<PAGE>   1

================================================================================
 
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
 
                                   FORM 10-Q
 
      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934
 
                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
 
                         Commission file number 1-3677
 
                            ALCAN ALUMINIUM LIMITED
            (Exact name of registration as specified in its charter)
 
<TABLE>
<S>                                               <C>
                    CANADA                                         Inapplicable
       (State or other Jurisdiction of                 (I.R.S. Employer Identification No.)
        Incorporation or Organization)
</TABLE>
 
         1188 SHERBROOKE STREET WEST, MONTREAL, QUEBEC, CANADA H3A 3G2
            (Address of Principal Executive Offices and Postal Code)
 
                                 (514) 848-8000
              (Registrant's Telephone Number, including Area Code)
 
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X], No [ ]
 
                     APPLICABLE ONLY TO CORPORATE ISSUERS:
 
At June 30, 1997, the registrant had 227,042,376 shares of common stock (without
nominal or par value) outstanding.
 
================================================================================
<PAGE>   2
 
PART I -- FINANCIAL INFORMATION
 
In this report, all dollar amounts are stated in U.S. Dollars and all quantities
in metric tons, or tonnes, unless indicated otherwise. A tonne is 1,000
kilograms, or 2,204.6 pounds. The word "Company" refers to Alcan Aluminium
Limited and, where applicable, one or more consolidated subsidiaries.
 
ITEM 1.  FINANCIAL STATEMENTS
 
                            ALCAN ALUMINIUM LIMITED
 
                    INTERIM CONSOLIDATED STATEMENT OF INCOME
                                  (unaudited)
 
<TABLE>
<CAPTION>
                                                                   Periods ended June 30
                                                       ----------------------------------------------
                                                          Second quarter              Six months
                                                       --------------------      --------------------
                                                        1997          1996        1997          1996
                                                       ------        ------      ------        ------
                                                       (in millions of US$, except per share amounts)
<S>                                                    <C>           <C>         <C>           <C>
REVENUES
  Sales and operating revenues....................     $2,011        $1,956      $3,881        $3,955
  Other income....................................         19            16          47            32
                                                       ------        ------      ------        ------
                                                        2,030         1,972       3,928         3,987
                                                       ------        ------      ------        ------
COSTS AND EXPENSES
  Cost of sales and operating expenses............      1,552         1,501       3,002         3,029
  Depreciation....................................        110           108         217           218
  Selling, administrative and general expenses....        115           103         218           211
  Research and development expenses...............         18            17          34            35
  Interest........................................         26            32          51            68
  Other expenses..................................         19            20          29            47
                                                       ------        ------      ------        ------
                                                        1,840         1,781       3,551         3,608
                                                       ------        ------      ------        ------
Income before income taxes and other items........        190           191         377           379
Income taxes (note 2).............................         72            74         117           143
                                                       ------        ------      ------        ------
Income before other items.........................        118           117         260           236
Equity income (loss)..............................         (1)           (5)          2             1
Minority interests................................         (1)           --          (3)           --
                                                       ------        ------      ------        ------
NET INCOME........................................     $  116        $  112      $  259        $  237
Dividends on preference shares....................          2             5           5            10
                                                       ------        ------      ------        ------
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS....     $  114        $  107      $  254        $  227
                                                       ======        ======      ======        ======
NET INCOME PER COMMON SHARE (NOTE 3)..............     $ 0.50        $ 0.47      $ 1.12        $ 1.00
                                                       ======        ======      ======        ======
DIVIDENDS PER COMMON SHARE........................     $ 0.15        $ 0.15      $ 0.30        $ 0.30
                                                       ======        ======      ======        ======
</TABLE>
 
                                        2
<PAGE>   3
 
                            ALCAN ALUMINIUM LIMITED
 
                    INTERIM CONSOLIDATED STATEMENT OF INCOME
                                  (unaudited)
 
<TABLE>
<CAPTION>
                                                                                Six months ended
                                                                                    June 30
                                                                              --------------------
                                                                               1997          1996
                                                                              ------        ------
                                                                              (in millions of US$)
<S>                                                                           <C>           <C>
RETAINED EARNINGS -- BEGINNING OF PERIOD.................................     $3,217        $2,959
Net income...............................................................        259           237
Dividends -- Common......................................................         68            68
          -- Preference..................................................          5            10
                                                                              ------        ------
RETAINED EARNINGS -- END OF PERIOD.......................................     $3,403        $3,118
                                                                              ======        ======
</TABLE>
 
                                        3
<PAGE>   4
 
                            ALCAN ALUMINIUM LIMITED
 
                       INTERIM CONSOLIDATED BALANCE SHEET
                              (unaudited for 1997)
 
<TABLE>
<CAPTION>
                                                                               JUNE 30   December 31
                                                                                1997        1996
                                                                               -------   -----------
                                                                               (in millions of US$)
<S>                                                                            <C>       <C>
                                               ASSETS
CURRENT ASSETS
  Cash and time deposits.....................................................  $   581     $   546
  Receivables................................................................    1,442       1,262
  Inventories -- Aluminum....................................................      780         736
              -- Raw materials...............................................      328         325
              -- Other supplies..............................................      246         244
                                                                               -------     -------
                                                                                 1,354       1,305
                                                                               -------     -------
Total current assets.........................................................    3,377       3,113
                                                                               -------     -------
Deferred charges and other assets............................................      311         314
Investments..................................................................      445         428
Property, plant and equipment
  Cost.......................................................................   11,485      11,517
  Accumulated depreciation...................................................    6,128       6,047
                                                                               -------     -------
                                                                                 5,357       5,470
                                                                               -------     -------
TOTAL ASSETS.................................................................  $ 9,490     $ 9,325
                                                                               =======     =======
</TABLE>
 
                                        4
<PAGE>   5
 
                            ALCAN ALUMINIUM LIMITED
 
                       INTERIM CONSOLIDATED BALANCE SHEET
                              (unaudited for 1997)
 
<TABLE>
<CAPTION>
                                                                               JUNE 30   December 31
                                                                                1997        1996
                                                                               -------   -----------
                                                                               (in millions of US$,
                                                                                 except per common
                                                                                  share amounts)
<S>                                                                            <C>       <C>
                                LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
  Payables...................................................................  $ 1,087     $ 1,008
  Short-term borrowings......................................................      237         178
  Income and other taxes.....................................................       47          98
  Debt maturing within one year..............................................       32          19
                                                                               -------     -------
                                                                                 1,403       1,303
                                                                               -------     -------
Debt not maturing within one year............................................    1,263       1,319
Deferred credits and other liabilities.......................................      750         770
Deferred income taxes........................................................      977         996
Minority Interests...........................................................       71          73
SHAREHOLDERS' EQUITY
  Redeemable non-retractable preference shares...............................      203         203
  Common shareholders' equity
     Common shares...........................................................    1,244       1,235
     Retained earnings.......................................................    3,403       3,217
     Deferred translation adjustments........................................      176         209
                                                                               -------     -------
                                                                                 4,823       4,661
                                                                               -------     -------
Total shareholders' equity...................................................    5,026       4,864
                                                                               -------     -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...................................  $ 9,490     $ 9,325
                                                                               =======     =======
COMMON SHAREHOLDERS' EQUITY PER COMMON SHARE.................................  $ 21.24     $ 20.57
                                                                               =======     =======
RATIO OF TOTAL BORROWINGS TO EQUITY..........................................    23:77       23:77
                                                                               =======     =======
</TABLE>
 
                                        5
<PAGE>   6
 
                            ALCAN ALUMINIUM LIMITED
 
                  INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
                                  (unaudited)
 
<TABLE>
<CAPTION>
                                                                                Six months ended
                                                                                    June 30
                                                                               ------------------
                                                                               1997         1996
                                                                               -----        -----
                                                                                (in millions of
                                                                                      US$)
<S>                                                                            <C>          <C>
OPERATING ACTIVITIES
  Net income..............................................................     $ 259        $ 237
  Adjustments to determine cash from operating activities:
     Depreciation.........................................................       217          218
     Deferred income taxes................................................        (6)          18
     Equity income -- net of dividends....................................         3            7
     Change in operating working capital..................................      (262)        (124)
     Change in deferred charges, other assets, deferred credits and other
      liabilities -- net..................................................        (4)         (12)
     (Gain) Loss on sales of businesses -- net............................       (13)           1
     Other -- net.........................................................        22          (24)
                                                                               -----        -----
CASH FROM OPERATING ACTIVITIES............................................       216          321
FINANCING ACTIVITIES
  New debt................................................................        35           47
  Debt repayments.........................................................       (34)        (295)
                                                                               -----        -----
                                                                                   1         (248)
  Short-term borrowings -- net............................................        77           25
  Common shares issued....................................................         9            6
  Dividends -- Alcan shareholders (including preference)..................       (73)         (78)
            -- Minority interests.........................................        (2)          --
                                                                               -----        -----
CASH FROM (USED FOR) FINANCING ACTIVITIES.................................        12         (295)
INVESTMENT ACTIVITIES
  Property, plant and equipment...........................................      (230)        (167)
  Net proceeds from disposal of businesses and other assets...............        48          372
                                                                               -----        -----
CASH FROM (USED FOR) INVESTMENT ACTIVITIES................................      (182)         205
Effect of exchange rate changes on cash and time deposits.................        --           (1)
                                                                               -----        -----
INCREASE IN CASH AND TIME DEPOSITS........................................        46          230
Cash of companies deconsolidated..........................................       (11)          --
Cash and time deposits -- beginning of period.............................       546           66
                                                                               -----        -----
Cash and time deposits -- end of period...................................     $ 581        $ 296
                                                                               =====        =====
</TABLE>
 
                                        6
<PAGE>   7
 
                            ALCAN ALUMINIUM LIMITED
 
                         INFORMATION BY PRODUCT SECTOR
                                  (unaudited)
 
<TABLE>
<CAPTION>
                                                               Period ended June 30
                                            -----------------------------------------------------------
                                                  SALES AND OPERATING REVENUES              OPERATING
                                            -----------------------------------------        INCOME   
                                                Intersector           Third parties          
                                            -------------------     -----------------     -------------
                                             1997        1996        1997       1996      1997     1996
                                            -------     -------     ------     ------     ----     ----
                                                               (in millions of US$)
<S>                                         <C>         <C>         <C>        <C>        <C>      <C>
SECOND QUARTER
Raw materials and chemicals.............    $   131     $   142     $  126     $  132     $ 31     $ 27
Primary metal...........................        378         419        383        376      136      139
Fabricated products.....................         --          --      1,499      1,443       94       57
Intersector and other items.............       (509)       (561)         3          5      (19)      29
                                            -------     -------     ------     ------     -----    -----
                                            $    --     $    --     $2,011     $1,956     $242     $252
                                            =======     =======     ======     ======     =====    =====
Reconciliation to net income
  Equity income (loss)..................                                                    (1)      (5)
  Corporate offices.....................                                                   (27)     (29)
  Interest..............................                                                   (26)     (32)
  Income taxes..........................                                                   (72)     (74)
                                                                                          -----    -----
  NET INCOME............................                                                  $116     $112
                                                                                          =====    =====
</TABLE>
 
<TABLE>
<CAPTION>
                                                               Period ended June 30
                                            -----------------------------------------------------------
                                                  SALES AND OPERATING REVENUES              OPERATING            
                                            ----------------------------------------         INCOME   
                                                Intersector           Third parties          
                                            -------------------     -----------------     -------------
                                             1997        1996        1997       1996      1997     1996
                                            -------     -------     ------     ------     ----     ----
                                                               (in millions of US$)
<S>                                         <C>         <C>         <C>        <C>        <C>      <C>
SIX MONTHS
Raw materials and chemicals.............    $   244     $   261     $  246     $  275     $ 39     $ 57
Primary metal...........................        769         930        756        742      302      302
Fabricated products.....................         --          --      2,871      2,930      159       98
Intersector and other items.............     (1,013)     (1,191)         8          8      (14)      45
                                            -------     -------     ------     ------     -----    -----
                                            $    --     $    --     $3,881     $3,955     $486     $502
                                            =======     =======     ======     ======     =====    =====
Reconciliation to net income
  Equity income (loss)..................                                                     2        1
  Corporate offices.....................                                                   (61)     (55)
  Interest..............................                                                   (51)     (68)
  Income taxes..........................                                                  (117)    (143)
                                                                                          -----    -----
  NET INCOME............................                                                  $259     $237
                                                                                          =====    =====
</TABLE>
 
                                        7
<PAGE>   8
 
                            ALCAN ALUMINIUM LIMITED
 
               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 1997
                                  (UNAUDITED)
 
1.   DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
     ACCOUNTING PRINCIPLES (GAAP)
 
     Differences relate principally to accounting for deferred income taxes and
     foreign currency translation.


<TABLE>
<CAPTION>
     Reconciliation of Canadian and U.S. GAAP
          
                                                                1997                    1996
                                                         -------------------     -------------------
                                                            AS         U.S.         As         U.S.
                                                         REPORTED      GAAP      Reported      GAAP
                                                         --------     ------     --------     ------
                                                            (in millions of US$, except per share
                                                         amounts)
    <S>                                                  <C>          <C>        <C>          <C>
    Net income
    First quarter......................................   $  143      $  142      $  125      $  120
    Second quarter.....................................      116         141         112         118
                                                          ------      ------      ------      ------
    Six months.........................................   $  259      $  283      $  237      $  238
                                                          ------      ------      ------      ------
    Net income attributable to common shareholders.....   $  254      $  278      $  227      $  228
                                                          ------      ------      ------      ------
    Net income per common share........................   $ 1.12      $ 1.23      $ 1.00      $ 1.01
                                                          ------      ------      ------      ------
    Deferred income taxes -- June 30...................   $  977      $  722      $  984      $  758
                                                          ------      ------      ------      ------
    Retained earnings -- June 30.......................   $3,403      $3,730      $3,118      $3,412
                                                          ------      ------      ------      ------
    Deferred translation adjustments -- June 30........   $  176      $   98      $  230      $  155
                                                          ======      ======      ======      ======
</TABLE>
 
2.   INCOME TAXES
 
<TABLE>
<CAPTION>
                                                           Second Quarter            Six months
                                                         -------------------     -------------------
    <S>                                                  <C>          <C>        <C>          <C>
    Current............................................   $   76      $  57       $  123      $ 125
    Deferred...........................................       (4)        17           (6)        18
                                                          ------      ------      ------      ------
                                                          $   72      $  74       $  117      $ 143
                                                          ======      ======      ======      ======
</TABLE>
 
     The composite of the applicable statutory corporate income tax rates in
     Canada is 40.3% (40.1% for 1996).
 
     The difference between income taxes calculated at the composite rate and
     the amounts shown as reported is attributable to prior years' tax
     adjustments and investment and other allowances.
 
     In 1996, the difference is attributable to investment and other allowances
     and tax exempt items partially offset by exchange.
 
3.   NET INCOME PER COMMON SHARE
 
     Net income per common share is based on the average number of shares
     outstanding during the period (second quarter 1997: 227.0 million; 1996:
     226.1 million; six months 1997: 226.9 million; 1996: 226.0 million). As at
     June 30 1997, there were 227,042,376 common shares outstanding.
 
4.   SUPPLEMENTARY INFORMATION
 
     STATEMENT OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                                        Second
                                                                        Quarter        Six months
                                                                      -----------     -------------
                                                                      1997    1996    1997     1996
                                                                      ---     ---     ----     ----
    <S>                                                               <C>     <C>     <C>      <C>
    Interest paid.................................................    $22     $30     $ 50     $ 72
    Income taxes paid.............................................     70      68      130      141
                                                                      ---     ---     ----     ----
</TABLE>
 
                                        8
<PAGE>   9
 
SUMMARIZED FINANCIAL INFORMATION
 
     The following is summarized consolidated financial information for Alcan
Aluminum Corporation, a wholly-owned subsidiary in the United States.
 
<TABLE>
<CAPTION>
                                                                    Second
                                                                    Quarter           Six months
                                                                 -------------     -----------------
                                                                 1997     1996      1997       1996
                                                                 ----     ----     ------     ------
<S>                                                              <C>      <C>      <C>        <C>
RESULTS OF OPERATIONS
Revenues.....................................................    $954     $906     $1,819     $1,728
Costs and expenses...........................................     897      858      1,737      1,638
                                                                 ----     ----     ------     ------
Income before incomes taxes..................................      57       48         82         90
Income taxes.................................................      22       19         32         35
                                                                 ----     ----     ------     ------
Net income...................................................    $ 35     $ 29     $   50     $   55
                                                                 ====     ====     ======     ======
</TABLE>
 
<TABLE>
<CAPTION>
                                                                           JUNE 30     December 31
                                                                            1997          1996
                                                                           -------     -----------
<S>                                                                        <C>         <C>
FINANCIAL POSITION
Current assets.........................................................     $ 820         $ 868
Current liabilities....................................................       459           578
                                                                            -----         -----
Working capital........................................................       361           290
Property, plant and equipment -- net...................................       748           756
Other liabilities -- net...............................................      (199)         (186)
                                                                            -----         -----
                                                                              910           860
Debt not maturing within one year......................................       105           105
                                                                            -----         -----
Net assets.............................................................     $ 805         $ 755
                                                                            =====         =====
</TABLE>
 
     In the above figures, inventories have been valued principally by the
last-in, first-out (LIFO) method. In the Company's consolidated financial
statements, the average cost method is used.
 
