Bonneville says Kaiser stays out of power deal talks
By Carole Vaporean
NEW YORK, May 10 (Reuters) - Kaiser Aluminum Corp. has not participated in discussions on final terms of a power deal with the Bonneville Power Administration (BPA) as its competitors in the Northwest region have, a BPA spokesman said on Thursday.
But Kaiser spokesman Scott Lamb said the company has ongoing discussions with the Portland, Oregon power agency.
``We have people involved in energy and power matters, and they have routine kinds of contact and conversations with BPA officials. And that contact is ongoing all the time,'' he said.
BPA said it has been in serious talks with all aluminum producers to finalize terms of the latest power arrangement that begins October 1 -- all except Kaiser.
``I can tell you that negotiations with Kaiser would be different. If we do get into a position to negotiate with Kaiser they'd be different than the ones with Golden Northwest, Columbia Falls, McCook Metals (all privately-held), or even Alcoa (NYSE:AA - news),'' Bonneville spokesman Mike Hanson said.
``As far as formal negotiating sessions, as to what happens after October 1, I just can't comment on that,'' Lamb said.
Aluminum companies have been working with BPA to nail down terms of a special provision in their new power contract that would shutdown smelters for two years to conserve power.
Hanson said the other aluminum companies have been co-operating with BPA throughout the energy crisis.
``Versus Kaiser, who originally worked out a deal during the first two months of their shut down to pay for employees and to sell us back the power at a reduced rate,'' he said.
Last June, Kaiser was one of the first aluminum producers in the Northwest to curtail production in the area because of high electricity costs, when it cut 128,000 annual tonnes.
OBLIGATED TO DELIVER POWER
To date, Kaiser has announced power re-sale transactions amounting to $468 million. It still has another $20 to $40 million of power left to sell by October, said Lamb.
``We, along with other companies, have signed contracts already for them (BPA) to deliver power. Right now, they are obligated to deliver power to us on October 1,'' said Lamb.
"Our preference is to take the power, re-start the smelters, bring people back to work, that is our preference. But, we have to wait and see what the rate is, Lamb added.
Last October aluminum producers renewed contracts to receive power from BPA at a fixed rate for five years beginning in October 2001.
A number of coincident factors conspired to keep power supplies at historic lows and drive power prices sky high.
In attempt to curb costs, Bonneville asked smelters to shutter operations for two years, and BPA will reset rates every six months depending on going rates at the time.
``If that's in the best interest of the region in the near term, we're willing to talk about that. And we would expect to be compensated just as the other companies are,'' said Lamb.
He was referring to BPA's offer to pay wages and benefits of workers at companies that agree to shutdown for two-years.
``To the extent that BPA has been reluctant to do that (with Kaiser) we think it is totally inappropriate,'' he added.
BPA said other smelters have been investing in new power generation, paying for their employees, modernizing plants, and paying existing debt with money made on power sales.
``In other words they have been putting their plants in a position to be able to re-open with a viable work force. We don't know what Kaiser's doing,'' said Bonneville's Hanson.
DISPUTE OVER COMPLIANCE
Kaiser has a contractual right to the power. They buy it for $22.50 a megawatt hour (MWh) and sell it for whatever they can get. Recently the open market has reaped $200 to $400 MWh.
``They won't be able to continue that procedure once the new contract takes effect,'' said Hanson.
The new pact also stipulates that Kaiser spell out its uses for the windfall profits and provide BPA with a plan.
``Well, they haven't done that. Since February 1, they have said nothing. We don't know what they're doing with the money. We don't know where it's going. And, it's close to the tune of half a billion dollars,'' said Hanson.
He added that, under the new contract BPA can withhold power equal to the value of what Kaiser remarketed if it does not specify how it spent the windfall profits.
Kaiser's Lamb said, ``The bottom line is that we are 100 percent compliant with that provision.''
Meanwhile, when it announced first quarter earnings on April 24, Kaiser said it was in talks on five separate possible asset sales to address approaching debt maturities, and will announce details within 60 days.
If the assets in question should include those in the Northwest, it is possible that a sale could be compromised if Kaiser does not comply with the reporting provision.
Lamb said, ``It's a non-issue, because we are 100 percent compliant. It's absolutely a non-issue.''
``I would suggest that folks remember that Kaiser is a global company. We have assets all around the world. As a company we have not specified any one business unit or any one geography as being either under consideration or absolutely not under consideration (for possible sale),'' he added.