Alcan Inc. announced Wednesday that it has paid $110 million US to Powerex, a subsidiary of B.C. Hydro, to settle a claim arising from the collapse of American energy trading company Enron.

Alcan said following the cancellation of its Kemano Completion generating project in northwestern B.C., it assigned to Enron Power Marketing Inc. the right and obligation to deliver specified volumes of electricity to Powerex.

When Enron went bankrupt in late 2001, Powerex filed a claim against Alcan and an arbitrator upheld the claim.

The company said it recorded a pre-tax charge of $100 million US in the fourth quarter of 2002. The remaining $10 million US will be charged to income in the fourth quarter of 2004.

Alcan terminating agreement with B.C. Hydro

Alcan also announced Wednesday that it has given B.C. Hydro five years notice that it will stop selling 140 megawatts of power to the utility under a long-term electricity purchase agreement.

The agreement, signed in 1990, gives Alcan the right to recall electricity for its own industrial purposes.

"In light of our recent experiences with low water levels in British Columbia and in consideration of our future potential industrial needs in British Columbia, Alcan is acting responsibly with regard to this initiative," said Cynthia Carroll, president of Alcan's primary metals group.

All energy deliveries under the agreement will end on Dec. 31, 2009.

Shares of Alcan closed down 22 cents at $58.91 on the TSX.