5.   SUBSEQUENT EVENT-CONTINGENT LIABILITY
 
     In July 1997, the Company received a notice of reassessment from the
     Canadian federal tax authorities seeking additional taxes of $22 in respect
     of 1988, as well as interest of $38. The Company is contesting the
     reassessment. Most of the additional taxes claimed relate to transfer
     pricing issues and, if these additional taxes are finally held to be
     payable in Canada, the Company believes that the major portion would be
     recoverable in other countries. However, any interest on additional taxes
     ultimately held to be payable in Canada would not be recoverable in other
     countries. It is expected that a notice of reassessment related to l989
     will also be received before the end of the year. The Company does not
     currently expect any significant impact from reassessments for years
     subsequent to 1989. Any necessary adjustments to the tax provisions of
     prior years will be reflected in the Company's results if it is determined
     that existing provisions are inadequate.
 
     In the opinion of management, all adjustments necessary for a fair
presentation of interim period results have been included in the financial
statements. These interim results are not necessarily indicative of results for
the full year.
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.
 
RESULTS OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                     Second quarter          Six months          First
                                                    -----------------     -----------------     quarter
                                                     1997       1996       1997       1996       1997
                                                    ------     ------     ------     ------     -------
                                                    (US$ millions, except per share amounts)
<S>                                                 <C>        <C>        <C>        <C>        <C>
Highlights
Sales and operating revenues....................    $2,011     $1,956     $3,881     $3,955     $1,870
Net income......................................       116        112        259        237        143
Net income per common share.....................      0.50       0.47       1.12       1.00       0.62
</TABLE>
 
                                        9
<PAGE>   10
 
     The Company reports consolidated net income of US$116 million for the
quarter ended June 30, 1997, compared to $112 million for the corresponding
period of 1996. After preference share dividends, net income per common share
for the quarter is 50 cents compared to 47 cents a year earlier.
 
     Net income in the first quarter of 1997, which included after-tax gains of
$36 million (16 cents per share) from the sale of downstream businesses and a
favourable income tax adjustment in Canada, was $143 million, or 62 cents per
share.
 
<TABLE>
<CAPTION>
                                                                     Second                       First
                                                                     quarter       Six months     quarter
                                                                  -------------   -------------   -----
VOLUMES                                                           1997    1996    1997    1996    1997
                                                                  -----   -----   -----   -----   -----
                                                                          (thousands of tonnes)
<S>                                                               <C>     <C>     <C>     <C>     <C>
Shipments
  Ingot products*.............................................      216     203     428     397     212
  Fabricated products.........................................      448     401     859     785     411
Fabrication of customer-owned metal...........................       73      70     140     126      67
                                                                  ------  ------  ------  ------  ------
                                                                     --      --      --      --      --
Total volume..................................................      737     674   1,427   1,308     690
                                                                  ======  ======  ======  ======  ======
Ingot product realizations (US$ per tonne)....................    1,770   1,727   1,733   1,737   1,696
Fabricated product realizations (US$ per tonne)...............    2,990   3,258   2,980   3,363   2,969
</TABLE>
 
*includes primary and secondary ingot and scrap
 
     Sales and operating revenues for the second quarter of 1997 were 8% higher
than in the first quarter and 3% ahead of the comparable period of 1996. Higher
volumes compared to the year-ago quarter were offset by lower fabricated product
price realizations.
 
     Total fabricated products volumes, which include products fabricated from
customer-owned metal, were 521 thousand tonnes (kt) in the second quarter, some
9% higher than the previous quarter and 11% up on the second quarter of 1996.
 
     Fabricated product realizations and margins showed a slight improvement
over the first quarter. The lower average realization compared to the year-ago
quarter reflects weaker prices, currency movements and a change in mix due
primarily to business disposals.
 
     Cost of sales and operating expenses were up 3% in the second quarter of
1997 compared to the year-ago quarter, in line with the increase in sales and
operating revenues. For the half year, cost of sales and operating expenses were
lower than in the comparable period of 1996 reflecting changes in sales mix, due
principally to business disposals, cost reductions, and currency movements.
 
     Selling, administrative and general expenses were $12 million higher than
the year-ago quarter, largely reflecting the costs of a project to replace and
upgrade financial systems throughout the group.
 
     The effective tax rate was 38% for the second quarter of 1997 compared to
24% in the first quarter which included the favourable tax adjustment in Canada.
The difference between this rate and the Company's composite statutory rate in
Canada of 40.3% is attributable principally to investment and other allowances.
 
PRODUCT SECTOR REVIEW
 
     The Company reports selected information by major product sector, viewed on
a stand-alone basis. Transactions between product sectors are conducted on an
arm's length basis and reflect market-related prices. Thus, profit on all
alumina produced by the Company, whether sold to third parties or used in the
Company's smelters, is included in the raw materials and chemicals sector.
Similarly, income from primary metal operations is mainly profit on metal
produced by the Company, whether sold to third parties or used in the Company's
fabricating operations. Income from fabricated product businesses represents
only the fabricating profit on rolled products and downstream businesses.
 
                                       10
<PAGE>   11
 
<TABLE>
<CAPTION>
                                                                Second
                                                                quarter         Six months        First
                                                             -------------     -------------     quarter
                                                             1997     1996     1997     1996      1997
                                                             ----     ----     ----     ----     -------
                                                             (US$ millions)
<S>                                                          <C>      <C>      <C>      <C>      <C>
Operating income
  Raw materials and chemicals............................      31       27       39       57         8
  Primary metal..........................................     136      139      302      302       166
  Fabricated products....................................      94       57      159       98        65
  Intersector and other items............................     (19)      29      (14)      45         5
                                                              ---      ---      ---      ---       ---
                                                              242      252      486      502       244
Equity income (Loss).....................................      (1)      (5)       2        1         3
Corporate offices........................................     (27)     (29)     (61)     (55)      (34)
Interest.................................................     (26)     (32)     (51)     (68)      (25)
Income taxes.............................................     (72)     (74)    (117)    (143)      (45)
                                                              ---      ---      ---      ---       ---
Net income...............................................     116      112      259      237       143
                                                              ===      ===      ===      ===       ===
</TABLE>
 
     Operating profits from raw materials and chemicals operations showed an
improvement over the first quarter due to higher price realizations.
 
     Results from primary operations were lower than in the first quarter,
partly because of a decline in price realizations on inter-divisional sales of
metal which, with respect to certain rolled products contracts, are based upon
LME ingot prices prevailing in earlier periods. In addition, first quarter
results included some gains on metal hedging.
 
     The improvement in results from fabricated product businesses continued in
the second quarter reflecting increased shipments and an improvement in profit
margins due to higher utilization of capacity and cost reductions.
 
     "Intersector and other items" includes the deferral or realization of
profits on intersector sales of metal. Realizations of such deferred profits
were substantial in 1996 due to falling ingot prices at that time. In the first
half of 1997 profits on intersector sales were deferred due to higher prevailing
ingot prices.
 
     A favourable tax adjustment of $26 million in Canada, arising out of
settlement of a dispute relating to prior years, is included in the tax charge
for the first quarter of 1997.
 
GEOGRAPHIC REVIEW
 
<TABLE>
<CAPTION>
                                                                Second
                                                                quarter         Six months        First
                                                             -------------     -------------     quarter
                                                             1997     1996     1997     1996      1997
                                                             ----     ----     ----     ----     -------
                                                             (US$ millions)
<S>                                                          <C>      <C>      <C>      <C>      <C>
Net income (Loss)
  Canada.................................................      46       54      131      105        85
  United States..........................................      40       27       66       48        26
  South America..........................................       5       14       19       20        14
  Europe.................................................      15        2       27       15        12
  Asia and Pacific.......................................       7        1       20       15        13
  Other (including eliminations).........................       3       14       (4)      34        (7)
                                                              ---      ---      ---      ---       ---
  Net income.............................................     116      112      259      237       143
                                                              ===      ===      ===      ===       ===
</TABLE>
 
     In Canada, operating net income is down from the first quarter due to the
favourable income tax adjustment included in the first quarter's result as well
as the timing impact on inter-divisional metal sales referred to above.
 
     In the United States, net income from operations improved further in the
second quarter reflecting strong fabricated product sales volumes and margins.
 
     South American results were lower than in the first quarter which included
a $10 million gain on the sale of non-strategic businesses.
 
     Business conditions continued to be difficult in Europe, but some
improvement was achieved due to higher shipments and cost reductions.
 
                                       11
<PAGE>   12
 
     In the Asia and Pacific region, results continue to be unsatisfactory,
largely due to the poor performance of our investment in Japan.
 
     The "Other" category includes a charge for the deferral of unrealized
profits on inter-regional sales of ingot whereas in the year-ago quarter this
result was favourable as previously deferred profits were recognized.
 
LIQUIDITY AND CAPITAL RESOURCES
 
OPERATING ACTIVITIES
 
     Cash generated from operating activities during the first half of 1997 was
$216 million, down from $321 million in the comparable period of 1996 primarily
due to an increase in operating working capital, resulting principally from
higher sales volumes.
 
FINANCING ACTIVITIES
 
     Cash from financing activities in the first half of 1997 was $12 million
compared to an outflow in the comparable period of 1996 of $295 million. In the
1996 period, the Company prepaid $217 million of debentures incurring an after-
tax charge of $12 million. The debt:equity ratio at June 30 was unchanged from
March at 23:77 versus 26:74 in June 1996. The ratio at the end of the second
quarter improves to 16:84 when adjusted to reflect surplus cash. Total debt at
June 30, 1997, was $1,532 million versus $1,731 million at the same date last
year.
 
     At the end of the second quarter of 1997, the Company had cash and time
deposits of $581 million.
 
INVESTMENT ACTIVITIES
 
     Capital expenditures during the first half of 1997 were $230 million,
compared to $167 million a year earlier. Significant investment decisions
reached so far in 1997 include a $350 million expansion of sheet rolling
capacity in Brazil and the $130 million development of a bauxite mine in
Australia. Both investments are scheduled for completion in 1999.
 
     Through the first six months of 1997, net proceeds from disposals of
businesses and other assets were $48 million, compared to $372 million a year
earlier, most of which was generated by the sale of downstream businesses in the
United Kingdom.
 
CONTINGENT LIABILITY
 
     In July 1997, the Company received a notice of reassessment from the
Canadian federal tax authorities seeking additional taxes. This is discussed in
Note 5 to the Interim Consolidated Financial Statements in Item 1 of Part I of
this report.
 
KEMANO COMPLETION PROJECT ("KCP")
 
     On August 5, 1997, the Company and the British Columbia Government signed a
final settlement agreement resolving the issues surrounding KCP. A further
discussion of this matter is contained in Item 5 of Part II of this report. The
Company's investment in KCP was written down in the third quarter of 1995 by an
extraordinary after-tax charge to income of $280 million.
 
PART II -- OTHER INFORMATION
 
ITEMS 1. THROUGH 4.
 
The registrant has nothing to report under these items.
 
ITEM 5. OTHER INFORMATION
 
     On August 5, 1997, the Company and the British Columbia ("B.C.") Government
signed a final settlement agreement ("Agreement"), which resolves the issues
surrounding the half-built Kemano Completion (hydroelectric) Project ("KCP") in
northern B.C.
 
     The Agreement ends conditionally the Company's court action against the
B.C. Government subject to the Company's ability to continue the action if the
B.C. Government abrogates by legislation, before January 1, 2005, certain of the
Company's rights. In the action the Company claims damages for the losses it
incurred as a result of the B.C. Government's rejection of KCP.
 
                                       12
<PAGE>   13
 
     In return for ending its court action, the Company benefits under the
Agreement through both a replacement electricity supply agreement and the
enhancement of an existing power sales agreement with B.C. Hydro. Under the
replacement electricity supply agreement, the B.C. Government would supply the
Company with up to 175 average annual MW of power if the Company builds a new
smelter in B.C. which begins operations between January 1, 2003 and January 1,
2010. The Company has also obtained immediate issuance of a permanent water
license for its existing hydroelectric facility.
 
     The Agreement obliges the Company to announce publicly its intention to use
all reasonable efforts, subject to economic and market conditions, to build a
new aluminum smelter in Kitimat and to announce publicly its intention to
restart idle capacity at its existing Kitimat smelter by January 1, 1998. Alcan
made these announcements on August 5, 1997.
 
     The Agreement also provides for the funding of environmental enhancements
to the Nechako River, with the Company making matching contributions of up to
CAN$50-million (currently US$35-million), and for the stimulation of sustainable
economic activity in northern B.C.
 
     The foregoing is a summary of the Agreement and does not purport to be
complete. Reference is made to the terms of the Agreement itself, a copy of 
which is filed herewith.
 
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
 
(a)   Exhibits
 
     (10)  Material Contracts
 
        10.1 B.C./Alcan 1997 Agreement. (Filed herewith.)
 
     (99)  Cautionary statement for purposes of the "Safe Harbor" provisions of
        the Private Securities Litigation Reform Act of 1995. (Filed herewith.)
 
(b)   Reports on Form 8-K
 
     None were filed in the quarter ended June 30, 1997.
 
                                       13
<PAGE>   14
 
                                   SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
 
                                             ALCAN ALUMINIUM LIMITED
 
Dated: August 14, 1997                   By: (signed)
                                          Denis G. O'Brien
                                          Controller
                                          (Chief Accounting Officer
                                          and a Duly Authorized Officer)
 
                                       14
<PAGE>   15
 
                            EXHIBIT 10.1: BC/ALCAN 1997 AGREEMENT
 
      This Agreement is made the 5th day of August, 1997,
 
BETWEEN:
 
             HER MAJESTY THE QUEEN IN RIGHT OF THE PROVINCE OF BRITISH COLUMBIA,
             represented by the Minister of Education, Skills and Training
 
             ("Province")
AND:                                                           OF THE FIRST PART
 
             ALCAN ALUMINIUM LIMITED
 
             ("Alcan")
                                                             OF THE SECOND PART.
 
WHEREAS the Province and Alcan wish to resolve all issues arising in connection
with the action commenced by Alcan against the Province in the Supreme Court of
British Columbia, Vancouver Registry (Action No. C970386).
 
      NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration of the
premises and of the covenants and agreements hereinafter set forth (the receipt
and sufficiency of which is acknowledged by each of the parties) the parties
covenant and agree that:
 
1.     DEFINITIONS AND INTERPRETATION
 
1.1    Words and phrases defined in Schedule 1 and used in this Agreement have
the meanings given in Schedule 1. Words and phrases used in a Schedule and
defined therein have, for the purpose of the Schedule, the meanings given
therein.
 
1.2    Rules of interpretation set out in Schedule 1 apply to this Agreement.
 
1.3    The following Schedules are attached to this Agreement:
 
        1     Definitions and Interpretation
 
        2A   Replacement Electricity Supply Agreement
 
        2B   LTEPA Memorandum
 
        3A   1997 Amendment
 
        3B   Final Water Licence
 
        3C   Amended Permit
 
        4     Nechako Environmental Enhancement Fund
 
        5     Northern Development Fund
 
        6     Mutual Release
 
1.4    Schedule 1 -- Definitions and Interpretation, Schedule 4 -- Nechako
Environmental Enhancement Fund and Schedule 5 -- Northern Development Fund form
part hereof and the remaining Schedules are attached hereto for reference
purposes and are being entered into pursuant hereto.
 
2.     POWER AGREEMENTS
 
2.1    Replacement Electricity Supply Agreement
 
      Pursuant to and concurrently with the execution and delivery of this
Agreement, the Province and Alcan are entering into the Replacement Electricity
Supply Agreement to provide Alcan, on the terms and conditions therein set out,
with a source of electric power to replace in part the electric power Alcan
would have generated from its Kemano Completion Project if Alcan had completed
that project.
 
