Power sales spark Kaiser profits
Trentwood not among `prospects for growth' as firm looks to sell assets
John Stucke - Staff writer
Electricity sales powered Kaiser Aluminum Corp.'s profits to $119.6 million during the first three months of the year, the company reported Tuesday.
Now the company is poised to shed factories and property within two months, CEO Raymond Milchovich said.
What that means for Trentwood is unknown, but the rolling mill does not fit into what Milchovich called Kaiser's "prospects for growth."
"We're in very active negotiations ... on five separate transactions, any one of which would help the company address debt," Milchovich said. "We'll be in a position to announce something specific within 60 days."
The company is making a turnabout, he told analysts Tuesday morning. Selling its allotment of Bonneville Power Administration electricity has been a boon.
The profits are a tenfold climb from early last year's net of $11.7 million, when Steelworkers were striking and megawatts sold cheap.
The big, one-time gain provided Kaiser with liquidity as it rebuilds its refinery in Gramercy, La., which was damaged in a 1999 explosion. The gain was enough to offset an operating loss before power sales were factored in.
The money is also helping Kaiser carve into its $923.6 million debt and pay for employee compensation, asbestos claims, taxes, interest and capital spending.
Based in Houston, Kaiser has significant holdings in Washington, including smelters in Mead and Tacoma, along with Trentwood and a rod mill in Richland.
Its first-quarter revenues were $480.3 million, down from $575.7 million a year ago, due mostly to idled production.
Milchovich declined to pinpoint asset sale possibilities, except to say they will be part of what he termed a "corporate-wide performance improvement initiative" to be announced within three weeks.
He highlighted the company's alumina and engineered products divisions as the company's best growth prospects.
The Trentwood mill, with 775 Steelworkers and 270 salaried employees, belongs to neither. Instead, it operates within Kaiser's flat-rolled division.
During the quarter, Trentwood shipped about 25,000 metric tons of aluminum products.
That's down. Trentwood workers produced more when rolling canned beverage stock was a key product.
Now, Trentwood workers make aluminum for the aerospace industry and other markets, company spokesman Scott Lamb said.
An asset deal could mean the sale of an entire site or just the equipment.
One question dogging Kaiser in Washington is the supply of electricity. BPA has threatened to withhold the 290 megawatts of electricity earmarked for Kaiser, basically leaving the Washington plants without a power supply.
Whether an empty power contract would follow the assets to a different owner hasn't been decided, BPA spokesman Ed Mosey said.
The agency is troubled that it couldn't reach an agreement with Kaiser over how to split the company's $400 million in power proceeds.
Kaiser originally paid BPA about $23.50 a megawatt hour under terms of a contract that expires in October, even though the federal agency had to initially spend millions of dollars buying the electricity in the open market. After BPA supplied Kaiser, the company resold the electricity at soaring market rates. Sometimes, BPA had to purchase the resold power at exorbitant rates.
New BPA contracts starting in October ban such power resales.
In five years, BPA wants aluminum companies off the federal system, a move Kaiser is fighting. BPA supplies about 40 percent of the electricity needed to run Kaiser's plants in the Northwest. The rest is from private suppliers, a source that is now far too expensive for energy-intensive aluminum companies.