Milchovich holds out hope for Kaiser restart
Company still negotiating revenue dispute with BPA
Bert Caldwell - Staff writer
Despite a prolonged shutdown of company smelter operations in the Northwest, Kaiser Aluminum Corp. Chairman Ray Milchovich Tuesday said the region remains attractive for the industry.
But he told analysts reviewing Kaiser's second-quarter financial results that company officials will reassess some costs of keeping its smelters at Mead and Tacoma on standby if prospects of a restart within the next year dim.
About 110,000 metric tons of smelting capacity, or four and a half potlines, could be brought back on line with electricity from the Bonneville Power Administration, he said. Mead contains eight potlines, Tacoma three.
All have been idle since December, when Kaiser decided to resell megawatts from Bonneville at profits estimated at more than $400 million.
Milchovich said Kaiser continues to try to resolve a dispute with the federal power marketing agency over a split of those proceeds.
Vice President Scott Lamb declined to comment on what progress, if any, has been made in those sometimes confrontational discussions.
As of Oct. 1, Bonneville will charge smelter customers $37 per megawatt-hour for electricity.
"It is a price we're giving serious consideration to, even as we speak," Lamb said, adding that Kaiser may await potentially lower rates to be set for power delivered after March 30, 2002.
Kaiser reported a net loss of $64.1 million, or 80 cents per share, for the quarter ended June 30. Last year, the company earned $11 million, or 14 cents per share, during the same period.
The results include a $45.8 million allowance for settling some asbestos claims against Kaiser, Milchovich noted.
For the first six months of 2001, company net income was $55.5 million, or 70 cents per share, compared with $22.7 million, or 29 cents per share, in 2000.
Net sales for the quarter, $446.8 million, and six months, $927.1 million, were below year-ago levels.
Milchovich said ongoing difficulties with startup of the Gramercy, La., refinery were a drag on earnings last quarter, as were the drop in smelting output, lower alumina prices, and weak demand for fabricated products like those produced at the Trentwood rolling mill.
The one bright spot there was continued strong demand for aluminum sheet used in the aerospace industry, he said.
Milchovich downplayed prospects for sales of Kaiser assets beyond the pending deal for 8.3 percent of its interest in Queensland Aluminum Limited in Australia.
In April, he said talks with several potential buyers were ongoing, but Lamb discouraged continued speculation on other sales.
But he added that Kaiser officials regard alumina refining and the manufacture of engineered products as areas that have the greatest potential for growth.