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Noranda mulling options in bid for reduced power rate

Keywords: Tags  Noranda Aluminum Holding Corp., quarterly results, power rate, reduction, rate petition, Missouri Public Service Commission, Layle K.


CHICAGO — Noranda Aluminum Holding Corp. has options if Missouri regulators do not approve a lower electricity price for the company.

The Franklin, Tenn.-based aluminum producer will give its current rate petition process with the Missouri Public Service Commission a "full go" and believes that route is the best for receiving a "sustainable" power price, Noranda president and chief executive officer Layle K. "Kip" Smith said during an earnings conference call with analysts Feb. 19.

"But we are going to take the actions that are necessary for our survival. And if this case were not adjudicated in our favor, we would ... look at other alternatives," Smith said.

Smith declined to say what those alternatives might be, and whether Noranda could leave St. Louis-based utility Ameren Corp.’s system or whether purchase commitments might prevent the company from doing so. He described the alternatives—and any corresponding timelines—as "proprietary."

"We would expect that a follow-on process would take some time, and we would take the employee actions necessary to make sure that we had the runway to take that time," he said.

Noranda is seeking a lower electricity rate in Missouri, without which it said it will need to cut 150 to 200 jobs or ultimately close its 260,000-tonne per year New Madrid, Mo., smelter. The company wants the rate to be approved quickly so that it will be in place by Aug. 1 (amm.com, Feb. 13).

As a large industrial consumer, Noranda already receives a discounted price on electricity but needs an even cheaper one to survive, Smith said. "Unfortunately that lower price is not competitive with what we believe our competition has or is in the process of seeking," he said.

Smith did not say who Noranda’s competitors might be. But two of Chicago-based Century Aluminum Co.’s smelters—one in Hawesville, Ky. (amm.com, Aug. 14) and one in Sebree, Ky. (amm.com, Jan. 30)—have already used the regulatory process to get a lower power rate.

Smith stressed that Noranda’s requirements are less expensive to serve than those of other customers and that the company is not seeking a rate that would place it among the lowest-cost smelters in the United States. "We are not even asking for a rate that puts us in the best third. We are just asking to be in the middle," he said, reasoning that the company could make up for the difference through other cost-saving measures.

Controlling power costs is crucial for U.S. smelters, Smith said, noting that only nine smelters remain in production in the country compared with 33 some 20 to 30 years ago. "We have been unable to find the smelter closure announcement that did not include power as either the sole or primary cause for the closure," he said. "And we are not different from any other smelter out there."

Cheaper power is "critical" for Noranda, Smith said, adding that the power issue is also "the No. 1 spot where I spend my time."


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