2.2    LTEPA and LTEPA Memorandum
<PAGE>   16
 
      The Province for itself, and on behalf of BC Hydro, acknowledges that BC
Hydro will abide, and Alcan acknowledges that it will abide, by the LTEPA,
including the LTEPA Memorandum. Pursuant to and concurrently with the execution
and delivery of this Agreement, BC Hydro and Alcan are entering into the LTEPA
Memorandum.
 
3.     1997 AMENDMENT, FINAL WATER LICENCE AND AMENDED PERMIT
 
      Pursuant to and concurrently with the execution and delivery of this
Agreement, the Province and Alcan are entering into the 1997 Amendment and the
Province is issuing to Alcan the Final Water Licence and Amended Permit.
 
4.     NECHAKO ENVIRONMENTAL ENHANCEMENT FUND
 
      The parties agree to the arrangements relating to the Nechako
Environmental Enhancement Fund described in Schedule 4.
 
5.     NORTHERN DEVELOPMENT FUND
 
      The parties agree to the arrangements relating to the Northern Development
Fund described in Schedule 5.
 
6.     KCP ACTION
 
6.1    The consideration given by the Province under this Agreement, the
Concurrent Agreements, the Final Water Licence and the Amended Permit is, inter
alia, for the release of the claim for loss by Alcan in Action No. C970386 in
accordance with this Agreement.
 
6.2    Concurrently with the execution and delivery of this Agreement, the
parties are executing and delivering the Mutual Release. In section 1 thereof,
the Mutual Release contains a condition that, if fulfilled, renders the Mutual
Release void ab initio.
 
6.3    The parties shall forthwith take appropriate steps to place the Action in
abeyance. Alcan shall have the right to continue the Action only if the Mutual
Release is rendered void ab initio in accordance with section 1 thereof, and, if
it is not so rendered void ab initio, the Province shall have the right to have
the Action dismissed by consent without costs to either party and Alcan hereby
consents to such dismissal.
 
6.4    The parties agree that they will co-operate with each other and take all
steps that may be required to ensure that either Alcan is able to continue with
the Action if it were to become entitled to do so or the Action is dismissed by
consent if Alcan were not entitled to do so, as the case may be.
 
6.5    This Agreement provides for the settlement of the Action, but nothing in
this Agreement constitutes, or may be relied upon by any party as, an admission
of any liability, fact or legal principle relative to the Action on the part of
the Province or of Alcan.
 
7.     FURTHER ASSURANCES
 
7.1    General
 
      Each party will do all things necessary, within its lawful capacity,
directly and indirectly, through its subsidiaries, agents and representatives,
to validate, make effective and give full force and effect to this Agreement,
and to implement the transactions contemplated by this Agreement. The foregoing
does not require the Province to do anything that would have the effect of
fettering the exercise of any statutory power.
 
7.2    Dispute Resolution
 
      If at any time before January 1, 2012:
 
      a)     the Province, its agents, or any person acting under the authority
           of the Province or its agents exercise any executive power or
           authority, whether or not constituting a breach under the agreements
           and documents described in (i) to (iv) below, which abrogates in
           whole or in part:
 
           (1)    the 1950 Agreement, as amended;
 
           (2)    the 1987 Settlement Agreement;
 
           (3)    the LTEPA, or
 
           (4)    this Agreement, any of the Concurrent Agreements, the Final
                  Water Licence or the Amended Permit,

           excluding, however, for greater certainty, the exercise in good faith
           by the Province, its agents or any person acting under
 
                                        2
<PAGE>   17
 
           the authority of the Province or its agents, of any executive power
           or authority regarding any approval, including without limitation the
           granting or failure to grant any regulatory approval, licence or
           permit, required for the New Smelter; or
 
      b)     an action or proceeding is brought by a third party not assisted or
           supported, directly or indirectly, by Alcan or is brought by a
           regulatory or administrative body on it own initiative that results
           in a court or a regulatory or administrative body making a final
           order, in respect of which all rights of review or appeal have been
           exercised or exhausted or the time permitted therefor has expired,
           that the Province or BC Hydro as applicable, lacked the authority to
           enter into or to carry out their respective obligations under this
           Agreement, the Concurrent Agreements, the Final Water Licence or the
           Amended Permit, provided that Alcan vigorously defends any such
           action or proceeding to the extent that it is lawfully entitled to do
           so,
 
then, at the request of Alcan, Alcan and the Province shall negotiate promptly
and in good faith and endeavour to agree upon actions that may lawfully be taken
by the Province, or upon adjustments (the "Agreement Adjustments") to this
Agreement, the Concurrent Agreements (other than the Mutual Release), the Final
Water Licence or the Amended Permit, or upon another basis of resolution as the
parties may agree, that are necessary to restore substantially the benefits
thereunder that would have accrued to Alcan if the action described in (a) above
had not been taken or the order described in (b) above had not been made. If the
parties are unable to agree upon appropriate lawful actions by the Province,
adjustments or other resolution within 90 days after Alcan's request to do so,
then the settlement of the terms and conditions of the Agreement Adjustments
shall be referred to and finally resolved by arbitration administered by the
British Columbia International Commercial Arbitration Centre pursuant to its
Rules. If at the time that arbitration is commenced under this section the
British Columbia International Commercial Arbitration Centre or its successor,
does not exist, or its Rules do not provide for an administered arbitration,
then that dispute shall be referred to and finally resolved by arbitration under
the Commercial Arbitration Act, as revised from time to time. The number of
arbitrators is 3 and the place of arbitration is Vancouver, British Columbia.
Notwithstanding the foregoing provisions of this section 7.2, nothing in this
section prevents or restricts in any manner whatsoever a party commencing and
continuing an action or proceeding against the other party for or in respect of
any breach, or failure to comply with, any provision of any of the agreements
and documents described in subparagraphs (a)(i) to (iv) above, except only that,
in the case of the exercise of any power or authority described in subparagraph
(a) above that may constitute a breach of, or failure to comply with, any
agreement or document described in subparagraphs (a)(i) to (iv) above, Alcan
must elect either to exercise its rights under that agreement or document or to
exercise its rights under this section 7.2.
 
8.     STATUS OF LEGAL RIGHTS AND AGREEMENTS
 
8.1    Confirmation of Agreements
 
      The Province for itself, and as to the LTEPA on behalf of BC Hydro, and
Alcan confirm that the 1950 Agreement, as amended, the 1987 Settlement Agreement
and the LTEPA are in full force and effect in accordance with their respective
terms and conditions.
 
8.2    Nanika Replacement
 
      Alcan agrees that any rights which Alcan may have been granted pursuant to
the letter of September 2, 1987 from the Honourable Jack Davis, the then
Minister of Energy, Mines and Petroleum Resources, on behalf of the Province to
Alcan and the letter of September 3, 1987 from Alcan to the Province in response
with reference to a replacement of the rights Alcan gave up under the 1987
Amendment to use water from the Nanika River are extinguished and of no further
force or effect.
 
9.     ANNOUNCEMENT OF NEW SMELTER/RESTART OF IDLE CAPACITY
 
      Upon execution and delivery of this Agreement, Alcan shall announce
publicly its intention to use all reasonable efforts, subject to market and
economic conditions and force majeure, to construct, itself or in association
with others, the New Smelter at Kitimat, B.C., and its decision to return any
idle capacity at its existing smelter at Kitimat, B.C. to full capacity on a
priority basis relative to other idle aluminum smelting capacity controlled by
Alcan, and, in any event, not later than January 1, 1998.
 
                                        3
<PAGE>   18
 
10.    GENERAL
 
10.1   Governing Laws
 
      This Agreement will be governed by and construed in accordance with the
applicable laws of Canada and of the Province of British Columbia.
 
10.2   Entire Agreement
 
      This Agreement, the Concurrent Agreements, the Final Water Licence and the
Amended Permit are the entire agreement between the parties relative to the
subject matter hereof.
 
10.3   Continuation of Agreement
 
      Except as herein provided, this Agreement will continue in full force and
effect for the duration of the Final Water Licence, and of all further licences,
permits and authorities issued or granted to Alcan or its successors or
permitted assigns.
 
10.4   Amendment
 
      This Agreement may be amended only by an instrument in writing signed by
the parties or their successors or permitted assigns.
 
10.5   Notices
 
      All notices, requests and other communications required or permitted to be
given under this Agreement must be in writing and delivered by hand as follows:
 
      To Alcan:
 
     Alcan Aluminium Limited
      1188 Sherbrooke Street West
      Montreal, Quebec, H3A 3G2
     Attention: Chief Legal Officer
 
     To the Province:
 
      Deputy Attorney General
      1001 Douglas Street
     Victoria, British Columbia V8V 1X4
 
or to such other address as may be given by notice as aforesaid by the
particular party, and will be deemed to have been given on the date of delivery.
 
10.6   Non-Waiver
 
      No waiver of any provision of this Agreement is enforceable unless in
writing and no such waiver will be deemed to, or will, constitute a waiver of
any other provision of this Agreement, nor will any such waiver constitute a
continuing waiver, unless otherwise expressly provided therein.
 
10.7   Jurisdiction
 
      Subject to section 7.2 hereof, the courts of the Province of British
Columbia, and courts to which appeals therefrom may be taken, have exclusive
jurisdiction in respect of any action, suit or proceeding arising out of or
relating to this Agreement, and the parties irrevocably and unconditionally
attorn to the jurisdiction of those courts in respect of any such action, suit
or proceeding. The foregoing does not affect any agreement to arbitrate
contained in any Concurrent Agreement.
 
10.8   Severability
 
      If any part of this Agreement is declared or held invalid for any reason,
that invalidity does not affect the validity of the remainder which continues in
full force and effect and must be construed as if this Agreement had been
executed without the invalid portion and it is hereby declared the intention of
the parties that this Agreement would have been executed without reference to
any portion which may, for any reason, be hereafter declared or held invalid.
 
                                        4
<PAGE>   19
 
10.9   Currency
 
      All amounts of money stated herein are expressed in Canadian dollars
unless otherwise stated.
 
10.10 Time
 
      Time is of the essence of this Agreement.
 
10.11 Enurement/Assignment
 
      This Agreement is binding upon and enures to the benefit of the Province
and its permitted assigns and is binding upon and enures to the benefit of Alcan
and its successors and permitted assigns. This Agreement may not be assigned by
either party without the prior written consent of the other party, which consent
may be arbitrarily withheld. The foregoing does not apply to the assignment of
any Concurrent Agreement permitted in accordance with its terms.
 
      IN WITNESS WHEREOF this Agreement has been executed and delivered by the
parties on the day and year first above written.
 
<TABLE>
<S>                                                <C>
                                                   HER MAJESTY THE QUEEN IN RIGHT
                                                   OF THE PROVINCE OF BRITISH
                                                   COLUMBIA, as represented by the Premier
                                                   of British Columbia and by the Minister
                                                   of Education, Skills and Training
                                                   Per: (signed) Glen Clark
                                                       Premier of British Columbia
                                                   Per: (signed) Paul Ramsey
                                                       Minister of Education, Skills and Training
                                                       and Minister responsible for the
                                                   Industrial
                                                       Development Act
 
Witness:                                           ALCAN ALUMINIUM LIMITED
(signed)                                           Per: (signed) Jacques Bougie
Signature                                              Jacques Bougie, President and Chief
                                                       Executive Officer
 
----------------------------------------------
Name Lorne D. Peterson
----------------------------------------------
Address Bowen Island, British Columbia
</TABLE> 
 
                                        5
<PAGE>   20
 
                                   SCHEDULE 1
 
                         DEFINITIONS AND INTERPRETATION
 
                             [Reference Section 1]
 
DEFINITIONS
 
"1950 AGREEMENT" means the agreement made December 29, 1950 between the Province
and Alcan and includes:
 
     (a)   Conditional Water Licence No. 19847 issued December 29, 1950 as
           amended by Amended Conditional Water Licence No. 19847 issued
           December 29, 1987;
 
     (b)   Permit Authorizing the Occupation of Crown Land No. 3449 issued
        December 29, 1950 as amended by Amended Permit Authorizing the
        Occupation of Crown Land No. 3449 issued December 29, 1987; and
 
     (c)   any plans, descriptions and other documents that, under the terms of
        the agreement as amended, are made part of it;
 
"1950 AGREEMENT, AS AMENDED" means the 1950 Agreement as amended by the 1987
Amendment and the 1997 Amendment;
 
"1987 AMENDMENT" means the agreement authorized by Order in Council 2572/87 and
made December 29, 1987 between the Province and Alcan;
 
"1987 SETTLEMENT AGREEMENT" means the agreement entered into between Alcan, Her
Majesty the Queen in Right of Canada, and the Province, dated September 14,
1987;
 
"1997 AMENDMENT" means the agreement authorized by Order in Council No. 0977 and
made August 5, 1997 between the Province and Alcan amending the 1950 Agreement,
as amended by the 1987 Amendment, a copy of which is attached as Schedule 3A;
 
"ACTION" means the action commenced by Alcan against the Province in the Supreme
Court of British Columbia, Vancouver Registry (Action No. C970386);
 
"ALCAN" means Alcan Aluminium Limited, a Canadian corporation (formerly named
"Aluminum Company of Canada, Limited"), and includes the successors and
permitted assigns of Alcan Aluminium Limited and any person claiming through it
or any of them;
 
"AMENDED PERMIT" means the Amended Permit issued to Alcan pursuant to the 1950
Agreement, as amended, a copy of which is attached as Schedule 3C;
 
"BC HYDRO" means British Columbia Hydro and Power Authority;
 
"CONCURRENT AGREEMENTS" means the Replacement Electricity Supply Agreement, the
1997 Amendment, the LTEPA Memorandum, and the Mutual Release;
 
"FINAL WATER LICENCE" means the Final Water Licence issued pursuant to the 1950
Agreement, as amended, a copy of which is attached as Schedule 3B;
 
"KEMANO COMPLETION PROJECT" means the Works and proposed Works comprised in the
hydroelectric project with that name, including:
 
     (a)   the plans, descriptions and other documents pertaining to components
        of that hydroelectric project that are filed with the Province by or on
        behalf of Alcan; and
 
     (b)   the Works and proposed Works comprised in the Kenney Dam Release
        Facility (as defined in the 1987 Settlement Agreement);
 
"LTEPA" means the Long Term Electricity Purchase Agreement between Alcan and BC
Hydro dated February 27, 1990;
 
"LTEPA MEMORANDUM" means the memorandum of even date herewith entered into
between BC Hydro and Alcan under the LTEPA and pursuant to section 2.2 of this
Agreement, a copy of which is attached as Schedule 2B;
 
"MUTUAL RELEASE" means the mutual release of even date herewith, a copy of which
is attached as Schedule 6;
 
"NECHAKO RIVER" means the Nechako River in British Columbia and includes all
streams and lakes tributary thereto;
 
                                        6
<PAGE>   21
 
"NEW SMELTER" means a new aluminium smelting facility of approximately 225,000
tonnes/annum to be announced by Alcan pursuant to section 9 of the Agreement and
as further defined in the Replacement Electricity Supply Agreement;
 
"REPLACEMENT ELECTRICITY SUPPLY AGREEMENT" means the agreement of even date
herewith entered into between the Province and Alcan pursuant to section 2.1 of
this Agreement, a copy of which is attached as Schedule 2A;
 
"SCHEDULE" means a schedule to this Agreement;
 
"WATER RELEASE FACILITY" means a water release facility at or near the Kenney
Dam that may be proposed for development pursuant to Schedule 4.
 
INTERPRETATION
 
      Grammatical variations of any defined terms have similar meanings; words
importing the singular number include the plural and vice versa where the
context requires; the division of this Agreement into separate sections,
subsections and Schedules, and the insertion of headings, are for convenience of
reference only and do not affect the interpretation of this Agreement.
References to a section within the agreement, or within a Schedule, mean a
section of the agreement or the Schedule, as the case may be, unless otherwise
indicated.
 
                                        7
<PAGE>   22
 
                                  SCHEDULE 2A
 
                            [Reference Section 2.1]
 
                    REPLACEMENT ELECTRICITY SUPPLY AGREEMENT
 
      This Agreement made the 5th day of August, 1997,
 
BETWEEN:
 
             HER MAJESTY THE QUEEN IN RIGHT OF THE PROVINCE OF BRITISH COLUMBIA,
             represented by the Minister of Education, Skills and Training
 
             ("Province")
AND:                                                           OF THE FIRST PART
 
             ALCAN ALUMINIUM LIMITED
 
             ("Alcan")
                                                              OF THE SECOND PART
 
WHEREAS the parties are entering into this Agreement pursuant to the provisions
of section 2.1 of the BC/ALCAN 1997 AGREEMENT;
 
      NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration of the
premises and for other good and valuable consideration, the receipt and
sufficiency of which is acknowledged by each of the parties, the parties agree
that:
 
1   DEFINITIONS AND INTERPRETATION
 
1.1 DEFINITIONS.  Words and phrases defined in this section 1.1 and used in this
Agreement have the meanings given in this section 1.1.
 
