Full Curtailment of Ormet’s Hannibal Operations
HANNIBAL, Ohio -- October 4, 2013
On October 2, the Public Utilities Commission of Ohio (PUCO) denied the
majority of Ormet’s request for an energy transition plan that would allow it
to operate while constructing an onsite natural gas based power generation
facility. Due to this decision, Ormet cannot emerge from bankruptcy and must
immediately shut down operations. Ormet estimates that an additional 600
people will be affected under the existing WARN notice.
Ormet was forced to file for bankruptcy on February 25, 2013 due to
historically low metal prices and exceedingly high and uncontrollable power
costs. The Ohio Power industrial rate which establishes the base rate for
Ormet to procure power has increased from $39.66 per MWh, when the Unique
Arrangement was established in 2009, to $60.83/MWh in September 2013, an
increase of over 53 percent. During the same period, wholesale power costs in
the region have decreased by over 10 percent. The Unique Arrangement was
created as an economic incentive to maintain and create jobs, which Ormet has
successfully done to date. At full operations, Ormet’s projected 2014 energy
cost would reflect an increase of $108 million, before the potential discount
of $54 million as provided for in the PUCO ruling.
“The economic impact of PUCO’s decision is simply a restructuring of the
existing economic incentives already pledged to Ormet for maintaining the jobs
and does not address the continued rate increases from AEP. It is not
sufficient to maintain, let alone increase, operating levels at Hannibal and
begin construction of an onsite power plant. The Chairman and one of the
Commissioners went out of their way to insult Ormet’s efforts to reduce costs.
I want to set the record straight and recognize that the USW and secured
creditors have coordinated in a collaborative effort with the Company to
reduce the company’s financial liabilities by almost $300 million. The PUCO
Commissioners never mentioned in their comments that Ohio’s energy policy
transition to market has massively increased energy costs and is misguided,
with its first major casualty being Ormet. How can this Administration justify
an energy policy that puts thousands of people out of work?”said Mike
Tanchuk, Chief Executive Officer and President of Ormet Corporation.
A restart of the Hannibal smelter in the future would be contingent upon
obtaining a long term economical power supply, similar to that achieved by
Century Aluminum in Kentucky, and an improving aluminum pricing environment.
This Statement contains forward-looking statements that can be identified by
use of words such as “anticipates,” “believes,” “estimates,” “expects,”
“hopes,” “targets,” “should,” “forecast,” “outlook,” “projects” or other words
of similar meaning. All statements that address the Company’s expectations or
projections about the future, including statements about the Company’s
strategy for growth, cost reduction goals, expenditures, financial results,
liquidity and capital needs, are forward-looking statements. Forward-looking
statements are based on the Company’s estimates, assumptions and expectations
of future events and are subject to a number of risks and uncertainties and
may or may not be realized. The Company cannot guarantee its future
performance or results of operations. All forward-looking statements in this
press release are based on information available to the Company on the date
hereof. The Company disclaims any intention or obligation to update or revise
any forward-looking statements, except as may be required by law. The
Company’s business is subject to a number of significant risks and
uncertainties, including the potential adverse impact of its Chapter 11 cases.
Given the significant uncertainties and risks to which the Company is subject
(a) the reader should not place undue reliance on forward-looking statements
contained in this press release and (b) the Company’s future results could
differ materially from the Company’s current results and from those
anticipated in the Company’s forward-looking statements.
James Burns Riley, 740-483-2602
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