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Alcoa gets 1-year reprieve from PUD

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WENATCHEE — Hopes of a restart at Alcoa’s Wenatchee Works aluminum plant have been extended, officially, for a year.

The Chelan County PUD Commission voted on Monday to approve Alcoa’s request for a one-year deferral of the $67 million contract charge that otherwise would have been due in June.

Instead, Alcoa will pay $7.33 million this year, which includes $2.8 million to “buy time” plus a pro-rated share of the $4.5 million due as part of the shutdown settlement. If the plant does not restart by June 2018, the company will pay the remaining $62 million.

If the plant restarts, the company’s contract will take up where it left off, with the $62 million being reduced for each year it operates.

The contract was designed to provide Alcoa with an incentive to operate, said Kelly Boyd, the PUD’s chief financial and risk officer. The contract included a clause that the full amount would be due in 18 months should the plant become idle.

The plant was “curtailed” in December 2015, but not closed, said Michael Padgett, Alcoa’s vice president of energy. The plant was taken offline in a way that would make a restart possible should the economic pieces warranting that decision fall into place, including aluminum prices and regulatory conditions.

Changes in the past couple of months have made that a possibility, he said, with the company showing a first-quarter profit, an uptick in aluminum prices and potential changes in the regulatory environment. The Trump Administration recently issued an executive order to investigate the aluminum industry, looking at whether competition from overseas competitors is having an adverse impact on national security. If so, it could lead to new tariffs, giving American-made aluminum a price edge.

But the indicators aren’t enough to make a decision to reopen by this June, which led to the proposal for the one-year deferral.

The PUD staff recommended the delay because it preserved the possibility for jobs in the community.

Alcoa has advised us that paying the $67 million due in June of this year would likely lead to a decision to shut the plant permanently,” Boyd said.

The company has about eight employees on the payroll to look after the facility. The rest of the 400-member workforce was offered retirement, a quit package or supplemental employee benefits.

At a meeting about the delay proposal last week, some employees suggested Alcoa sweeten the deal by offering to extend their unemployment benefits. Some suggested the company was seeking the one-year delay as a tactic to avoid paying additional severance packages.

On Monday, Padgett and Wenatchee Aluminum Trades Council President Kelley Woodard said that wasn’t the case.

Even so, the request for an extension of benefits to help retain the experienced workforce was sent to Alcoa headquarters in Pittsburgh. No answer has been received.

Woodard said despite his concerns that Alcoa is “kicking the can down the road” with its request for a delay, he supports plan.

It took me a while to make up my mind, but I think the one-year delay is the best chance to reach the goal we’ve all had since the plant shut down — to get it reopen,” he said.

PUD Commissioner Ann Congdon said she had reservations about the deferral, but voted for it, as did all of the commissioners in attendance Monday.

I would like to see the plant reopen,” she said.

Padgett said the next step for Alcoa is to continue looking at the possibilities.

I think we basically have this decision so we will keep exploring the restart or remain curtailed decision,” he said. “I am very appreciative of the commissioners and staff for making the decision the way they did and helping preserve the opportunity for Wenatchee Works. It’s not an easy decision, but we are very thankful.”

Woodard said he is pleased with the decision.

I’m hoping by next year, our plant is reopen and we don’t have to go through this again,” he said. “My focus since we’ve shut down is to get the plant restarted. That’s still my focus.”

 

Reach Nevonne McDaniels at 509-664-7151 or .