     (a)    "ADAPTED TERMS" means, with respect to each Eligible Sale, the price
        payable during the Substitution Period for electricity thereunder and
        all other terms and conditions applicable thereto during that period,
        adapted in accordance with section 7.2.2(d), so that such price, terms
        and conditions, when applied hereunder during the Substitution Period,
        are no more nor less favourable to the economic interests of the
        Province and BC Hydro than the price, terms and conditions of the
        Eligible Sale, provided however that in no event may any Adapted Terms
        extend the Supply Period beyond the date stated herein;
 
     (b)    "ALCAN" means Alcan Aluminium Limited, a Canadian corporation
        (formerly named "Aluminum Company of Canada, Limited"), and includes the
        successors and, if this Agreement is assigned, its Permitted Assign;
 
     (c)    "ALCAN'S SYSTEM" means the electrical generation and transmission
        system owned and operated by Alcan in British Columbia, and includes all
        modifications thereto and repairs and replacements thereof;
 
     (d)    "APPLICABLE FACTOR" means, in each Year, .155, less, in the years
        2003 to 2008 inclusive, the following:
 
<TABLE>
<CAPTION>
          YEAR
          <S>                                                                       <C>
          2003 - 2005.............................................................  .020
          2006....................................................................  .015
          2007....................................................................  .010
          2008....................................................................  .005
</TABLE>
 
     (e)    "AVMW" means average annual megawatts of energy;
 
     (f)     "BANK" means Royal Bank of Canada;
 
     (g)    "BASE ELECTRICITY" means up to 115 AvMW of electricity delivered to
        Alcan by the Province under this Agreement;
 
     (h)    "BASE ELECTRICITY PRICE" means the price payable for Base
        Electricity delivered hereunder, determined under section 7.2.1 or
        section 7.2.2, as applicable;
 
                                        8
<PAGE>   23
 
     (i)     "BC/ALCAN 1997 AGREEMENT" means the agreement made the 5th day of
        August, 1997 between the Province and Alcan;
 
     (j)     "BC HYDRO" means British Columbia Hydro and Power Authority and its
        successors;
 
     (k)    "BC HYDRO'S SYSTEM" means the electrical generation, transmission
        and distribution system owned and operated by BC Hydro in British
        Columbia, and includes all modifications thereto and repairs and
        replacements thereof;
 
     (l)     "BUSINESS DAY" means any day other than Saturday, Sunday or a day
        that is recognized in British Columbia as a national or provincial
        holiday;
 
     (m)   "DESIGNATED SCHEDULING REPRESENTATIVES" means the person or persons
        designated under section 4.2;
 
     (n)    "ELIGIBLE SALE" means a sale of electricity meeting all the
        following conditions:
 
        (i)   the vendor of the electricity is the Province or any of its
             agents;
 
        (ii)   the electricity is being sold to the owner or operator of a
             primary aluminum smelter operating in British Columbia for the
             purpose only of operating that smelter and related facilities; and
 
        (iii)  the sale is made under an agreement with a term exceeding 10
             years, inclusive of all renewals exercisable at the option of the
             purchaser, and involving the delivery and purchase of more than 50
             AvMW;
 
     (o)    "EXPERT" means a person appointed in accordance with section
        7.2.2(d) to determine Adapted Terms;
 
     (p)    "FORCE MAJEURE" means (i) acts of God, including without limitation
        earthquake, landslide, windstorm, ice storm, lightning, volcanic
        eruption; (ii) interruptions of generation or transmission service;
        (iii) strikes, shutdowns in anticipation of strikes, lock-outs and other
        labour disturbances; (iv) acts or omissions of a government or an agency
        or authority of government; (v) accidents, equipment breakdown,
        electrical disturbances and imbalances; (vi) riots, acts of sabotage,
        blockades, civil disobedience, fire, flood, wars, delays or
        interruptions in transportation; (vii) Forced Outage; (viii) any court
        injunction or order, or any other cause not reasonably anticipated or
        not within the control of the party claiming force majeure (including,
        in the case of force majeure claimed by the Province, a force majeure
        affecting BC Hydro), whether of the nature or subject matter herein
        enumerated or not, but excluding:
 
        (ix)  economic hardship or lack of financial means; and
 
        (x)   in the case of force majeure claimed by the Province or BC Hydro:
 
             (A)  acts or omissions of the government of British Columbia or an
                  agency or authority thereof; and
 
             (B)  a Single Contingency Outage.
 
     (q)    "FORCED OUTAGE" means the occurrence of component failure or similar
        condition which requires that a generating unit or other equivalent
        component, or both, be removed from service, but does not include a
        Single Contingency Outage;
 
     (r)     "KEMANO GENERATING STATION" means the hydroelectric generating
        station of Alcan at Kemano, British Columbia, and includes all
        modifications thereto and repairs and replacements thereof and all
        additional generating facilities made or constructed from time to time
        for the purpose of generating electricity using water held under Final
        Water Licence No. 102324, any amendment thereof or any licence issued in
        substitution or replacement thereof;
 
     (s)    "KITIMAT SUBSTATION" means the electrical substation of Alcan at its
        smelter at Kitimat, British Columbia;
 
     (t)     "LME PRICE" means, for each Month, the Canadian dollar equivalent,
        determined in accordance with section 7.2.3, of the average for the
        Month of the "official" 3 months' price per tonne for aluminum, 99.7%
        purity, announced daily by the London Metals Exchange ("LME") and
        expressed in U.S. dollars, as set by the quotation committee of the LME
        after the end of the second session of the Ring trading and published as
        bid and offer prices, provided that for the purpose of this Agreement
        the mid-point of the daily bid and offer prices will be taken, and
        provided also that if for any reason the foregoing ceases to be
        determinable, the Canadian dollar equivalent of the published price for
        aluminum that, of all published
 
                                        9
<PAGE>   24
 
        prices then available, most closely reflects the equivalent of the
        foregoing, as determined by written agreement between the parties, or
        failing agreement by arbitration hereunder, will be used as the "LME
        Price". For greater certainty the parties acknowledge that the price per
        tonne for aluminum described above is currently that price published on
        the Reuters Network under Reuters page reference MTLE in the London
        Financial Times against the line title "AM Official" on its commodities
        page report on prices;
 
     (u)    "MONTH" means a calendar month;
 
     (v)    "MW" means megawatt;
 
     (w)    "MWH" means megawatt hour;
 
     (x)    "MWH/T" means megawatt hour per tonne;
 
     (y)    "NECHAKO RIVER" means the Nechako River in British Columbia and
        includes all streams and lakes tributary thereto;
 
     (z)    "NEW SMELTER" means a new aluminum smelting facility having a
        designed annual production capacity of approximately 225,000 tonnes
        owned and/or operated by Alcan alone or with others and located in
        Kitimat, British Columbia, and includes all modifications thereto and
        repairs and replacements thereof;
 
     (aa)   "PERMITTED ASSIGN" means a person to whom this Agreement is assigned
        as permitted under section 12.4;
 
     (bb)   "POINT OF DELIVERY" means the point where BC Hydro's 287 KV
        transmission line dead-ends on Alcan's 287 KV switching station
        structure immediately east of the road to the existing Kitimat smelter
        and south of Anderson Creek or such other point of delivery as may be
        designated by written agreement between the parties;
 
     (cc)   "POWEREX" means British Columbia Power Exchange Corporation and its
        successors;
 
     (dd)   "PRIME RATE" means the prime rate of interest announced from time to
        time by the Bank as a reference rate used by it for the purpose of
        determining rates of interest charged by it to commercial borrowers for
        Canadian dollar loans;
 
     (ee)   "PROVINCE" means Her Majesty the Queen in Right of the Province of
        British Columbia or, if this Agreement is assigned, its Permitted
        Assign;
 
     (ff)    "PRUDENT UTILITY PRACTICES" means any of the practices, methods and
        acts engaged in or approved by a significant portion of the electric
        utility industry during the relevant time period, or any of the
        practices, methods and acts which in the exercise of reasonable judgment
        in light of the facts known at the time the decision was made, could
        have been expected to accomplish the desired result at a reasonable cost
        consistent with good business practices, reliability, safety and
        expedition. Prudent Utility Practices are not intended to be limited to
        the optimum practices, methods, or acts to the exclusion of all others,
        but rather to be acceptable practices, methods, or acts generally
        accepted in the Western Systems Coordinating Council region.
 
     (gg)   "REPLACEMENT ELECTRICITY" means Base Electricity and Supplementary
        Electricity as required for the operations of the Smelting Facilities
        after utilization of all electricity generated by the Kemano Generating
        Station after allowance for station service, Kemano township service and
        transmission losses;
 
     (hh)   "SINGLE CONTINGENCY OUTAGE" means an outage, exceeding one hour in
        duration, of BC Hydro's System that has the effect of preventing,
        hindering or delaying the Province in delivering or providing
        Replacement Electricity in accordance with this Agreement and that would
        not have had that effect if BC Hydro's supply to Alcan were designed and
        constructed to a double contingency standard according to Prudent
        Utility Practices, but for greater certainty excludes an outage caused
        by Alcan or by the manner in which Alcan's System is operated and
        maintained that would have caused the outage even if BC Hydro's supply
        to Alcan had been designed and constructed to a double contingency
        standard.
 
     (ii)    "SMELTING FACILITIES" means the existing aluminum smelting
        facilities at Kitimat, B.C., and includes all modifications thereto and
        repairs and replacements thereof, and when constructed, the New Smelter;
 
                                       10
<PAGE>   25
 
     (jj)    "START-UP OF THE NEW SMELTER" means the date of initial operation
        of the New Smelter at a load level which requires delivery hereunder of
        all or part of the Base Electricity to the Smelting Facilities in
        addition to utilization of all electricity generated at the Kemano
        Generating Station;
 
     (kk)   "SUBSTITUTION PERIOD" means the period commencing on the later of:
 
        (i)   the date of commencement of delivery of electricity under the
             Eligible Sale, or
 
        (ii)   the Supply Commencement Date,
 
        until the earlier of:
 
        (iii)  termination of the Eligible Sale; or
 
        (iv)  the date when Alcan has again exercised its right in respect of a
             subsequent Eligible Sale and the Substitution Period applicable
             thereto has commenced; or
 
        (v)   the expiration of the Supply Period;
 
     (ll)    "SUPPLEMENTARY ELECTRICITY" means electricity supplied as part of
        the firming services provided by the Province through BC Hydro, as agent
        for the Province, to Alcan, which is designed to increase Alcan's firm
        energy at Kitimat by 60 AvMW;
 
     (mm) "SUPPLEMENTARY ELECTRICITY PRICE" means the price payable by Alcan to
        the Province for Supplementary Electricity pursuant to section 7.3;
 
     (nn)   "SUPPLY COMMENCEMENT DATE" means a date specified by Alcan under
        section 5, but to be not earlier than January 1, 2003.
 
     (oo)   "SUPPLY PERIOD" means the period from and including the Supply
        Commencement Date to and including the earlier of (i) December 31, 2023
        and (ii) the date when this Agreement is terminated;
 
     (pp)   "SYSTEM" shall include all water storage, hydraulic, electrical
        generation, transmission and distribution facilities comprising either
        Alcan's System or BC Hydro's System, as the context requires, and
        "Systems" means both Alcan's System and BC Hydro's System;
 
     (qq)   "T" or "TONNE" means a metric tonne;
 
     (rr)    "YEAR" means a calendar year.
 
1.2   INTERPRETATION.  Grammatical variations of any defined terms have similar
meaning; words importing the singular number include the plural and vice versa
where the context requires; the division of this Agreement into separate
sections, and subsections, and the insertion of headings, are for convenience of
reference only and do not affect the interpretation of this Agreement. Words and
phrases having well known trade or technical meanings will be given those
meanings, unless otherwise defined herein.
 
2.     GENERAL OBLIGATIONS
 
2.1    SUPPLY.  Subject to the terms and conditions of this Agreement, the
Province shall supply Replacement Electricity, which the Province assures Alcan
as being continuously available to Alcan to meet its load requirements for the
Smelting Facilities, after giving effect to the provisions of section 2.6. The
Province is not obliged to supply Replacement Electricity until Start-Up of the
New Smelter occurs. The Province confirms its appointment of BC Hydro as agent
of the Province for the purpose of administering the performance of this
Agreement by the Province. The Province may change its agent for this purpose
with Alcan's written approval, such approval not to be withheld or delayed
unreasonably.
 
2.2    SPECIFICATION.  Replacement Electricity shall be in the form of 3 phase
alternating current at a nominal frequency of 60 Hertz and at a nominal voltage
of 287 kV. The voltage variation at the Point of Delivery shall be not more than
10% from the nominal voltage, except during contingency or emergency conditions.
 
2.3    PROTECTIVE AND CONTROL EQUIPMENT.  Alcan shall install, repair and
maintain, at its cost, on the Alcan System protective and control equipment
required in the reasonable opinion of BC Hydro and in accordance with Prudent
Utility Practices.
 
2.4    POINT OF DELIVERY.  Subject to this Agreement, the Province shall make
the Replacement Electricity available to Alcan at the Point of Delivery.
 
                                       11
<PAGE>   26
 
2.5    TITLE AND RISK.  Title to and risk of loss in respect of the Replacement
Electricity shall pass from the Province to Alcan at the Point of Delivery.
 
2.6    USE OF REPLACEMENT ELECTRICITY.  Alcan agrees that throughout the Supply
      Period:
 
      (a)    Alcan shall use all electricity generated at the Kemano Generating
           Station to meet the requirements of the Smelting Facilities prior to
           using any Base Electricity;
 
      (b)    Alcan shall use the full amount of the Base Electricity to meet the
           requirements of the Smelting Facilities before using any of the
           Supplementary Electricity;
 
      (c)    Alcan shall use the full amount of the Base Electricity to meet the
           requirements of the Smelting Facilities before using electricity
           obtained from any third party; and
 
      (d)    Alcan shall use the Replacement Electricity only to meet the
           requirements of the Smelting Facilities, and Alcan shall not sell,
           exchange or otherwise market any of the Replacement Electricity,
           without the prior written consent of the Province, which consent may
           be withheld arbitrarily and in the sole discretion of the Province.
 
2.7    OTHER AGREEMENTS.  Alcan warrants that from and after the Supply
Commencement Date it will not be bound by any agreement or commitment for the
delivery of electricity generated at the Kemano Generating Station to any other
person during the Supply Period that contravenes Alcan's obligations under
section 2.6.
 
3.     BASE ELECTRICITY
 
      Subject to the terms of this Agreement, commencing on the Supply
Commencement Date, and thereafter during the Supply Period, the Province shall
make available for sale and delivery to Alcan, and, as Alcan requires, shall
sell and deliver in accordance with Prudent Utility Practices, and Alcan shall
purchase, accept delivery of and pay for, the Base Electricity at delivery rates
not exceeding 115 MW and in consideration of payment of the amount determined
under section 7.2. Nothing in this Agreement obliges Alcan to purchase, accept
delivery of or pay for all or any part of the Base Electricity not taken by
Alcan.
 
4.     FIRMING SERVICES
 
4.1    PROVISION OF SUPPLEMENTARY ELECTRICITY.  Subject to the terms of this
Agreement, commencing on the Supply Commencement Date, and thereafter during the
Supply Period, the Province will provide Alcan with the Supplementary
Electricity to firm up Alcan's electric energy in accordance with the terms of
this section 4 and in consideration of payment of the amount determined under
section 7.3.
 
4.2    GENERATION SCHEDULES.  Alcan shall deliver to BC Hydro a weekly schedule
showing its anticipated generation at the Kemano Generating Station and its
consequent requirements for Supplementary Electricity hereunder, in each case
for the following week. Each party shall designate and identify to the other
party a person or persons responsible for the delivery and receipt of scheduling
information.
 
4.3    OPTIMIZATION.  The Designated Scheduling Representatives shall exchange
scheduling information for the purpose of optimizing the combined generation
output of the Systems in accordance with terms set out in this section 4 and
Prudent Utility Practices.
 
4.4    LIMITED AUTHORITY.  The Designated Scheduling Representatives have no
authority to amend this Agreement or to determine any matter which affects the
ownership of either of the Systems or the right of Alcan and BC Hydro at all
times to have actual physical control and independent possession of their
respective Systems.
 
4.5    SYSTEM TITLE/RISK/RESPONSIBILITY.  Each party continues to have title to,
and risk and responsibility for, its own System, and the other party assumes no
proprietary interest in, or risk or responsibility whatsoever for, the other
party's System.
 
