Kaiser nets $130M from power
Bonneville Power Administration could pull plug
John Stucke - Staff writer
Kaiser Aluminum Corp. found several buyers for the electricity it normally uses to make aluminum at Mead. The deal netted the company $130 million.
It's Kaiser's last major sale of electricity, representing the balance the company can sell through September, said company spokesman Scott Lamb.
While California and some industries have been crippled by the high cost of electricity in the past several months, Kaiser has turned the problem into a profitable strategy.
By keeping its Tacoma smelter shuttered and idling the works at Mead, Kaiser has been able to resell its allotment of electricity from the Bonneville Power Administration for prices fetching many times what it originally paid.
Beginning last fall, several sales earned the company about $400 million -- more than its core business of making metal at Tacoma and Mead.
The sales, however, have earned the company controversy as well.
While other aluminum companies also have curtailed operations to resell BPA-supplied electricity, Kaiser and the federal agency have been unable to reach agreement on how the windfall should be used.
Kaiser hasn't given an accounting of exactly how the money is being spent or how it will be used. Generally, Lamb said, the proceeds from power sales are being used for such things as mitigating employee expenses; putting the money into a savings account to offset much-higher electricity costs in the future, and corporate expenses to strengthen the company and pay for costs incurred with shutdown and start-up activities.
BPA has been critical of Kaiser, and has threatened to unplug the company from the federal system beginning in October.
"Obviously, that's the hammer that's in the contract," said BPA spokesman Ed Mosey. He said the negotiations with Kaiser remained at a standstill, adding that the agency is reviewing its legal strategy.
Should BPA withhold power to Kaiser, the company would have to shop the market for its massive electricity needs.
Such a scenario likely would be too expensive for Kaiser and force a much longer closure.
The agency wants Kaiser to share the wealth netted from electricity sales. The company claims it already has.
That disagreement is followed by Kaiser's reluctance to invest the proceeds in new electricity generating plants. While BPA wants energy-intensive aluminum companies off the federal system in five years, such a move poses big costs and a new business focus.
Some aluminum companies are building generation. Others are still exploring the opportunity. Some, such as Kaiser and the Columbia Falls Aluminum Co. in northwest Montana, have said they can't make such an investment pencil out in such a volatile power market.
Kaiser, according to Lamb, is still hopeful of reaching an accord with BPA.
He said no decision has been made about reopening the Mead smelter by Oct. 1, when Kaiser no longer can sell electricity. Start-up activities would take between three and six weeks.
"That's what we want to do," Lamb said, adding that Kaiser is trying to determine what its rates will be and whether running the smelter can be a long-term venture.
Also on Friday, Kaiser announced it has recorded about $289 million in insurance recoveries from the explosion at its refinery in Gramercy, La.