| Item 1.01 | Entry Into a Material Definitive Agreement |
On March 31, 2021, Kaiser Aluminum Warrick, LLC (f/k/a Alcoa Warrick LLC), a subsidiary of Kaiser Aluminum Corporation (collectively, the “Company”) entered into a Ground Lease Agreement (the “Lease Agreement”) with Warrick Real Estate LLC, for certain sections of the Lease Agreement, Alcoa Power Generating Inc., and Warrick Newco LLC, each a subsidiary of Alcoa Corporation (collectively, “Alcoa”). Subject to the terms and conditions of the Lease Agreement, the Company agreed to lease the land (the “Leased Premises”), located in Warrick County, Indiana, which is associated with the Company’s aluminum casting and rolling mill facility (the “Rolling Mill”). The Company has entered into the Lease Agreement in connection with the closing of the transaction described below under Item 2.01.
The initial term of the Lease Agreement is a period of sixty (60) years, after which the Company has the option to extend the term for up to three additional twenty (20)-year periods. Following the expiration of the term, the Lease Agreement will renew automatically on a year-to-year basis until terminated. The Lease Agreement provides that rent on the Leased Premises will be set at fifty thousand dollars ($50,000) per year. Additionally, the Company will pay for the cost of certain “Support Services” to be provided to the Rolling Mill by Alcoa, which include the provision of potable water, compressed air, laboratory services, electricity, steam and hot water.
In order to transition the Company’s operations from being dependent on the “Support Services” to an independent facility with its own self-sufficient infrastructure, Alcoa will provide “Transition Services,” including providing infrastructure and equipment for the production of steam, hot water and compressed air and conveying the filtration plant currently utilized for the supply of potable water. Moreover, the Lease Agreement requires Alcoa to pay for the development of infrastructure necessary for the Rolling Mill to obtain electricity from a third party power supplier, subject to the terms of the Lease Agreement. Alcoa will provide the Support Services through a period to extend no later than June 30, 2024, by which date Alcoa must complete its Transition Services.
Upon the termination of the Lease Agreement or upon the satisfaction of certain conditions, Alcoa has the option to convey title to the Leased Premises to the Company, and the Company has the option to purchase the Leased Premises from Alcoa. Both options are exercisable for nominal consideration. Separately from these options, in the event that Alcoa desires to sell the Leased Premises or certain adjacent property, the Lease Agreement gives the Company a right of first offer. The Lease Agreement can be terminated by Alcoa prior to the expiration of the term in the event that the Company breaches the market-based molten metal supply agreement between the two companies (this termination right being subject to the Company’s opportunity to cure).
A copy of the Lease Agreement is attached as Exhibit 10.1 hereto and incorporated herein by reference. The foregoing summary of the Lease Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Lease Agreement.
| Item 2.01 | Completion of Acquisition or Disposition of Assets |
On March 31, 2021, the Company completed its acquisition of Alcoa Warrick LLC along with certain assets comprising the Rolling Mill facility (the “Transaction”), pursuant to the terms of the Purchase Agreement between the Company and Alcoa dated November 30, 2020. The initial purchase price of $670,000,000 (which is subject to standard adjustments for working capital and indebtedness) was paid in full at closing on March 31, 2021.
As provided in the Purchase Agreement, Alcoa retains ownership of (1) the smelting assets and power plant adjacent to the Rolling Mill facility and (2) the land under the Rolling Mill facility, which is subject to the Ground Lease discussed under Item 1.01 above. In conjunction with the completion of the Transaction, Alcoa and the Company have also entered into certain ancillary agreements in addition to the Ground Lease, including a transition services agreement and the molten metal supply agreement and certain other commercial agreements relating to the Transaction.