4.6    PROVINCE'S OBLIGATIONS FOR SUPPLEMENTARY ELECTRICITY.  The Province shall
provide electricity to Alcan, at times, rates and in amounts as agreed by the
parties, except that:
 
      (a)    during any hour the Province is not obligated to deliver any more
           than 60 MW; and
 
      (b)    during the course of any Year the Province is not obligated to
           provide more than 60 AvMW, less the amount of electricity generated
           at the Kemano Generating Station in accordance with section 4.7 that
           is
 
                                       12
<PAGE>   27
 
           in excess of 780 AvMW, or such other value as is agreed between the
           parties as representative of the firm capability of the Kemano
           Generating Station.
 
4.7    ALCAN OBLIGATIONS.  Alcan shall:
 
      (a)   make all reasonable efforts to adjust the timing of its generation,
         and to adjust its maintenance schedules, in response to requests from
         BC Hydro and to operate Alcan's System in a manner that permits
         optimization of the combined generating output of the Systems, all
         subject to requirements for public safety, flood control and fisheries
         protection, and to the provisions of Alcan's applicable licences and
         permits; and
 
      (b)   make all reasonable efforts to maintain and repair Alcan's System in
         accordance with Prudent Utility Practices.
 
5.     NOTICE OF COMMENCEMENT
 
5.1    NOTICE OF SUPPLY COMMENCEMENT.  Alcan may give the Province not later
than January 1, 2007 notice specifying a Supply Commencement Date that is not
earlier than January 1, 2003 and not later than January 1, 2010. Alcan may give
the Province further notice at any time or from time to time thereafter
specifying a change in the Supply Commencement Date to a date that is not more
than 90 days earlier or later than the date first specified by Alcan pursuant to
this section 5.1. If Alcan gives notice specifying a Supply Commencement Date
and commences construction of the New Smelter and Start-Up of the New Smelter is
delayed due solely to Force Majeure, of which Alcan gives prompt notice to the
Province, then the Supply Commencement Date will be deferred to the extent of
that delay.
 
5.2    CONFIRMATION.  Alcan shall confirm the Supply Commencement Date by not
less than 30 days' prior notice to the Province, and such notice shall include
Alcan's estimate of its scheduling requirements during initial operation of the
New Smelter.
 
5.3    EARLY TERMINATION.  This Agreement terminates with effect from January 1,
2010 unless:
 
      (a)   Start-Up of the New Smelter and the Supply Commencement Date occurs
         on or before January 1, 2010; or
 
      (b)   Alcan has commenced construction of the New Smelter on or before
         January 1, 2007 and thereafter Start-Up of the New Smelter is delayed
         solely due to Force Majeure.
 
5.4    NEW SMELTER APPROVAL.  If Alcan makes submissions to governmental
authorities of the Province necessary to commence the process for approvals
required for the New Smelter on or before December 31, 1998, and despite Alcan's
best efforts to comply with all requirements for such approvals, the approvals
are delayed beyond December 31, 2000, the Province agrees that it will review
with Alcan the Replacement Electricity schedule to identify revisions that may
be appropriate to accommodate that delay and both parties agree to negotiate in
good faith such revisions.
 
6.     METERING
 
6.1    METERING.  The Replacement Electricity delivered hereunder shall be
determined and recorded for the purpose of this Agreement by meters and metering
apparatus installed by BC Hydro at a point of metering as determined by BC
Hydro. Alcan shall provide BC Hydro with reasonable access to its premises, at
BC Hydro's own risk and expense, for the installation and maintenance of the BC
Hydro meters and metering apparatus. All amounts of electricity generated at and
flowing out of the Kemano Generating Station shall be determined and recorded
for the purpose of this Agreement by meters and metering apparatus at the points
of metering located at the Kemano Generation Station. All amounts of electricity
flowing into and out of the Kitimat Substation shall be determined and recorded
for the purpose of this Agreement by meters and metering apparatus at the points
of metering at that substation. Measurement, directly or indirectly, of the
kilovolt-amperes, kilowatt hours, or other factors or quantities at the meters
supplied by each of the parties shall be the responsibility of the parties
supplying those meters.
 
6.2    METERING STANDARDS.  The Electricity and Gas Inspection Act(Canada), as
revised from time to time and the regulations made thereunder shall govern the
metering carried out under this Agreement. The parties acknowledge that Alcan
and BC Hydro may test, calibrate, remove and change their respective metering
equipment at any reasonable time. Each party shall be entitled to have a
representative present at any test or calibration by the other party.
 
                                       13
<PAGE>   28
 
6.3    METER FAILURE.  If the metering equipment supplied by either of the
parties fails to register correctly or for any reason meter readings are
unobtainable, the amount of electricity shall be estimated by the party
responsible for such equipment from the best information available and such
estimate, except in the case of manifest error, shall for billing purposes have
the same force and effect as an exact meter reading. Each of the parties will
cooperate with the other in providing access to their meters and metering
apparatus for the purpose of periodic testing of accuracy and reliability.
 
7.     PRICE
 
7.1    PRICES.  The Base Electricity Price and Supplementary Electricity Price
shall be determined, and the amount payable shall be calculated, in accordance
with the provisions of this section 7.
 
7.2    BASE ELECTRICITY PRICE
 
7.2.1  LME BASED PRICE.  Subject to section 7.2.2, the Base Electricity Price is
      calculated as:
 
      LME Price multiplied by the Applicable Factor
      ---------
      14.45MWh/t
 
Alcan shall pay the Province for Base Electricity delivered in each Month during
the Supply Period an amount equal to the Base Electricity Price multiplied by
the amount of Base Electricity taken by Alcan, expressed in MWh.
 
7.2.2  MOST FAVOURED NATION PROVISION.
 
      (a)   If at any time after the date of this Agreement and before expiry of
         the Supply Period, an Eligible Sale is entered into, the Province shall
         give prompt notice to Alcan setting out the terms thereof.
 
      (b)   Within 60 days after delivery of a notice under subparagraph (a)
         above, Alcan may give notice to the Province that Alcan wishes to take
         delivery of electricity under this Agreement on Adapted Terms, and
         setting out Alcan's proposed Adapted Terms.
 
      (c)   Within 60 days after receipt by the Province of notice under
         subparagraph (b), the Province shall give notice to Alcan of the
         Province's proposed Adapted Terms, if and to the extent different from
         those proposed by Alcan.
 
      (d)   The parties shall negotiate promptly, reasonably and in good faith
         and endeavour to agree upon Adapted Terms and to record them in writing
         in an agreement between the parties and those Adjusted Terms shall
         apply to the delivery and provision of electricity under this Agreement
         for the duration of the Substitution Period. If the parties are unable
         to agree upon Adapted Terms within 60 days after notice is given by the
         Province to Alcan under subparagraph (c) above, all unresolved Adapted
         Terms will be determined by a person (the "EXPERT") appointed by
         written agreement between the parties, or if the parties do not so
         agree within 15 days after notice by one party to the other party
         requesting such appointment and nominating a person for that purpose,
         then the Expert will be appointed by a judge of the Supreme Court of
         British Columbia upon application of either party pursuant to the
         Commercial Arbitration Act, as revised from time to time.
 
      (e)   In determining Adapted Terms, the Expert:
 
         (i)   shall establish procedures that the Expert considers necessary;
 
         (ii)   shall afford each party equal treatment and opportunity in the
              presentation of its position on matters to be resolved; and
 
         (iii)  shall make his or her determination at Vancouver British
              Columbia.
 
      (f)   The parties shall:
 
         (i)   comply with the procedures established by the Expert; and
 
         (ii)   bear in equal proportions the fees and expenses of the Expert
              and otherwise bear their own expenses incurred in relation to the
              establishment of the Adapted Terms.
 
      (g)   A determination of Adapted Terms by the Expert is binding on the
         parties, except as otherwise provided in subparagraph (i) below.
 
      (h)   For greater certainty the parties acknowledge and agree that any
         Adapted Terms will include, for the benefit of Alcan, the unrealized
         value of the discounts described in section 1.1(d);
 
                                       14
<PAGE>   29
 
      (i)   Within 30 days after the Expert has determined Adapted Terms and
         communicated that determination in writing to both parties, Alcan, by
         written notice to the Province, may elect to revoke its notice under
         subparagraph (b) above, and failing delivery within that 30 day period
         of a notice of revocation, the Adapted Terms determined by the Expert
         shall apply to the delivery and provision of electricity under this
         Agreement for the duration of the Substitution Period. If notice of
         revocation is given as aforesaid, those Adapted Terms will not apply
         and this Agreement shall continue in full force and effect in
         accordance with the terms and conditions herein contained.
 
      (j)   If Adapted Terms are not agreed or established in accordance with
         this Section 7.2.2 before the commencement of the Substitution Period,
         the parties shall continue to perform their respective obligations
         under this Agreement in accordance with the terms and conditions herein
         set out until the Adapted Terms are so agreed or established, whereupon
         the Adapted Terms will be applied retroactively to the beginning of the
         Substitution Period and the parties shall make whatever adjustments are
         necessary between them to give effect thereto. Any such adjustments
         shall be included in and form part of the Adapted Terms.
 
      (k)   Upon expiry of the Substitution Period, and provided the Supply
         Period is continuing, the parties shall continue to perform their
         obligations under this Agreement in accordance with the terms and
         conditions herein set out.
 
7.2.3  CURRENCY EXCHANGE.  For the purpose of determining the LME Price, a daily
quoted price expressed in U.S. dollars will be converted to Canadian dollars at
the rate of exchange quoted by the Bank for same the day as the day for which
the price is quoted, or if that day is not a Business Day, then for the next
following Business Day.
 
7.3    FIRMING SERVICES CHARGE
 
      Alcan shall pay the Province for Supplementary Electricity during the
Supply Period the sum of CAD $75,000 per Month.
 
8.     BILLING AND PAYMENT
 
8.1    PAYMENT TERMS.  As soon as practicable following the last day of each
Month, the Province shall send Alcan an invoice setting out the amount payable
to the Province by Alcan for Replacement Electricity under this Agreement during
the immediately preceding Month. On or before the 20th day of the next following
Month (or if that day is not a Business Day, then on the Business Day next
following that day), Alcan shall pay the Province the amount set out in such
invoice. Payment shall be made in full without set-off or withholding, except as
expressly provided in this Agreement or agreed in writing between the parties.
 
8.2    DISPUTED INVOICES.  If Alcan disputes all or any part of an invoice,
Alcan shall pay the entire invoice in full on the payment date specified in
section 8.1, together with notice of dispute, including reasonable particulars.
If it is determined subsequently by agreement or arbitration hereunder that all
or part of the invoice was not then due, the Province shall pay Alcan interest
thereon at a rate per annum equal to the Prime Rate plus 2%, calculated daily
and compounded monthly, from the date of payment to the date on which payment
was properly due or the date on which any overpayment is repaid to Alcan,
whichever is earlier.
 
8.3    PLACE OF PAYMENT.  All payments by Alcan for Replacement Electricity
shall be made in Canadian dollars at par to an office or banker of the Province,
as the Province may direct, at Vancouver, British Columbia;
 
8.4    LATE PAYMENT. If any payment required to be made by Alcan hereunder is
not paid when due, Alcan shall pay to the Province interest thereon at a rate
per annum equal to the Prime Rate plus 2%, calculated daily and compounded
monthly, from the due date of payment until payment is made.
 
8.5    TAXES. The Base Electricity Price and the Supplementary Electricity Price
are expressed herein exclusive of all applicable federal and provincial sales
and excise taxes, and Alcan shall pay all such taxes in accordance with
applicable law from time to time.
 
9.     FORCE MAJEURE
 
9.1    PERFORMANCE EXCUSED. If either party is prevented, hindered or delayed in
performing any obligation under this Agreement by the occurrence of an event of
Force Majeure, performance by that party of such obligation shall be excused to
the extent that it is so prevented, hindered or delayed until such cause has
been removed or overcome.
 
                                       15
<PAGE>   30
 
9.2    NOTICE. A party excused under this section 9 from performance of any
obligation, or reasonably anticipating that it will be so excused, shall give
notice to that effect promptly to the other party.
 
9.3    MITIGATION. A party prevented, hindered or delayed shall make reasonable
efforts to remove or overcome the cause of the prevention, hindrance or delay as
soon as is practicable. Nothing contained in this Agreement requires a party to
settle any strike, lock-out or labour dispute in which it may be involved or to
accept any permit, licence, contract or authorization necessary for the
performance of this Agreement containing terms and conditions which a party
determines, in its good faith and judgement, are unacceptable to it.
 
10.    LIABILITY
 
10.1   ALCAN DEFAULT. If Alcan fails to pay an amount awarded to the Province by
way of a final and binding award in an arbitration hereunder, or by way of a
final judgement of a court of competent jurisdiction, in either case in respect
of which all rights of appeal have been exercised and exhausted or the time for
doing so has expired, and that failure continues for a period of not less than
90 days after written notice thereof is given by the Province to Alcan, then the
Province, without prejudice to, or restricting the exercise of, any other right
or remedy available to the Province in respect of that failure, at any time
thereafter for so long as the failure continues, may, on not less than 5 days
prior written notice, suspend the delivery and provision of Replacement
Electricity hereunder, or, whether or not it has first so suspended such
delivery and provision of Replacement Electricity, terminate this Agreement by
written notice to Alcan.
 
10.2   PROVINCE DEFAULT. If the Province fails to deliver and provide
Replacement Electricity in breach of this Agreement, then except to the extent
caused or contributed to by Alcan's failure to exercise all reasonable measures
to mitigate its loss and damage, Alcan may recover from the Province the
following loss and damage suffered or incurred by Alcan as a result of that
breach:
 
      (a)    damage to, or loss or destruction of, tangible property forming
           part of the Smelting Facilities;
 
      (b)    the incremental cost to Alcan of obtaining electricity to replace
           the Replacement Electricity that the Province fails to deliver or
           provide hereunder; and
 
      (c)    the actual cost to Alcan of lost production at the Smelting
           Facilities less the avoided costs of production thereof.
 
      Alcan will give the Province access to, and a reasonable opportunity to
audit Alcan's records of the foregoing loss and damage.
 
10.3   INDEMNIFICATION FOR THIRD PARTY CLAIMS. Each party (in this section 10.3
called the "indemnitor") shall indemnify and hold harmless the other party, its
employees and agents (in this section 10.3 called collectively the "indemnitee")
for all claims, demands, actions, causes of action, suits, and proceedings
brought against the indemnitee by any third person for damages for personal
injury or property damage caused by the negligent act or omission of, or breach
of this agreement by, the indemnitor, its employees or agents while in, on or
about the premises of the indemnitee under or in relation to this Agreement.
 
10.4   CONSEQUENTIAL DAMAGES EXCLUDED. Except only as provided in section 10.2
but otherwise notwithstanding any other provision of this Agreement, neither
party is liable to the other party, in contract, tort (including but not limited
to negligence) or under any other theory of law, under or in relation to this
Agreement for any loss of production, revenue, profit, market or opportunity, or
special, punitive, incidental, indirect or consequential damage suffered or
incurred by the other party.
 
10.5   REMEDIES EXCLUSIVE.  Except as otherwise herein provided expressly, for
any breach or default hereunder for which an express remedy or measure of
damages is provided herein, that express remedy or measure of damages is the
sole and exclusive remedy or measure of damages applicable to that breach or
default, and all other remedies or damages at law or in equity are waived
expressly by each party in respect of that breach or default.
 
11.    DISPUTE RESOLUTION
 
11.1   ARBITRATION.  Subject to section 11.3, all disputes arising out of or in
connection solely with this Agreement shall be referred to and finally resolved
by arbitration administered by the British Columbia International Commercial
Arbitration Centre pursuant to its Rules. The number of arbitrators is three.
The place of arbitration is Vancouver, British Columbia.
 
                                       16
<PAGE>   31
 
11.2   ALTERNATIVE AD HOC ARBITRATION.  If at the time a dispute arises, the
British Columbia International Commercial Arbitration Centre or a successor,
does not exist, or its Rules do not provide for an administered arbitration,
then that dispute will be referred to and finally resolved by arbitration under
the Commercial Arbitration Act, as revised from time to time. The number of
arbitrators is three and the place of arbitration is Vancouver, British
Columbia.
 
11.3   INTERIM/CONSERVATORY RELIEF.  The agreement of the parties to arbitrate
disputes does not prevent a party, pending an arbitral award on the merits of
the dispute, from recourse to any court of competent jurisdiction for the
purpose only of obtaining interim and conservatory relief or enforcing any
arbitral award.
 
