Aluminum company works out a power-profit deal with BPA
Sale of electricity once earmarked for smelter work will bring in about $400 million
John Stucke - Staff writer
Golden Northwest Aluminum Inc. stands to net about $400 million by selling its federal supply of electricity into a needy market.
Three-fourths of the money will flow into projects, paychecks and the company's coffers. The remaining $100 million will be dedicated to the Bonneville Power Administration.
The company's two smelters sit across the Columbia River from each other_ one in Goldendale, Wash., and the other in The Dalles, Ore.
Brett Wilcox, Golden Northwest's CEO, said Tuesday that selling electricity would earn his company "more than twice the value of making aluminum products."
Like other aluminum companies in the Northwest, Golden receives the bulk of its electricity -- about 300 megawatts of the 475 needed to power both smelters -- from BPA.
By reselling all but 25 megawatts of its BPA allotment, Wilcox said, the company will realize a nine-month windfall. It will use about $200 million to pay off some upgrade costs, fully compensate about 1,100 workers laid off because of the recent curtailment and bolster its reserves to pay for needed improvements.
Another $100 million will be earmarked for a new gas-fired combustion turbine project to generate about 248 megawatts, along with a wind-power project. Both are expected to lessen Golden's dependence on BPA by the year 2006.
The remaining $100 million of the proceeds will go back to BPA to help the agency. BPA, like others, has had to purchase pricey power on the open market to meet its contractual obligations, said spokesman Mike Hansen.
"We're not buying any power right now, but we have had to, and now need to contain the high prices," Hansen said. The deal was called a model by U.S. Energy Secretary Bill Richardson.
"If other Northwest aluminum producers curtail production in the next few months, they should look to this agreement as a model," he said in a prepared statement.
The comments could be considered a call for Kaiser Aluminum Corp. to follow suit.
Kaiser, too, has resold most of its BPA power. During the months of December and January, it earned about $89 million by shutting down its Mead smelter.
It sparked criticism and charges of profiteering from the United Steelworkers of America and government officials. Each wanted the company to pay more in wages to its laid-off work force and to pledge some of the money into new power-generation projects.
Kaiser has since agreed to fully pay its laid-off Steelworkers. Spokeswoman Susan Ashe has said the company is carefully researching how to best use the power sale proceeds to ensure the company can reopen its shuttered smelters in Tacoma and Mead.
Hansen said BPA and Kaiser are discussing further power sales that will cover February through October. That's when Kaiser's new contract with BPA begins.
It doesn't offer Kaiser the ability to resell power. Nor does BPA's new contract with Golden, which also begins in October.