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Ormet: Positioned well short-term

February 27, 2013
Compiled by Staff , Times Leader

HANNIBAL - Ormet Corp. survived daunting challenges in the past year, but company and union officials appear hesitant to discuss how well the company is positioned for the future.

Neither Chief Executive Officer Mike Tanchuk nor Tom Byers, president of United Steelworkers Local 5724 at the Ormet Hannibal Primary Aluminum Reduction Plant, responded to several requests for comment for this report.

The Public Utilities Commission of Ohio approved Ormet's request to defer paying electric bills that were due for October and November, allowing the company to pay them in 17 monthly installments during 2014 and 2015. The company said these bills total about $27 million. As part of the deal, however, commission members stated that any further Ormet requests for help from the PUCO must include a "business plan confirming its long-term ability to exist without ratepayer support."

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THE ORMET Corporation appears positioned for the short-term future with a new power agreement with American Electric Power. However, the rising cost of electricity brings Ormet’s long-term viability into question.

And with electricity prices expected to rise as utilities shutter coal-fired power plants, Ormet is looking for a new direction.

Byers has said he was glad Ormet Corp. made it through 2012 without laying off as many employees as expected, but he would like to see the 237 who are out of work return to their jobs. Last summer, Ormet issued a Worker Adjustment and Retraining Notification Act notice regarding the possibility of laying off 998 employees, including 837 union workers and 161 members of management. Byers said the WARN notice expired Dec. 31, meaning the company does not appear to be in position for such massive layoffs.

There were 719 employees on the job with four of the six potlines at Hannibal running in January.

In addition to American Electric Power bills that Tanchuk said were going to increase by about $20 million per year, company officials cited declining aluminum prices on the London Metal Exchange as reasons for issuing the WARN notice.

"I am seeing the cup as being two-thirds of the way full," Byers said in January. "The price of aluminum has come up a bit since they issued that notice. We are hopeful that this can all work out in the end.

"The last thing this area needs, especially right now, is to lose these jobs. And that doesn't even count all the jobs they support," he added.

But as Ormet's electricity rate debate continues with the PUCO and AEP, the Ohio Consumers' Counsel questioned the rate discount plan Ormet got from AEP in July 2009 for a period of 10 years. The organization believes other AEP customers will ultimately have to pay more than $305 million in higher rates over the 10-year period in order for Ormet to receive lower power rates.

"We support economic development, but there must be a balanced approach," said Maureen Grady, counsel of record for the Ohio Consumers' Counsel. "That is a lot of money for ratepayers to be giving to a corporation."

The counsel is the statewide legal representative for Ohio's residential consumers in matters related to utility services. It advocates for residential consumers before the Public Utilities Commission of Ohio with a nine-member, bipartisan governing board.

AEP spokesman Jeff Rennie said his company could not "speculate on the amount that customers might have to pay under the Ormet unique arrangement."

"There are several variables including future fuel costs and customer usage that we cannot predict and that would substantially impact the total," Rennie added.

Byers collected more than 2,500 signatures for a petition and accompanying letter that he mailed to Ohio Gov. John Kasich, seeking the governor's help to find a solution for Ormet.

"Ormet is a vital part of southeast Ohio's economy, and the administration has worked to encourage efforts among the independent stakeholders to craft a successful, sustainable future for the company and its employees," Rob Nichols, press secretary for Kasich, said in response.



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