12.    GENERAL
 
12.1   NOTICES.  All notices, requests and other communications required or
permitted to be given under this Agreement must be in writing and delivered by
hand as follows:
 
     To Alcan:
 
      Alcan Aluminium Limited
      1188 Sherbrooke Street West
      Montreal, Quebec, H3A 3G2
      Attention: Chief Legal Officer
 
      To the Province:
 
      Deputy Attorney General
      1001 Douglas Street
      Victoria, British Columbia V8V 1X4
 
      and to:
 
      British Columbia Hydro and Power Authority
      333 Dunsmuir Street
      Vancouver, British Columbia V6B 5R3
      Attention: General Counsel
 
or to such other address as may be given by notice as aforesaid by the
particular party, and will be deemed to have been given on the date of delivery.
 
12.2   CHOICE OF LAW.  This Agreement will be governed by and construed in
accordance with the applicable laws of Canada and of the Province of British
Columbia.
 
12.3   JURISDICTION.  For the purpose of section 11.3, the courts of the
Province of British Columbia, and courts to which appeals therefrom may be
taken, have non-exclusive jurisdiction in respect of any action, suit or
proceeding arising out of or relating to this Agreement, and the parties
irrevocably and unconditionally attorn to the jurisdiction of those courts in
respect of any such action, suit or proceeding.
 
12.4   ASSIGNMENT.
 
12.4.1 This Agreement may not be assigned by either party without the prior
written consent of the other party, save and except that this Agreement may be
assigned, on notice, but without consent:
 
      (a)    by the Province to BC Hydro or to Powerex;
 
      (b)    by Alcan to a lender or lenders by way of security to secure
           financing obtained for the purpose of the design, construction and
           operation of the New Smelter; and
 
      (c)    by Alcan to any person or persons who acquire from Alcan all or a
           part of the Smelting Facilities.
 
12.4.2 The right of either party to assign this Agreement with consent or on
notice only as provided in section 12.4.1 is subject to the condition that the
assignee, concurrently with the assignment, shall have entered into an agreement
with the non-assigning party, in form and substance acceptable to the
non-assigning party, acting reasonably, under which the assignee agrees to
become a party to and bound by this Agreement.
 
                                       17
<PAGE>   32
 
12.4.3 No assignment to a Permitted Assign relieves the assigning party of its
liability for the performance and observance of its obligations hereunder by it
and by the Permitted Assignee, unless otherwise expressly agreed in writing by
the non-assigning party.
 
12.5   SEVERABILITY.  If any part of this Agreement is declared or held invalid
for any reason, that invalidity does not affect the validity of the remainder
which continues in full force and effect and must be construed as if this
Agreement had been executed without the invalid portion and it is hereby
declared the intention of the parties that this Agreement would have been
executed without reference to any portion which may, for any reason, be
hereafter declared or held invalid.
 
12.6   NON-WAIVER.  No waiver of any provision of this Agreement is enforceable,
unless in writing and no such waiver will be deemed to, or will, constitute a
waiver of any other provision of this Agreement, nor will any such waiver
constitute a continuing waiver, unless otherwise expressly provided therein.
 
12.7   FURTHER ASSURANCES.  Each party will do all things necessary, within its
lawful capacity, directly and indirectly, through its subsidiaries, agents and
representatives, to validate, make effective and give full force and effect to
this Agreement, and to implement the transactions contemplated by this
Agreement. The foregoing does not require the Province to do anything that would
have the effect of fettering any statutory power.
 
12.8   COMPLIANCE WITH APPLICABLE LAW.  Each party, in performing their
obligations under this Agreement, shall comply with all applicable laws of the
Province of British Columbia and the laws of Canada applicable therein.
 
12.9   SURVIVAL OF ALCAN OBLIGATIONS.  Nothing in this Agreement relieves Alcan
of any obligation that it may now or hereafter have under any agreement or law
binding upon Alcan to deliver electricity to, or otherwise assist BC Hydro in
emergency circumstances.
 
12.10 CURRENCY.  All amounts of money stated herein are expressed in Canadian
dollars unless otherwise stated.
 
12.11 ENTIRE AGREEMENT.  This Agreement is the entire agreement between the
parties relative to the subject matter hereof.
 
12.12 AMENDMENT.  This Agreement may be amended only by an instrument in writing
signed by the parties.
 
12.13 ENUREMENT.  This Agreement is binding upon and enures to the benefit of
the Province and its Permitted Assigns and is binding upon and enures to the
benefit of Alcan its successors and Permitted Assigns.
 
                                       18
<PAGE>   33
 
IN WITNESS WHEREOF this Agreement has been executed and delivered by the parties
on the day and year first above written.
 
<TABLE>
<S>                                      <C>
                                         HER MAJESTY THE QUEEN IN RIGHT
                                         OF THE PROVINCE OF BRITISH
                                         COLUMBIA, as represented by the
                                         Minister of Education, Skills and
                                         Training
                                         Per: (signed) Paul Ramsey
                                              Minister of Education, Skills and
                                              Training and Minister responsible
                                              for the Industrial Development Act
 
Witness:                                 ALCAN ALUMINIUM LIMITED
 
(signed)----------------------------     Per: (signed)
Signature                                     Jacques Bougie, President and
                                              Chief Executive Officer
 
------------------------------------
Name Lorne D. Peterson
------------------------------------
Address Bowen Island, British Columbia
</TABLE> 
 
                                       19
<PAGE>   34
 
                                  SCHEDULE 2B
 
                            [Reference Section 2.2]
 
                MEMORANDUM OF CONSENT AND AGREEMENT PURSUANT TO
                  THE LONG-TERM ELECTRICITY PURCHASE AGREEMENT
 
Date:      August 5, 1997
 
Parties:    British Columbia Hydro and Power Authority ("BC Hydro") and Alcan
            Aluminium Limited ("Alcan")
Reference: Long-Term Electricity Purchase Agreement made as of February 27, 1990
           ("Agreement")
 
1.     DEFINITIONS.  Words and phrases defined in the Agreement and used in this
      Memorandum have the meanings given in the Agreement, unless otherwise
      defined herein. "North Coast Interconnect" means a point of delivery on BC
      Hydro's System that is south or west of its Skeena substation, at
      transmission voltage (above 69kV), including Alcan's Kitimat busbar. "COB"
      means the California Oregon Border (COB) Interconnect, being a point on
      the interconnected transmission system in the United States where the high
      voltage AC transmission lines of the Pacific Northwest interconnect with
      those of California at the California -- Oregon Border.
 
2.     AGREEMENT CONFIRMED.  Pursuant to section 16.1 of the Agreement, the
      parties confirm that the Effective Date of the Agreement is January 1,
      1995, and that the Agreement is in full force and effect in accordance
      with its terms and conditions. Each party will abide by the Agreement,
      including this Memorandum.
 
3.     AMOUNT OF ELECTRICITY  Pursuant to section 6 of the Agreement, the
      parties acknowledge and agree that each of them has fulfilled its
      respective obligations under the Agreement to and including December 31,
      1996. The parties further acknowledge and agree that:
 
      (a)    the amount of electricity required to be purchased and sold under
           the Agreement during 1997 is 140 AvMW; and
 
      (b)    the amount of electricity required to be purchased and sold under
           the Agreement from and after January 1, 1998 for the remaining term
           of the Agreement is 307 AvMW, subject to the exercise of recall
           rights thereunder.
 
4.     167MW POINT OF DELIVERY.  Pursuant to section 4 of the Agreement, Alcan,
      by written notice to BC Hydro given at any time on or before September 30,
      1997, may elect to change the Point of Delivery under the Agreement so
      that effective January 1, 1998 167 AvMW is delivered at COB. This right
      may be exercised once only and upon exercise, is irrevocable, unless BC
      Hydro and Alcan otherwise agree in writing.
 
5.     ALTERNATE 167MW ARRANGEMENT.  Pursuant to section 4 of the Agreement, BC
      Hydro will consent to an arrangement ("Alternate 167 Arrangement") under
      which 167 AvMW of electricity required to be sold and delivered by Alcan
      under the Agreement, forming part of its total obligation of 307 AvMW,
      may, at the request of Alcan, be supplied by another person ("Alternate
      167 Supplier") to BC Hydro at either COB or the North Coast Interconnect ,
      subject to the following conditions:
 
      (a)    Alcan shall prepare a list of qualified and reliable proposed
           Alternate 167 Suppliers for review with, and approval by, BC Hydro
           and BC Hydro will not unreasonably withhold, or delay by more than 5
           business days, the approval of any proposed Alternate 167 Supplier;
 
      (b)    the Alternate 167 Supplier will be a person selected by Alcan from
           those on the list approved under subparagraph (a);
 
      (c)    the Alternate 167 Arrangement shall take effect at any time on or
           after January 1, 1998, and shall continue for the duration of the
           term of the Agreement;
 
      (d)    the Alternate 167 Arrangement may be made with no more than one
           Alternate 167 Supplier, unless otherwise agreed between BC Hydro and
           Alcan;
 
      (e)    if requested by BC Hydro, the Alternate 167 Supplier shall agree in
           writing with BC Hydro to be bound by the Agreement , subject to
           adjustments described in section 7;
 
                                       20
<PAGE>   35
 
      (f)     notwithstanding the Alternate 167 Arrangement, unless BC Hydro
           exercises its right under subparagraph (h) below, Alcan shall
           continue to be liable for the full and proper observance and
           performance from and after the date on which the Alternate 167
           Arrangement takes effect of all the obligations of Alcan and the
           Alternate 167 Supplier under the Agreement, including the Alternate
           167 Arrangement;
 
      (g)    Alcan shall give BC Hydro not less than 30 days prior written
           notice of Alcan's intent to enter into the Alternate 167 Arrangement,
           including identification of the proposed Alternate 167 Supplier and
           all terms and conditions of the proposed Alternate 167 Arrangement;
 
      (h)    BC Hydro, by written notice to Alcan given within 30 days after
           receipt of notice from Alcan under paragraph (g) above, may elect to
           require, in lieu of the Alternate 167 Arrangement, that Alcan's
           obligation to sell and deliver, and BC Hydro's obligation to purchase
           and pay for, 307 AvMW of electricity under the Agreement from and
           after the date of first delivery under the Alternate 167 Arrangement
           is reduced by an amount equal to 167 AvMW in consideration of the
           payment, on the same terms as apply to the Alternate 167 Arrangement,
           by BC Hydro to Alcan of an amount equal to the consideration that
           would have been payable by the Alternate 167 Supplier to Alcan under
           the Alternate 167 Arrangement, plus CAD $100,000 to be applied to
           compensate and reimburse the Alternate 167 Supplier in respect of
           costs incurred by it in relation to the bidding, negotiation and
           settlement of the Alternate 167 Arrangement.
 
6.     ALTERNATE 140MW ARRANGEMENT.  Pursuant to section 4 of the Agreement, BC
Hydro confirms that it will consent to an arrangement ("Alternate 140
Arrangement") under which the Point of Delivery of 140 AvMW of electricity
required to be sold and delivered by Alcan under the Agreement, forming part of
its total obligation of 307 AvMW, will be changed to COB and supplied by another
person ("Alternate 140 Supplier") to BC Hydro at COB during a period commencing
on a date ("140 Commencement Date") specified by Alcan, but not earlier than
January 1, 2003, and expiring December 31, 2014, subject to the following
conditions:
 
      (a)    Alcan shall prepare a list of qualified and reliable proposed
           Alternate 140 Suppliers for review with, and approval by, BC Hydro
           and BC Hydro will not unreasonably withhold or delay by more than 5
           business days the approval of any proposed Alternate 140 Suppliers;
 
      (b)    Alcan will solicit bids from proposed Alternate 140 Suppliers on
           the list approved under sub-paragraph (a);
 
      (c)    Alcan will give BC Hydro a copy of the request for bids, all
           addenda, and a copy of any bid received that Alcan intends to accept;
 
      (d)    the request for bids will require that, if requested by BC Hydro,
           the successful bidder shall agree in writing with BC Hydro to be
           bound by the Agreement, subject to adjustments desired in section 7;
 
      (e)    not later than November 1, 1999, Alcan shall give BC Hydro written
           notice of its intent either to:
 
           (i)   reject all bids received; or
 
           (ii)   accept one bid, and specifying the bid that Alcan intends to
               accept;
 
      (f)     if Alcan gives notice of its intent to reject all bids received,
           then Alcan shall continue to sell and deliver, and BC Hydro shall
           continue to purchase and pay for, 140 AvMW of electricity at the
           North Coast Interconnect;
 
      (g)    if Alcan gives notice of its intent to accept a bid, then BC Hydro,
           by written notice to Alcan, given within 30 days after receipt of
           notice from Alcan, may elect to require that Alcan decline the bid
           that it intends to accept, in which case Alcan's obligation to sell
           and deliver, and BC Hydro's obligation to purchase and pay for
           electricity under the Agreement from and after the 140 Commencement
           Date is reduced by an amount equal to 140 AvMW of electricity and BC
           Hydro shall pay to Alcan the amount that would have been payable to
           Alcan by the successful bidder, according to the terms of payment
           that would have been applicable to its bid, plus CAD$100,000 to be
           applied to compensate and reimburse the successful bidder in respect
           of costs incurred by it in relation to bidding on the 140 Alternate
           Arrangement;
 
                                       21
<PAGE>   36
 
      (h)    notwithstanding any Alternate 140 Arrangement, unless BC Hydro
           exercises its right under subparagraph (g) above, Alcan shall
           continue to be liable for the full and proper observance and
           performance from and after the date on which the Alternate 140
           Arrangement that takes effect of all the obligations of Alcan and the
           Alternate 140 Supplier under the Agreement, including the Alternate
           140 Arrangement.
 
7.     ADAPTED PROVISIONS.  The parties shall negotiate in good faith and
resolve by written agreement or failing agreement by arbitration under the
Agreement adjustments necessary to the Agreement to accommodate any Alternate
167 Arrangement or Alternate 140 Arrangement, ("Alternate Arrangement")
including without limitation, provisions to the effect that:
 
      (a)    the recall provisions of section 5.4 of the Agreement will not
           apply to electricity supplied under an Alternate Arrangement;
 
      (b)    the combined load factor of the total amount of electricity
           supplied under the Agreement, including any Alternate Arrangement,
           and before and after any recall rights are exercised under section
           5.4 of the Agreement, will be 95%, as provided for in section 3.2.2
           of the Agreement;
 
      (c)    the scheduling provisions under section 6 of the Agreement will
           apply to any Alternate Arrangement;
 
      (d)    the water rental reimbursement provisions under section 9.1 of the
           Agreement will not apply to any electricity supplied under an
           Alternate Arrangement, or to any electricity purchased by Alcan from
           any third party for supply under the Agreement; and
 
      (e)    the proportionate reduction provisions under section 11.6 of the
           Agreement will not apply to any Alternate Arrangement.
 
8.     BC HYDRO ASSIGNMENT. Pursuant to section 15.1 of the Agreement, Alcan
confirms its consent to any assignment by BC Hydro to another purchaser of the
rights of BC Hydro to purchase and pay for electricity, if any, to be delivered
at COB, provided that BC Hydro gives Alcan notice thereof and remains liable for
the full and proper observance and performance from and after the date on which
the assignment takes effect of all the obligations of BC Hydro and the assignee
under the Agreement.
 
9.     FURTHER ASSURANCES.  Pursuant to section 16.1 of the Agreement, each
party shall cooperate with the other and promptly take all such further action
and do all such further things, including settlement of further provisions, as
may be necessary to permit the performance hereof.
 
