Century Aluminum to get Ky. power on open market, acquire Sebree - Beckley, Bluefield & Lewisburg News, Weather, Sports

Century Aluminum to get Ky. power on open market, acquire Sebree smelter

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It's a tale of two smelters for Jackson County, W.Va., and Hancock County, Kentucky.

While Ravenswood residents wait and wonder if and when the smelter there that closed in 2009 will reopen, Century announced April 29 with Big Rivers Electric Corp. and Kenergy Corp. the same day in announcing a tentative agreement on the framework for providing market priced power to the Hawesville, Ky. smelter in Hancock County, where Century had issued a WARN, or conditional closure notice.

Under the arrangement, the electric cooperatives would purchase power on the open market and pass it through to Century at the market price plus additional costs incurred by them.

According to details from Big Rivers, the arrangement "is intended to have no impact on the current rate proposal of Big Rivers or the related flow-through rate proposal of Kenergy."

The agreement is pending approval from several third parties, including the boards of directors of all the parties, the Kentucky Public Service Commission and the Rural Utilities Service, among others.

The agreement is expected to move quickly to finalize details before the current power contract expires Aug. 20.

The Hawesville smelter has a rated capacity of 244,000 tonnes of primary aluminum and employs about 650 men and women.

Century also announced April 29 it has entered into a definitive agreement to acquire substantially all of the assets of the Sebree aluminum smelter in Kentucky.

That smelter is in Henderson County, Ky., and employs more than 500 men and women. It currently is owned by a subsidiary of Rio Tinto Alcan Inc. and has an annual production capacity of 205,000 metric tons of primary aluminum.

"We are well acquainted with the Sebree smelter and its excellent management team and talented group of employees," Century President and CEO Michael Bless said in a news release. "We believe that, with these facilities under common ownership, we will derive real benefits in better serving customers and through improving both operations with the sharing of best practices in safety, technical and operational practices and procedures."

Bless said Century believes Sebree, like Hawesville, is globally competitive in every area except the cost of power.

"Maintaining operations at these plants, and the thousands of direct and indirect jobs they provide and support, is critical for the entire western Kentucky community," Bless said in the news release. "Gaining access to competitive energy is crucial for the continued viability of these plants, and we hope that the tentative agreement we have reached for Hawesville will be the first step towards obtaining market priced power."

The terms of the Sebree agreement state that Century will acquire the smelter for $61 million in cash, after $4 million in purchase price deductions along with $71 million in working capital. RTA will retain all historical environmental liabilities of the Sebree smelter and has agreed to fully fund the pension plan being assumed by Century's subsidiary at closing.

According to the news release, this agreement is subject to certain closing conditions, including the consent of Kenergy Corp. to the assignment of the smelter's existing power contract, which is scheduled to end Jan. 31, 2014.

Century engaged in a lengthy special rate hearing with the Public Service Commission of West Virginia last year. Retiree health insurance has been hanging in the balance as part of the rate agreement. The option of purchasing free market electricity was brought up during the rate hearing, after Bless said the company could make a profit by getting its electricity from the open market in West Virginia, but in its reply briefs in the rate case, the company said the process to adopt a deregulation plan was "daunting, as is the challenge of constructing a deregulation plan which satisfies the multiple stakeholders. Nowhere in its testimony did Century propose such an alternative."

Century announced its quarterly earnings last week, and during that call, Bless said restarting the Ravenswood smelter "remains a priority, and we are in discussions with the power provider and other key constituencies aimed at finding a suitable arrangement."