Dow Jones Business News
Kaiser Aluminum Seeks To Reject BPA Power Pact
HOUSTON -(Dow Jones)- Kaiser Aluminum Corp. (KLUCQ) filed a motion with the U.S. Bankruptcy Court for the District of Delaware to reject the 2001-2006 subscription contract with the Bonneville Power Administration. ADVERTISEMENT
In a press release Thursday, the company said the filing was in connection with a shift to market-based power purchases for its operations in the Pacific Northwest.
Kaiser, which filed for Chapter 11 bankruptcy protection in February, has the right to assume or reject certain contracts that existed prior to the filing date, subject to court approval and certain other limitations. The court is expected to rule on the motion at a regularly scheduled hearing on Sept. 23.
Kaiser said the rejection of the BPA contract could take effect as early as Oct. 1, depending on court approval of the motion and on the timing of Kaiser's execution of new power contracts with other providers for the ongoing normal operation of the Trentwood, Wash., rolling mill.
By seeking to reject the BPA contract, Kaiser expects to avoid "take or pay" penalties that it would incur beginning Oct. 1. BPA can impose such penalties if the company isn't using the full amount of power called for in the contract, and the market price of electricity is below the BPA contract power price. Kaiser currently is using less than 40 megawatts of the 291 megawatts contemplated in the BPA contract. Based on recent market prices for electricity, the company estimates that "take or pay" penalties could amount to as much as $ 1 million to $2 million a month.
The company has a separate power transmission agreement with the BPA that permits, and will continue to permit, Kaiser to transmit third-party power to its facilities.
-Stephen Lee; Dow Jones Newswires; 201-938-5400