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AEP mulls impact of Ormet shutdown

Keywords: Tags  Ormet Corp., American Electric Power Co., Inc. aluminum, smelter, power dispute, shurtdown, bankruptcy, Nicholas Akins United Steelworkers Union


CHICAGO — Ormet Corp. might not remain in business, executives at American Electric Power Co. Inc. (AEP), Ormet’s power supplier, said during a July 25 earnings call.

"There are issues related to whether or not Ormet stays in business," AEP executive vice president and chief financial officer Brian Tierney said when asked by an analyst about the Columbus, Ohio-based utility’s exposure to the bankrupt Hannibal, Ohio-based aluminum producer. "If Ormet were to stop operations altogether," the move would result in AEP seeing a pre-tax hit to revenue of about $2.8 million per month, he said.

Ormet, like other industrial users, represents a large load for AEP, said company chief executive officer, president and director Nicholas Akins. "But that one in particular (Ormet) ... we hardly make any money off it to begin with," he said.

An AEP spokeswoman stressed that the executives’ comments about Ormet, the utility’s largest customer, came in response to a hypothetical scenario presented by an analyst. "We really don’t have any special insight into the status of their operations," she told AMM.

Ormet executives did not respond to a request for comment July 26, and an attorney representing the firm said he could not comment on whether or when Ormet might make a decision to curtail production.

The United Steelworkers (USW) union, which represents workers at Ormet, said it was unlikely that any move to curtail operations was imminent. Ormet probably won’t make any decision until the Public Utilities Commission of Ohio (PUCO) weighs in on a power dispute between the company and AEP next week, a USW spokesman said.

PUCO will decide during a regular meeting July 31 whether to move up a hearing on the dispute between AEP and Ormet, which is currently slated for Aug. 27, a commission spokesman said.

Besides, "the company would have to confer with us in terms of exactly what they would be doing in terms of curtailing operations," the USW spokesman said, noting that any cutbacks wouldn’t likely come until "early August" and would not necessarily involve shutting down all operations. Ormet’s fate depends largely on its ability to reach an agreement with AEP on reduced electricity rates, he said.

AEP has in the past worked to help Ormet remain an employer in Ohio, the AEP spokeswoman said. "Despite the significantly discounted electricity price that they receive, unfortunately the aluminum markets are very difficult and they are in bankruptcy," she said. "They are looking for reduced energy costs through a subsidy that would be paid for by other AEP Ohio customers, and we have concerns about that."

Ormet filed for bankruptcy protection in February citing high legacy and power costs and low aluminum prices ( amm.com, Feb. 26). The company was sold last month to a subsidiary of Wayzata, Minn.-based Wayzata Investment Partners (amm.com, June 4).

Ormet says the power dispute jeopardizes the sale and may force production cuts or even liquidation (amm.com, July 15). The company has permission to slash production if necessary (amm.com, July 24).


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