<TABLE>
<S>                                                <C>
ALCAN ALUMINIUM LIMITED                            BRITISH COLUMBIA HYDRO AND POWER AUTHORITY
 
By:(signed)                                        By:(signed)
   Name: Jacques Bougie                               Michael Costello, President
   Office: President and Chief
   Executive Officer
</TABLE>
 
                                       22
<PAGE>   37
 
                                  SCHEDULE 3A
 
                             [Reference Section 3]
 
                                  1997 AMENDMENT
 
      This Agreement made the 5th day of August, 1997,
 
BETWEEN:
 
           HER MAJESTY THE QUEEN IN RIGHT OF THE PROVINCE OF BRITISH COLUMBIA,
           represented by Minister of Education, Skills and Training and
           Minister responsible for the Industrial Development Act
 
           ("Province")
 
                                                               OF THE FIRST PART
AND:
 
           ALCAN ALUMINIUM LIMITED
 
           ("Alcan")
 
                                                              OF THE SECOND PART
 
WHEREAS:
 
A.     Pursuant to the Industrial Development Act, R.S.B.C.1996, c.220, (the
"Act") and Order in Council No. 2883 dated December 29, 1950 made under the
authority of the Act, the Province entered into an agreement with Alcan dated
December 29, 1950 (the "1950 Agreement") pursuant to which the Province granted
to Alcan certain rights, including without limitation those rights represented
by Conditional Water Licence No. 19847 and Permit to Occupy Crown Lands No. 3449
both dated December 29, 1950 to develop the hydroelectric power potential of the
Nechako and the Nanika Rivers in British Columbia;
 
B.     Pursuant to an agreement, the "1987 Settlement Agreement" dated September
14, 1987 between Alcan, the Province and Her Majesty the Queen in Right of
Canada (the "Federal Crown") Alcan agreed to abandon in part rights granted
under the 1950 Agreement, inter alia, in order to protect the sockeye and
chinook salmon in the Nechako and Nanika Rivers and to facilitate the expansion
of permanent industries in British Columbia;
 
C.     Pursuant to section 2 of the Act and Order-in-Council No. 2572 dated
December 24, 1987, the 1950 Agreement was amended by an agreement dated December
29, 1987 (the "1987 Amendment"), between the Province and Alcan;
 
D.     The Province and Alcan have agreed to further amend the 1950 Agreement,
as amended by the 1987 Amendment, pursuant to section 2 of the Act;
 
E.     The entering into of this Agreement by the Province and the execution of
the same by the responsible Minister has been duly authorized by
Order-in-Council No. 0977 dated August 5, 1997.
 
NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration of the premises and
the covenants and agreements hereinafter set forth (the receipt and sufficiency
of which is hereby acknowledged), the Province and Alcan hereby covenant and
agree as follows:
 
1.     DEFINITIONS
 
      For the purposes of this Agreement:
 
      (a)    "1987 Settlement Agreement" means the agreement entered into
           between Alcan, the Federal Crown and the Province dated September 14,
           1987;
 
      (b)    "Kemano Completion Project" means the Works and proposed Works
           comprised in the hydroelectric project with that name, including:
 
                                       23
<PAGE>   38
 
           (i)   the plans, descriptions and other documents pertaining to
               components of that hydroelectric project that are filed with the
               Province by or on behalf of Alcan; and
 
           (ii)   the Works and proposed Works comprised in the Kenney Dam
               Release Facility (as defined in the 1987 Settlement Agreement);
 
      (c)    "Nechako River" means the Nechako River in British Columbia and
           includes all streams and lakes tributary thereto;
 
      (d)    "Works" means "Works" as defined in the 1950 Agreement, as amended
           by the 1987 Amendment.
 
2.   AMENDMENTS
 
2.1    The 1950 Agreement, as amended by the 1987 Amendment, is hereby further
      amended as follows:
 
      (a)    the rights under the Act granted by the Province to Alcan in the
           first paragraph of section 1 of the 1950 Agreement, as amended by the
           1987 Amendment, including those rights represented by the Conditional
           Water Licence No. 19847 and Permit to Occupy Crown Lands No. 3449 are
           hereby amended such that Alcan shall be entitled to store and to use
           by diversion or otherwise only those waters and to occupy only those
           Crown lands, identified and described in the Final Water Licence and
           Amended Permit appended hereto and made part hereof as Schedules "A"
           and "B", on the terms and conditions provided therein and in the 1950
           Agreement, as amended by the 1987 Amendment and by this Agreement;
 
      (b)    the Province and Alcan agree that the Final Water Licence to be
           issued pursuant to section 2 of the 1950 Agreement, as amended by the
           1987 Amendment and by this Agreement, will be issued together with
           the Amended Permit in the forms attached on the date of execution of
           this Agreement instead of on December 31, 1999;
 
      (c)    the Province hereby authorizes the responsible Minister to issue
           under the Act the Final Water Licence and Amended Permit to Alcan in
           the attached forms; and
 
      (d)    the Province and Alcan agree that the assets that were constructed
           and partially constructed as part of the Kemano Completion Project
           remain Works for the purposes of the 1950 Agreement, as amended by
           the 1987 Agreement and by this Agreement, and will only be used in a
           manner consistent with the Final Water Licence.
 
3.   ALCAN'S FINAL WATER LICENCE
 
3.1    The Province and Alcan agree that the rights identified in the Final
Water Licence represent the full extent of the water rights granted to Alcan
under the 1950 Agreement, as amended by the 1987 Agreement and by this
Agreement.
 
3.2    Alcan agrees that it shall observe and comply with the limitations
imposed by this Agreement, and, for greater certainty, the Final Water Licence
and the Amended Permit, upon any rights under the Water Act R.S.B.C. 1948,
C.361, which have been conferred on Alcan pursuant to the 1950 Agreement, as
amended by the 1987 Agreement and by this Agreement.
 
4.   MISCELLANEOUS
 
4.1    If any provision of this Agreement is invalid or unenforceable, such
provision shall be severable and the remainder of this Agreement, and the 1950
Agreement, as amended by the 1987 Amendment, and all rights of Alcan granted
pursuant thereto, shall remain in full force and effect.
 
4.2    This Agreement amends the 1950 Agreement, as amended by the 1987
Amendment, and this Agreement and the 1950 Agreement, as amended by the 1987
Amendment, shall henceforth be read together and have effect as though all the
provisions in the 1950 Agreement, as amended by the 1987 Amendment and by this
Agreement were contained, mutatis mutandis, in one instrument. In particular, a
reference in the 1950 Agreement, as amended by the 1987 Amendment, to the
Licence or the Permit or to the Amended Licence or to the Amended Permit shall
be deemed to be a reference to the Final Water Licence or the Amended Permit, as
the case may be.
 
                                       24
<PAGE>   39
 
4.3    The 1950 Agreement, as amended by the 1987 Amendment and by this
Agreement, shall continue in full force and effect and the Province and Alcan
each acknowledge that they are bound by the terms and conditions of the 1950
Agreement, as amended by the 1987 Amendment and by this Agreement.
 
4.4    The Province and Alcan each hereby ratify and confirm the terms and
conditions of the 1950 Agreement, as amended by the 1987 Amendment and by this
Agreement, and agree to take whatever further steps are necessary in order to
give full force and effect to the 1950 Agreement, as amended by the 1987
Amendment and by this Agreement, and to this Agreement.
 
      IN WITNESS WHEREOF the Province and Alcan have each executed this
Agreement, each being duly authorized and empowered to execute this Agreement as
of the day and year above written.
 
<TABLE>
<S>                             <C>
                                HER MAJESTY THE QUEEN IN RIGHT OF THE PROVINCE
                                OF BRITISH COLUMBIA, as represented by the
                                Minister of Education, Skills and Training
 
                                Per:(signed) Paul Ramsey
                                Minister of Education, Skills and Training and
                                      Minister responsible for the Industrial
                                      Development Act
Witness:                        ALCAN ALUMINIUM LIMITED
 
(signed)                        Per:(signed)
Signature                       Jacques Bougie, President and Chief
                                     Executive Officer
 
Name Lorne D. Peterson
 
Address Bowen Island, British Columbia
</TABLE>
 
                                       25
<PAGE>   40
 
                                  SCHEDULE 3B
 
                             [Reference Section 3]
 
                          PROVINCE OF BRITISH COLUMBIA
 
                           INDUSTRIAL DEVELOPMENT ACT
 
                              FINAL WATER LICENCE
 
      ALCAN ALUMINIUM LIMITED of Montreal, P.Q., is hereby authorized to store,
divert and use water and to construct, maintain and operate works as follows:
 
(a)  The sources of water supply are the Nechako River above Grand Canyon and
     all the streams and lakes tributary thereto.
 
(b)  The points of storage, diversion and use, and the extent of the Nechako
     Reservoir, are approximately as shown on the plan marked Exhibit "A" which
     is attached hereto and forms part hereof.
 
(c)  The date from which this Licence shall have precedence is 3 August 1949.
 
(d)  The purposes for which this Licence is issued are storage and power as set
     forth in an Agreement between the Government of British Columbia and the
     Licensee, dated 29 December 1950, as amended on 29 December 1987, and
     further amended on August 5, 1997 (the "1950 Agreement, as amended").
 
(e)  (1)  The maximum quantity of water which may be stored is 23,850
        cubic-hectometres, of which 7100 cubic-hectometres are live storage.
 
     (2)  The maximum rate of diversion and use for power purpose is 170
        cubic-metres per second.
 
(f)  The works may be operated to divert and use water for power purpose
     throughout the whole year. The works may be operated to collect water into
     storage throughout the whole year.
 
(g)  This Licence is appurtenant to the land required for the powerhouse
     indicated on Exhibit "A".
 
(h)  The works authorized under this Licence are those described in the 1950
     Agreement, as amended.
 
(i)  This Licence is issued in accordance with the terms of the 1950 Agreement,
     as amended, and supersedes Amended Conditional Water Licence No. 19847.
 
(j)  At no time will this Licence be cancelled, nor the quantity of water that
     the Licensee is authorized to store, divert and use be reduced below the
     quantity set forth in this Licence, except in the case of default by Alcan
     in the performance of its obligations under sections 5 and 6 of the 1950
     Agreement, as amended.
 
(k)  In order to provide flows necessary for the protection of sockeye and
     chinook salmon, the Licensee is authorized to make releases into the
     Nechako River in accordance with the "Short Term Annual Water Allocation"
     as defined in the 1987 Settlement Agreement dated 14 September 1987 among
     Her Majesty The Queen in Right of Canada, Her Majesty The Queen in Right of
     the Province of British Columbia and the Licensee.

                                         (signed) Paul Ramsey
                                         Minister of Education, Skills and
                                         Training and Minister responsible for
                                         the Industrial Development Act
 
File: 0179602           Date Issued: August 5, 1997           Licence No. 102324
 
                                       26
<PAGE>   41
Schedule 3B
Exhibit "A"


Map Province of British Columbia
<PAGE>   42
 
                                  SCHEDULE 3C
 
                             [Reference Section 3]
 
                                 AMENDED PERMIT
 
                          PROVINCE OF BRITISH COLUMBIA
 
                           INDUSTRIAL DEVELOPMENT ACT
 
            AMENDED PERMIT AUTHORIZING THE OCCUPATION OF CROWN LAND
 
      ALCAN ALUMINIUM LIMITED of Montreal, P.Q., being the holder of Final Water
Licence No. 102324 authorizing the storage, diversion and use of the water of
the Nechako River and tributaries is hereby authorized to occupy by and in
connection with flooding those Crown Lands lying below the 859.54 metre (2,820
feet) contour around and adjacent to the storage reservoir above Kenney Dam
tributary to the Nechako River, as shown on Exhibit "A" attached hereto and
forming part hereof, and to occupy by and in connection with the construction,
maintenance and operation of the works referred to in Final Water Licence No.
102324 those Crown Lands designated in an Agreement between the Government of
British Columbia and the Licensee dated 29 December 1950, as amended on 29
December 1987, and as further amended on August 5, 1997 (in this Amended Permit
collectively called the "Agreement"), the total having an area of 53,384
hectares (131,915 acres).
 
      The Licensee is authorized to use or destroy the timber on the said lands
by submerging it or otherwise in accordance with the terms and conditions of the
Agreement.
 
      This Amended Permit is appurtenant to the land to which Final Water
Licence No. 102324 is appurtenant.
 
      The conditions relative to the rights granted under this Amended Permit
are in accordance with the terms of the Agreement, to which this Amended Permit
is to be attached and forms a part thereof. Amended the 5th day of August, 1997.
 
                                         ---------------------------------------
                                         (signed) Paul Ramsey
                                         Minister of Education, Skills and
                                         Training and Minister responsible for
                                         the Industrial Development Act
File: 0179602
Amended Permit No. 3449
 
                                       27
<PAGE>   43
Schedule 3C
Exhibit "A"

Map Province of British Columbia
<PAGE>   44
 
                                   SCHEDULE 4
 
                             [Reference Section 4]
 
                      ESTABLISHMENT AND ADMINISTRATION OF
 
                   THE NECHAKO ENVIRONMENTAL ENHANCEMENT FUND
 
1.     ESTABLISHMENT OF THE NECHAKO ENVIRONMENTAL ENHANCEMENT FUND.
 
      The parties will establish and administer a Nechako environmental
enhancement fund (the "Nechako Environmental Enhancement Fund") in accordance
with this Schedule.
 
2.     ESTABLISHMENT OF ENVIRONMENTAL FUND MANAGEMENT COMMITTEE.
 
      The parties will establish a management committee (the "Management
Committee") in accordance with this Schedule.
 
3.     STRUCTURE OF MANAGEMENT COMMITTEE.
 
      Subject to sections 4 and 6, the Management Committee will be comprised of
three persons: one appointed by Alcan, one appointed by the Minister of
Environment, Lands and Parks (the "Environment Minister") and one appointed by
the Federal Government.
 
4.     PARTICIPATION OF THE FEDERAL GOVERNMENT.
 
      The parties will jointly request the Federal Government to participate in
the Management Committee. The request will remain open if the Federal Government
does not elect to participate initially. If the Federal Government chooses to
participate initially by so electing within 60 days of the joint request, it
will be asked to select and appoint an appropriate Federal official to the
Management Committee who will be invited to chair but may elect to sit only as a
member. If the Federal Government elects to participate at a later date, it may
then appoint such member and the number of members of the Management Committee
will be increased from three to four persons.
 
5.     APPOINTMENT WITHIN 90 DAYS.
 
      The parties will each appoint their representatives within 90 days of the
execution of this Agreement. If a party fails to appoint its representative
within this time period, that party will be deemed to have declined to appoint a
representative, and the Management Committee will proceed with the remaining
members.
 
6.     SELECTION OF THE THIRD MEMBER IF NO INITIAL FEDERAL PARTICIPATION.
 
      If the Federal Government does not choose to participate in the Management
Committee within 60 days of the joint request, then a third member will be
appointed as follows:
 
      (a)    the parties will first attempt to select the third member by
           consensus;
 
      (b)    if the parties are unable to agree on a mutually acceptable third
           member within 60 days, then the parties will immediately thereafter
           request the Chair of the Fraser Basin Council to appoint an
           appropriate third member;
 
      (c)    the Chair of the Fraser Basin Council will be requested to appoint,
           within 30 days, a neutral individual with no affiliation to either
           party, who has appropriate experience with environmental issues and
           with consensus-based decision-making, who will be asked to chair the
           Management Committee;
 
      (d)    in order to assist the Chair of the Fraser Basin Council in making
           the selection, each party will provide to the Chair of the Fraser
           Basin Council a list of six potential members who meet the
           requirements of sub-section 6(c) and who are willing and able to sit
           as a member; and
 
      (e)    if the selected person subsequently becomes unable to serve, then
           the parties will request the Chair of the Fraser Basin Council to
           select a replacement member using the process set out in this section
           6.
 
                                       28
<PAGE>   45
 
7.     APPOINTMENT/REPLACEMENT OF CHAIR.
 
      If no member accepts the Chair on appointment or if the Chair resigns that
position, the initial or replacement Chair will be selected by majority vote of
the members.
 
8.     MANAGEMENT COMMITTEE WORKING PROCEDURES.
 
      The Management Committee will develop and implement its internal working
procedures and the terms under which the Nechako Environmental Enhancement Fund
will be established and administered, subject to the following basic
requirements:
 
      (a)    all meetings will be called by the Chair or any two members and all
           members must be given reasonable notice of all meetings;
 
      (b)    a quorum of the Management Committee will be two members, unless
           the management Committee consists of only one member, in which case
           quorum will be one; and
 
      (c)    the Management Committee will seek to reach decisions by consensus
           but if the majority concludes that, despite reasonable efforts,
           consensus cannot be reached, then decisions will be made by majority
           vote.
 
9.     COSTS OF THE MANAGEMENT COMMITTEE.
 
      Each party will be responsible for the costs of the participation of its
representative on the Management Committee and will share equally:
 
      (a)    the costs of operation of the Management Committee; and
 
      (b)    the costs of preparing the report referred to in section 12;
 
up to an aggregate amount of $500,000, or such greater amount as may be agreed
to in writing by the parties, provided that if any payment by the Province is
delayed due to a need for statutory appropriation, Alcan's obligation to make a
payment hereunder, and the Federal Government's obligation should it choose to
participate, will be delayed for the corresponding period. If it chooses to
participate, the Federal Government will also be responsible for the costs of
the participation of its representative and a proportionate share of the costs
under (a) and (b) above. However, if the third member must be selected under the
provisions of section 6, then the parties will share equally the reasonable
costs of the participation of the third member.
 
10.    PURPOSES OF THE MANAGEMENT COMMITTEE.
 
      The purpose of the Management Committee is to review, assess and report on
options that may be available for the downstream enhancement of the Nechako
watershed area. These options may include, but are not limited to, the
development of a water release facility at or near the Kenney Dam, or the use of
the Nechako Environmental Enhancement Fund for other downstream enhancement
purposes.
 
