Kaiser still open to NW smelter restart, BPA talks
NEW YORK, July 24 (Reuters) - Kaiser Aluminum Corp. (NYSE:KLU) said on Tuesday that it remains open to the possibility of restarting its shuttered smelter operations in the U.S. Pacific Northwest, but that reopening is contingent on declines in market prices for electric power.
On a conference call to securities analysts following Kaiser's second-quarter earnings, Chief Executive Officer Ray Milchovich said, ``I'd like to reiterate that we have maintained our ability to restart up to approximately 110,000 metric tonnes of Northwest smelter capacity on or after October 1, 2001, subject to prevailing economics.''
He added that Kaiser is also open ``to achieving mutually acceptable terms with BPA (Bonneville Power Administration) for continued curtailment.''
To clarify, company spokesman Scott Lamb said the 110,000 tonnes would be the amount of smelter capacity Kaiser can run in the Northwest on its power allocation from the BPA.
``That assumes Trentwood (rolling mill) continues to run normally,'' said Lamb.
Milchovich added that with the recent rapid declines in market rates for power, ``We also have the option to purchase power in the market if it's economically feasible to do that.''
All primary aluminum producers with operations in the Northwest have had to curtail production in a climate of massive increases in power prices.
Some producers signed agreements with BPA not to operate for a limited time in order to lower demand for the power generators' electricity as it attempts to bring power prices more in line with historically accessible rates.
Milchovich said on Tuesday that its negotiations with BPA are ongoing.
``We've maintained the option to restart, however, given the fundamentals of the Northwest. We've also said we remain open to acceptable terms and conditions regarding a curtailment agreement (with BPA),'' the CEO said.
``I do not want to say more than, those negotiations (with BPA) are alive and ongoing. An arrangement could be reached any time between now and October 1,'' he added.
Kaiser has maintained for several months that it has a preference to restart part of its Northwest smelter operations if at all possible in the current environment.
``Short of that, the company is maintaining its option to operate,'' he added.
Asked when Kaiser would decide whether to keep its smelters on maintenance or not, Milchovich responded, ``What we've maintained is the infrastructure in good order. And we've maintained the ability to immediately start up at least 4-3/4's lines if not more, depending on the market price of power.''
``If for some reason we were convinced that we were going to be curtailed for a year or longer, it would be prohibitive for us to continue to incur the infrastructure expense that we've got there,'' he added.
He said that decision would be made sometime between now and October 1, when its new power contract with Bonneville takes effect.
In terms of impact on income from keeping the Northwest infrastructure on maintenance, Milchovich said, ``That would not be much more negative than what we've had in the second quarter, because we're reasonably stablized at this level.''
``It does not get much more negative than this, but it could be less than this depending on the cuts that we may choose to make,'' the CEO added.
Finally, he said as he has in past sessions with analysts, ``The company continues to believe that the Pacific Northwest power fundamentals are sound and capable of supporting long-term smelter operations.''