa, to develop a strategy for communicating the program • The team suggested creating a mascot in order to symbolize the program and help to convey the concepts and targets • A campaign centered on the mascots Energildo and Porconômicowere created to represent a person who seeks opportunities and another one who saves the money

Ensure good communication with the plants • In conjunction, other ways of communication were utilized: • A summary article in the newspaper Gente em Açãowas circulated in all locations and sent to employees’ homes. • The Letter of the President was used to send a message to all employees of how vital the program was.

Discuss the schedule with the global team and the plant staff • The assessment was scheduled not to conflict with other events close or during the assessment that might distract personnel from focusing on the assessment.

Determine the availability of the best technical resources • Choice of the consultants is crucial for the success of the assessment: • Should be experienced, proven and recommended • Includes people worldwide – Alcoans or contractors • Expectations must be clear and objective • The need for consultants was determined considering the main processes of the Alcoa plants in Latin America to include: • Compressed air • Cooling, water and tower systems • Process heating • Steam • Electrical motors • Electrical systems • Metrics and measurements • Combustion systems

Develop a channel to allow 100% employee participation • Employee participation should be required from the top floor to the shop floor • In Brazil, it was utilized the existing Program of Suggestions to engage people in the identification of opportunities for energy reduction in the plants, where employees can give suggestions solve some problem or improve some process while earning a prize when the suggestion is approved and implemented • This allows engaging the most hands-on personnel and strengthening the energy efficiency culture.

Utilize a pilot assessment to demonstrate the results • While the initial assessment estimate was to find a 10% energy reduction through potential projects, a pilot assessment was used to verify the estimate and reinforce the cost-benefit relationship before announcing the program to all locations. • São Luis Smelter was chosen as the pilot due to its size, potential energy savings, employee energy awareness, and technical expertise (these people could assist at assessments at other locations). Staffing is summarized below: • The event identified about US$ 5.3 million in potential projects with average payback of 1.2 years.This value represented about 9.9% of the total energy consumed in the areas that were assessed.

Utilize a pilot assessment to demonstrate the results • Example of opportunity identified during the assessment at São Luis: • The possibility of changing from throttling control to inlet guide vanes in order to improve energy efficiency in the reactor of line 1. It was converted in DI (# 52353)

Allow adequate time for the entire assessment process • While planning takes about one month, the assessment process itself takes about two months, including the pre-work and the report preparation periods. • During the pre-work, it is very important to gather information from the processes that will be assessed such as process flow, product flow, energy schemes and diagrams, energy consumption data, and rates for electricity, gas and fuels.

Allow adequate time for the entire assessment process • The week starts with some general presentations covering the energy market in the region and then a specific presentation that explains the program and the format for the work that will be conducted. • Management should participate in this initial meeting in order to have the opportunity to express their for the endeavor.

Develop an action plan for implementation • Action plan to promote implementation is crucial to capturing projected savings. Funding should be lined up early in the process to facilitate implementation and validate the overall energy program. • A workshop was organized at each plant in the end of each assessment to discuss the opportunities, validate the recommendations, and define what actions would be required for implementation. • Interaction with the Capex team during the workshop is very important. • Blitzes and RFA’s was addressed after the projects were defined. • An effort was made to view all projects as part of the overall energy efficiency program rather than stand-alone initiatives. The plant SPA was critical during this process. • Some projects were converted into DI’s status 2 or 3. • DI’s were very useful in engaging the leadership and furthering their commitment.

Create a capital budget that addresses implementation process • In order to keep all plants engaged in the program, efforts were made to approve at least one project at each plant while adhering to the original requirements. • Alternative funding was identified in case of Capex restrictions in Alcoa. Specifically in Brazil, the following options for energy efficiency funding were available: • BNDES – National Bank of Economic and Social Development • Private Banks/Private Companies • Energy distribution companies (New Soderberg Project at Poços de Caldas – project of plant modernization has been discussed with Cemig/Efficientia a potential long-term funding / Lighting project of Tubarão is under analysis to be funded by Indeco ESCO) • Energy generation companies • A special Capex budget was approved by GPP in the value of US$ 2 MM to be applied in projects of Energy Efficiency following a specific criteria: • Payback < 1 year • Energy reduction (thermal / compressed air / electricity) • Reduction on CO2 emissions

