HANNIBAL, Ohio--(BUSINESS WIRE)--On October 2, the Public Utilities Commission of Ohio (PUCO) denied the majority of Ormet’s request for an energy transition plan that would allow it to operate while constructing an onsite natural gas based power generation facility. Due to this decision, Ormet cannot emerge from bankruptcy and must immediately shut down operations. Ormet estimates that an additional 600 people will be affected under the existing WARN notice.
Ormet was forced to file for bankruptcy on February 25, 2013 due to historically low metal prices and exceedingly high and uncontrollable power costs. The Ohio Power industrial rate which establishes the base rate for Ormet to procure power has increased from $39.66 per MWh, when the Unique Arrangement was established in 2009, to $60.83/MWh in September 2013, an increase of over 53 percent. During the same period, wholesale power costs in the region have decreased by over 10 percent. The Unique Arrangement was created as an economic incentive to maintain and create jobs, which Ormet has successfully done to date. At full operations, Ormet’s projected 2014 energy cost would reflect an increase of $108 million, before the potential discount of $54 million as provided for in the PUCO ruling.
“The economic impact of PUCO’s decision is simply a restructuring of the existing economic incentives already pledged to Ormet for maintaining the jobs and does not address the continued rate increases from AEP. It is not sufficient to maintain, let alone increase, operating levels at Hannibal and begin construction of an onsite power plant. The Chairman and one of the Commissioners went out of their way to insult Ormet’s efforts to reduce costs. I want to set the record straight and recognize that the USW and secured creditors have coordinated in a collaborative effort with the Company to reduce the company’s financial liabilities by almost $300 million. The PUCO Commissioners never mentioned in their comments that Ohio’s energy policy transition to market has massively increased energy costs and is misguided, with its first major casualty being Ormet. How can this Administration justify an energy policy that puts thousands of people out of work?” said Mike Tanchuk, Chief Executive Officer and President of Ormet Corporation.
A restart of the Hannibal smelter in the future would be contingent upon obtaining a long term economical power supply, similar to that achieved by Century Aluminum in Kentucky, and an improving aluminum pricing environment.
Cautionary Statement
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