Investing in Indiana

is investing approximately $330 million at its Warrick Power Plant in

, to increase environmental performance, increase power efficiency, lower costs and further secure long-term, low-cost power for its smelter and related downstream business there.

Plans include installation of scrubbers on all four operating units, boiler modifications to provide greater fuel flexibility, and installation of new and improved coal handling facilities for increased efficiency. The company announced in May plans to invest $45 million to purchase equipment and the right to mine coal in nearby Friendsville, Illinois.

"This is a significant investment to reduce emissions well beyond anything required by regulation while increasing the competitiveness of the Warrick Operations and ensure that we have long-term, low-cost power for our smelter and rolling facilities here," said Alan Cransberg, President, North America Primary Metals.

Vectren Corporation, which owns a portion of the Warrick Power Plant, has also committed $68 Million to the project, bringing the total investment to $400 million.

Construction is slated to begin immediately and continue through to 2010. During this time, more than 500 local contractors will work at the site with more than 200 onsite every day for 18 months.

Alcoa says their work will result in an integrated environmental control system at the Warrick Power Plant that will include wet Flue Gas Desulphurisation spray/absorption towers, flue gas booster fans, and support facilities. More than 25 new employees will be needed to operate the system that will provide benefits that include a 98% reduction in SO2 and an eight million gallon wastewater reduction.

Major physical changes at the plant will include new stack configurations, new barge loading and unloading facilities, slurry handling and preparation facilities, water treatment facilities to reuse Warrick Operations discharge waters, dry fly-ash handling, an electrical sub-station, new coal handling equipment, and improved control facilities for the entire system.

Alcoa's investment in the Friendsville Mine calls for the addition of a coal preparation facility and material handling infrastructure to enable transport of coal via railcar to the smelter's power plant. The coal is expected to be available for use by Alcoa Warrick Operations by July 2006.

Under the terms of the agreement, Alcoa will purchase the rights to mine 2,500 acres in reserve at the mine near Mount Carmel, Illinois for 10 years, with the opportunity to expand from there. The mine will be capable of producing approximately one million tons of coal a year, approximately 45 percent of the power plant's fuel requirement. Vigo Coal will provide mining services to Alcoa. The mine will contribute approximately $20 million annually to the local economy.

The Warrick Power Plant is a four-unit, 742 megawatt (MW), coal-fired, steam-electric generating facility. Units One, Two and Three, rated at 144 MW each, and one-half of the 300 MW Unit Four are owned by Alcoa. Vectren, an

gas and electric utility, owns the other half of Unit Four. All of these units were placed in service between 1960 and 1970. Of the Alcoa-owned generation, nearly all of the power is provided to Warrick Operations, with over 90% of this going to the smelter.