11.    CONSULTATION PROCESS.
 
      The Management Committee will consult with the Nechako Watershed Council,
if formed, and any other stakeholders that the Management Committee considers
appropriate. The Management Committee may approve funding for consultation
purposes up to an amount of $100,000 a year. Alcan and the Province will share
equally the cost of such approved funding unless the Federal Government chooses
to participate in the Management Committee, in which case the Federal Government
will be responsible for a proportionate share of the cost of approved funding.
 
12.    MANAGEMENT COMMITTEE REPORTS.
 
      As soon as practicable after carrying out the consultation pursuant to
section 11, the Management Committee will complete and deliver a report to the
Province, Alcan and such other parties as appropriate, which report will
include:
 
      (a)    its decision on the appropriate options for downstream enhancement
           of the Nechako watershed area;
 
      (b)    a plan for the implementation of each of the selected options,
           including the identification of the appropriate party or parties to
           implement the options;
 
      (c)    an independent report for each selected option providing a detailed
           estimate of the costs for implementation of the option, including any
           ongoing costs associated with the option;
 
                                       29
<PAGE>   46
 
      (d)    a program for the use of the funding described in section 15 below
           to meet the costs of each of the selected options and to provide for
           financial and project reporting.
 
13.    DECISIONS BINDING ON THE PARTIES.
 
      Subject to the financial arrangements described below in section 15, and
the other terms of this Schedule, the decisions of the Management Committee will
be binding on the parties.
 
14.    FORMATION OF THE NECHAKO WATERSHED COUNCIL.
 
      Immediately following the execution of this Agreement, the Province will
help to facilitate the formation of the Nechako Watershed Council (the
"Council"), in order to provide advice to the Management Committee on the uses
and priorities of the Nechako Environmental Enhancement Fund.
 
15.    ALCAN'S FINANCIAL CONTRIBUTION.
 
      Funding of each of the selected options will be drawn down as required to
meet the cash flow needs of the expenditure program established by the
Management Committee for that option as provided in the report. Within 7 days
after each contribution has been made into the Nechako Environmental Enhancement
Fund by another person of 50% of each draw down for an option, Alcan will make a
matching contribution into the Nechako Environmental Enhancement Fund. The
aggregate and cumulative maximum of Alcan's contributions will be CAD$50,000,000
including any costs incurred by Alcan under section 9 (b) or under section 11.
Alcan will receive a credit against its obligation to contribute to the Nechako
Environmental Enhancement Fund in an amount not exceeding, in the aggregate,
CAD$10,000,000 for the total amount of the reduction or elimination of costs
which would have been incurred in the development or implementation of any of
the selected options to the extent that such reduction or elimination is shown
to be achieved by the use of any design or engineering studies or reports
prepared for Alcan prior to the date hereof on the Kenney Dam Release Facility
as part of the Kemano Completion Project. These funds will be disbursed in
accordance with the program for the use of funding developed by the Management
Committee. The CAD$50,000,000 contribution by Alcan represents its total
contribution to downstream enhancement under the program described in this
Schedule, including the capital costs of any water release facility which may be
selected and, whether or not a water release facility is built, Alcan shall not
be required to contribute any further amount to a water release facility or
other downstream enhancement. For greater certainty, this provision does not
affect any responsibility of Alcan that exists in respect of its ownership of
the Works.
 
16.    OPERATION AND MAINTENANCE OF A RELEASE FACILITY.
 
      If a water release facility is built under the program described in this
Schedule, then once completed, Alcan will operate, and manage the maintenance
of, the facility at its sole cost and expense. Alcan will not be responsible for
the costs of maintenance, other than as set forth above, except to the extent
that those costs are in part paid for by Alcan through its contribution to the
Nechako Environment Enhancement Fund under section 15 of this Schedule.
 
                                       30
<PAGE>   47
 
                                   SCHEDULE 5
 
                             [Reference Section 5]
 
                           NORTHERN DEVELOPMENT FUND
 
1.     ESTABLISHMENT OF THE FUND.  The Northern Development Fund (the "Fund")
will be established and administered in accordance with the terms of this
Schedule.
 
2.     PURPOSE OF THE FUND.  The purpose of the Fund is to promote sustainable
economic development in Northwestern British Columbia, including through
promoting and carrying out measures and/or programmes:
 
      (a)    to support investment in new or existing businesses;
 
      (b)    to create new employment or stabilize existing employment; and
 
      (c)    to support such other goals consistent with the purpose of the Fund
           as the Minister of Employment and Investment (the "Minister") may
           consider desirable.
 
      For purposes hereof, Northwestern British Columbia includes the Nechako
River basin.
 
3.     FUND ADMINISTERED BY THE MINISTER.  The Fund will be administered by the
Minister and payments out of the Fund will be made at the Minister's discretion
and direction in accordance with this Schedule for measures or programmes
meeting the purpose of the Fund. The Minister shall issue an annual report on
the administration of the Fund.
 
4.     ADVICE OF THE NORTHERN DEVELOPMENT FUND ADVISORY BOARD.  Prior to
approving any payments out of the Fund, the Minister will seek the
recommendations of the Advisory Board (as hereinafter defined). The
recommendations of the Advisory Board are to provide guidance only and will not
be binding on the Minister.
 
5.     PAYMENTS INTO THE FUND.  Alcan and the Province will each contribute CAD
$7,500,000 to the Fund, in accordance with the following provisions:
 
      (a)    the Province shall contribute CAD$2,500,000 on January 1 of 1998,
           1999 and 2000 or, at its option, on a later date in each year;
 
      (b)    the Province shall provide Alcan with 14 days' prior notice of the
           date of its contribution for each year; and
 
      (c)    Alcan shall contribute CAD$2,500,000 each year on the date of the
           Province's contribution.
 
6.     OTHER FUNDING SOURCES.  Additional financial contributions to the Fund
that may be made by any third party may be accepted if considered by the
Province to be in the best interests of the Fund.
 
7.     PAYMENTS HELD IN CONSOLIDATED REVENUE FUND.  The contributions of the
parties required under section 5 and payments, if any, received from third
parties under section 6, will be made into, invested and disbursed from, the
Province's Consolidated Revenue Fund pursuant to the Financial Administration
Act, or another mechanism or structure for holding and making payments from the
Fund as the Province may decide.
 
8.     ESTABLISHMENT OF THE NORTHERN DEVELOPMENT FUND ADVISORY BOARD.  Prior to
March 31, 1998, the Province will establish the Northern Development Fund
Advisory Board (the "Advisory Board").
 
9.     APPOINTMENT OF MEMBERS.  The Advisory Board will be comprised of at least
8 persons from the Northwestern region of British Columbia appointed by the
Minister. The Advisory Board shall include:
 
      (a)    one or more representative(s) of the Province
 
      (b)    one or more local government representative(s);
 
      (c)    one or more business representative(s), other than from Alcan;
 
      (d)    one or more First Nations representative(s);
 
      (e)    one or more union representative(s); and
 
      (f)     two persons nominated by Alcan as its representatives;
 
      (g)    other persons representative of the Northwestern region.
 
                                       31
<PAGE>   48
 
10.    DESIGNATION OF CHAIR AND PROCEDURES.  The Minister will designate one of
the members other than a representative of either the Province or Alcan to be
the Chair of the Advisory Board. The Chair of the Advisory Board, in
consultation with the Minister, will then establish the Advisory Board's working
procedures.
 
11.    CONSULTATION PROCESS.  To develop recommendations for the Minister as to
how the Fund should be utilized, as well as identifying any general or specific
measures or programmes which might be supported through the Fund, the Advisory
Board may consult with residents of Northwestern British Columbia.
 
                                       32
<PAGE>   49
 
                                   SCHEDULE 6
 
                             [Reference Section 6]
 
                                 MUTUAL RELEASE
 
      KNOW ALL PERSONS BY THESE PRESENTS that, subject to the condition set out
in section 1 hereof:
 
      (a)    Alcan Aluminium Limited ("Alcan") for and in consideration of the
           execution and delivery by Her Majesty the Queen in Right of the
           Province of British Columbia (the "Province") of the BC/Alcan 1997
           Agreement (the "Agreement") between Alcan and the Province and of the
           Replacement Electricity Supply Agreement, the 1997 Amendment, the
           Final Water Licence and the Amended Permit and the execution and
           delivery by British Columbia Hydro and Power Authority of the LTEPA
           Memorandum, all as defined in the Agreement (collectively called the
           "BC/Alcan Agreements"), and for and in consideration of the payment
           of $10.00, the full receipt and sufficiency of which hereby is
           acknowledged, does hereby agree by these presents for itself, its
           subsidiaries and their respective directors, senior officers, agents,
           successors and assigns to remise, release and forever discharge the
           Province and its ministers, officials, employees, agents, successors
           and assigns (hereinafter collectively called the "Province Releasee")
           of and from any and all claims, actions, causes of action, demands,
           rights, damages, costs, debts, expenses and compensation whatsoever,
           whether at law or in equity and whether known or unknown, suspected
           or unsuspected, which Alcan, its subsidiaries or their respective
           directors, senior officers or agents have arising as a direct or
           indirect consequence of, or in relation to the Kemano Completion
           Project as defined in the Agreement ("KCP") not proceeding, and,
           without limiting the generality of the foregoing, all claims and
           causes of action advanced, or which could be advanced, and all
           matters arising out of and referred to, in action number C970386,
           styled Alcan Aluminium Limited v. Her Majesty The Queen in Right of
           the Province of British Columbia commenced in the Vancouver Registry
           of the Supreme Court of British Columbia (the "Action"), on the terms
           and conditions hereinafter set out; and
 
      (b)    the Province for and in consideration of the execution and delivery
           by Alcan of the BC/Alcan Agreements, and for and in consideration of
           the payment of $10.00, the full receipt and sufficiency of which
           hereby is acknowledged, does hereby agree by these presents for
           itself and its ministers, senior officials, agents, successors and
           assigns to remise, release and forever discharge Alcan and its
           subsidiaries and their respective directors, officers, employees,
           agents, successors and assigns (hereinafter collectively referred to
           as the "Alcan Releasee") of and from any and all claims, actions,
           causes of actions, demands, rights, damages, costs, debts, expenses
           and compensation whatsoever, whether at law or in equity and whether
           known or unknown, suspected or unsuspected, which the Province has
           arising as a direct or indirect consequence of, or in relation to KCP
           not proceeding, and, without limiting the generality of the
           foregoing, all claims and causes of actions advanced in, or which
           could be advanced in, and all matters arising out of and referred to,
           in the Action, on the terms and conditions hereinafter set out.
 
1.     IT IS FURTHER UNDERSTOOD and agreed that it is a condition of this Mutual
Release that, if at any time before January 1, 2005 an Act of the Legislature of
the Province of British Columbia is enacted that abrogates in whole or in part
the 1950 Agreement, as amended, the 1987 Settlement Agreement, the 1997
Amendment, the Final Water Licence, the Amended Permit, the Replacement
Electricity Supply Agreement, the LTEPA, the LTEPA Memorandum or this Mutual
Release, all as defined in the Agreement, and within 90 days after any such Act
is enacted, Alcan by written notice to the Province elects to terminate this
Mutual Release and continue the Action, then, unless the abrogation is rescinded
or nullified by further enactment of the Legislature within 90 days after such
notice, this Mutual Release is void ab initio and of no force and effect, except
only that the provisions of this section 1 continue to bind the parties. Nothing
in this paragraph prevents Alcan from commencing a separate proceeding
challenging any legislation which abrogates, in whole or in part, any of the
agreements referred to herein. This Mutual Release is irrevocable, unconditional
and final and remains so if that notice is not given by Alcan within the time
herein permitted or, if given, if the abrogation is rescinded or nullified
within the 90 day period. The parties acknowledge that the effluxion of time
between the date hereof and the date on which the Mutual Release becomes void ab
initio does not prejudice, or affect in any way, the enforcement by a party of
any right that could be enforced by it on or before the date hereof, and is not
 
                                       33
<PAGE>   50
 
a waiver of, or acquiescence in, any fact or circumstance which forms the basis
for any such right, except to the extent otherwise provided in any of the
Agreement, any Concurrent Agreement, the Final Water Licence or the Amended
Permit, all as defined in the Agreement, that are not are so abrogated.
 
2.     IT IS FURTHER UNDERSTOOD and agreed that the settlement in respect of
which this Mutual Release is entered into is not an admission of liability and
nothing herein contained, nor the consideration given for this Mutual Release,
shall be construed as an admission of liability on the part of the Province or
of Alcan.
 
3.     AND Alcan hereby covenants and agrees not to make any claim or take any
proceeding whatsoever related to the matters herein released against any person,
firm, corporation, association, partnership, government or governmental
authority which might result in a claim for contribution and indemnity or
otherwise against the Province Releasee and, if such claim or proceeding is
taken or initiated by Alcan, then Alcan does hereby covenant and agree to save
harmless and indemnify the Province Releasee from any and all liabilities,
damages, interest, costs (including legal fees and disbursements as between
solicitor and own client), expenses and compensation of whatsoever kind in
respect of any claim for contribution or indemnity or otherwise.
 
4.     AND the Province hereby covenants and agrees not to make any claim or
take any proceeding whatsoever related to the matters herein released against
any person, firm, corporation, association, partnership, government or
governmental authority which might result in a claim for contribution and
indemnity or otherwise against the Alcan Releasee and, if such claim or
proceeding is taken or initiated by the Province, then the Province does hereby
covenant and agree to save harmless and indemnify the Alcan Releasee from any
and all liabilities, damages, interest, costs (including legal fees and
disbursements as between solicitor and own client), expenses and compensation of
whatsoever kind in respect of any claim for contribution or indemnity or
otherwise.
 
5.     AND the Province and Alcan hereby declare that in entering into this
Mutual Release they each understand and agree that they rely fully on their own
judgment, belief and knowledge of the nature of this document.
 
6.     AND the Province and Alcan each acknowledge that the facts in respect of
which this Mutual Release is made may prove to be other than or different from
the facts now known. The Province and Alcan each expressly accept and assume the
risk of the facts being different and agree that all of the terms and conditions
of this Mutual Release shall be effective and not subject to termination by any
discovery of any difference in facts or any new facts, save and except only as
provided in section 1 hereof.
 
7.     AND the Province and Alcan each further confirm, acknowledge and agree
that in entering into:
 
      (a)  the Agreement; and
 
      (b)  the Concurrent Agreements, the Final Water Licence and the Amended
        Permit, all as defined in the Agreement,
 
all promises, representations, collateral warranties or agreements, whether
oral, written, express or implied, not therein expressed are merged into the
Agreement and are of no further legal force or effect from the date of execution
of the Agreement, unless this Mutual Release is rendered void ab initio and of
no force and effect pursuant to paragraph 1 hereof. The consideration stated
herein is the sole and entire consideration for this Mutual Release.
 
8.     AND the Province hereby represents and declares that the Province has not
assigned any right of action concerning the matters hereby released to any
person, corporation or other legal entity who might claim against the Alcan
Releasee.
 
9.     AND Alcan hereby represents and declares that Alcan has not assigned any
right of action concerning the matters hereby released to any person,
corporation or other legal entity who might claim against the Province Releasee.
 
10.    WHEREVER the singular is used throughout this Mutual Release, the same
shall be construed as meaning the plural where the context requires.
 
11.    THE Province and Alcan each state that it has consulted with and has been
advised by its own solicitors before entering into this Mutual Release and that
it has carefully read this Mutual Release, knows the contents hereof and signs
the same as its own free act.
 
12.    THE terms of this Mutual Release are contractual and not recitals.
 
13.    THIS MUTUAL RELEASE is governed by the laws of the Province of British
Columbia and the laws of Canada applicable therein.
 
                                       34
<PAGE>   51
 
      IN WITNESS WHEREOF the parties have executed this Mutual Release on the
5th day of August, 1997.
 
<TABLE>
<S>                                                <C>
                                    HER MAJESTY THE QUEEN IN RIGHT OF
                                    THE PROVINCE OF BRITISH COLUMBIA,
                                    as represented by the Minister of Education,
                                    Skills and Training
                                    Per:(signed) Paul Ramsey
                                        Minister of Education, Skills and
                                        Training and Minister responsible for
                                        the Industrial Development Act
 
Witness:                            ALCAN ALUMINIUM LIMITED
 
(signed)                            Per:(signed)
Signature                               Jacques Bougie, President and
                                        Chief Executive Officer
 
---------------------------------
Name Lorne D. Peterson
----------------------------------------------
Address Bowen Island, British Columbia
</TABLE>
 
                                       35