Create a capital budget that addresses implementation processOpportunities related to R&D ALCOA Hydro Power Plants ANEEL REGULATION (Law No 9.991,June 2000) 0.4% of NET REVENUE ~ USD 1 MM / year 1 Manager 1 Coordinator 1 Specialist P&D Management Project ENERGY GROUP (Regional and Global) R&DLA&C GROUP (Regional and Global) PLANTS LABS UNIVERSITIES CONSULTANCIES R&D PROJECT A R&D PROJECT B R&D PROJECT C R&D PROJECT D R&D PROJECT E R&D PROJECT F SCHOLARSHIP / EQUIPMENT / HUMAN RESOURCES / FEES / MATERIALS / EXPENSES

1 year after launching the program • What has been done since July-2010 – when the Energy Efficiency Program was approved 35

Results after 8 energy assessments

8 assessments already performed Utinga Extrusion Plant Tubarão Extrusion Plant Jamalco Refinery Itapissuma Flat, Rolling and Extrusion Plant ALUMAR Smelter

Example of problem fixed during the assessment • Itapissuma Flat and Rolling Products plant • The regenerative burners installed on MF-10 had the capability to improve performance reducing fuel consumption to less than 60% of current values • This translates into more than $450,000/yr of fuel impact • Furnace performance would be improved from 300 Nm3/tonne to 170 Nm3/tonne • A problem in the pilot burner was identified and fixed during the assessment, saving about $200,000/yr • Consumption was reduced from 300 Nm3/tonne to 225 Nm3/tonne

Examples of projects in progress • Tubarão Extrusion Products plant: • Project: conversion of 4 aging furnaces from electricity to natural gas (DI # 52357) • Payback is 6 months • Annual savings: USD 520 k • Electrical Cost: $46.00/MMBtu (USD) • LPG Cost: $21.00/MMBtu (USD) • Natural Gas Cost: $12.46/MMBtu (USD) • Compressed Air: $322.00/MMBtu (USD) • Itapissuma plant: • Project: compressed air leakage elimination program (DI # 52354) • Payback is 2 months • Annual savings: USD 180 k

Examples of projects in progress • Tubarão Extrusion Products plant: • Project: Lighting System Project Redesign (DI # 52356) • Payback is 1.2 years • Annual savings: USD 105 k • Itapissuma plant: • Project: combustion control improvement (DI # 51727 / 51719) • Payback is 0.9 years • Annual savings: US$ 340 k

Turbine Capacity Recovery at Jamaica Alumina Refinery • TG#3 is currently producing ~25 MW versus a capacity of 34.3 MW • Investigation has indicated that loss of capacity is due to internal deposits on the turbine blades • History of TG#3 maintenance shows periodic loss of power generation capacity • Root Cause: • Impurities in steam depositing on turbine blade surfaces • Amounts & types of impurities is a function of process conditions, and tend to be location-specific • Distribution & concentration on blade surfaces tends to be a function of turbine design • Probable Sources: • Contaminated flash steam condensate • Excessive boiler steam drum to superheater carryover on one or more boilers • A combination

Points we learned by doing • Planning is key for success – the best planning is always the next one • Budget must be discussed early • Engagement of the SPA is crucial • One assessment week is very fast… pre-work is the right time to get information • Implementation of the actions is the hardest part • PERSISTANCE • is the key word in an • ENERGY EFFICIENCY PROGRAM

This individual goals can summarize the next steps… • Category • Financial • Conclude the energy assessments at Refineries (4 assessments) • For score 5 – Conclude all assessments and find at least USD200k in immediate savings • Implement the projects already identified by the assessments • For score 5 – Implement > 75% of the opportunities (60 findings) • Accomplish the target of DI’s • For score 5 – Achieve 110% of the target (USD 2 MM) • Sustainability • Obtainincome by selling carbon credits • For score 5 – Conclude the documentation of Flexgas project

OBRIGADO

Energy Efficiency Program ALCOA LATIN AMERICA & CARIBBEAN U.S.& Brazil Industrial Energy Efficiency Workshop,