Ormet is prepping for shutdown

HANNIBAL – Roughly 900 people could be in the unemployment line by November if Ormet Corp. follows the provisions of the Worker Adjustment and Retraining Notification Act notice.

One week after announcing the plant would reduce production to one-third capacity by running just two of its six potlines, Ormet is preparing for a total shutdown if it cannot achieve lower power rates from American Electric Power, via the Public Utilities Commission of Ohio. Ormet uses massive amounts of electricity to produce aluminum via an electrolytic process.

The notice, filed late Thursday with the Ohio Department of Job and Family Services, is similar to the one Ormet issued last year. At that time, the company announced about 1,000 workers could lose their jobs due to the same issue it now faces – higher AEP bills.

The new notice shows the plant employs about 100 fewer people than it did last year.

According to a filing with the Public Utilities Commission of Ohio by James Burns Riley, chief financial officer for Ormet, the move to curtail operations from four to two potlines last week affected “over 200 individuals.” The company is now preparing to let all employees go, pending a sale to Wayzata Investment Partners that is contingent upon Ormet receiving electricity discounts.

The WARN notice is the “result of unexpected delays in obtaining necessary modifications to the purchase price of electricity, which has resulted in Ormet’s inability to close on the proposed sale … ,” it states.

In February, Ormet filed for bankruptcy in U.S. District Court in Delaware. The company later announced a planned $221 million sale to Minnesota-based Wayzata, but emphasized this transaction required convincing the PUCO to allow Ormet pay AEP a reduced rate for electricity.

However, commissioners at a PUCO meeting last week denied Ormet’s request for emergency relief, so the company will not learn if it will get reduced power rates until an Aug. 27 meeting.

“The financial distress of a single non-utility company such as Ormet does not rise to the level of an emergency … ,” the commission states in a ruling signed by Commissioners Todd Snitchler, Steven Lesser, Lynn Slaby, M. Beth Trombold and Asim Z. Haque.

The rate dispute is taking place because AEP could raise Ormet’s bills to $62.83 per megawatt hour. The rate was just $39.66 per megawatt hour when the companies reached a power agreement in 2009, according to Ormet President and Chief Executive Officer Mike Tanchuk.

“In the current metal pricing environment, Ormet simply cannot overcome the massive increase in the Ohio Power electric rates experienced over the past several years. Ormet must receive the relief requested to continue operations and build a future for our employees and community,” Tanchuk has said.