Alcoa Inc. and Alumina Limited have announced that they have agreed to make certain changes to the Alcoa World Alumina and Chemicals (“AWAC”) joint venture that will enhance value for Alcoa, Alumina, and their respective shareholders.

In conjunction with these amendments, the parties have agreed to terminate their litigation in the Delaware Court of Chancery relating to Alcoa’s pending separation into two independent, publicly traded companies. Alcoa Inc. remains on track to complete its separation in the second half of 2016.

In general, the changes to the joint venture agreements are intended to align more closely the partners’ interests in AWAC, while establishing greater strategic flexibility and autonomy for both partners.

Effective upon the completion of Alcoa’s separation, certain changes will be made to the governance and financial policies of the joint venture, intended to enhance the cooperation between the shareholders. These changes will promote faster decision-making, joint input on significant decisions, improved information sharing and a more streamlined process for resolving disputes. The changes will also simplify AWAC’s dividend and cash management policies and require that AWAC raise a limited amount of debt to fund future mutually agreed growth projects.

In the event of a change of control of either partner in the future, opportunities for the AWAC partners to engage in expansion and development projects would increase, with each partner having the right to proceed unilaterally with an expansion or development project inside the joint venture if the other partner chooses not to participate. A partner that avails itself of such an opportunity would pay for the costs related to the project, including for AWAC resources and shared facilities used, and be entitled to that project’s resulting off-take. In addition, upon a change of control, the exclusivity and non-compete restrictions under the current joint venture agreements would terminate, and be replaced by rights of first offer on expansions and other development projects that either party may choose to undertake outside of the joint venture.

If a change of control of Alumina were to occur in the future, off-take rights for alumina and bauxite would be triggered. For example, if an industrial acquirer became the new partner in AWAC it would be entitled to buy alumina and bauxite at market prices for that partner’s internal consumption. In addition, that future partner would also be entitled to buy 1 million tons of alumina at market prices for resale into the market. This could have the effect of establishing a strategic joint venture partner and long-term customer for AWAC.

“We believe these changes create a true win-win situation and will enhance value for our AWAC joint venture, the future Alcoa Corporation, and its shareholders,” said Roy Harvey, President of Alcoa’s Global Primary Products and future CEO of Alcoa Corporation. “We are strengthening our partnership agreement and more closely aligning the partners’ interests. We are also establishing a broader set of value-creating options for AWAC by providing its owners with greater strategic flexibility. Among other benefits, this opens the door for an industrial partner to enter the joint venture, and like Alcoa, to become a long term customer for bauxite and alumina. Alcoa looks forward to completing our separation, launching two strong companies later this year, and to working closely with Alumina to realize the full potential of the AWAC partnership.”

Alumina’s Chief Executive Officer, Peter Wasow, said, “We have refreshed the joint venture agreements to reflect the new realities of our industry and Alcoa and Alumina’s individual circumstances. These agreements strengthen the AWAC joint venture for Alcoa and Alumina, giving the companies greater control over their investments and future strategic options. We have enjoyed a successful relationship with Alcoa for over 50 years and look forward to working together in this next phase.”