Ormet Workers OK Contract Ahead of Wayzata Purchase
By a vote of 417-130, members of United Steelworkers Local 5724 at Ormet Corp. ratified a new contract with the company hoping to purchase the plant, Wayzata Investment Partners.
After its recent filing for restructuring in U.S. Bankruptcy Court in Delaware, Ormet officials believe they have a buyer in Minnesota-based Wayzata. Though the aluminum producer has found ways to deal with much of its debt, the major reason for the bankruptcy involves pension costs.
Any final details regarding the future operations of the Hannibal facility remain in dispute with the bankruptcy court.
Though Ormet Chief Executive Officer Mike Tanchuk could not confirm the total amount Wayzata is offering to pay for Ormet, published reports indicate the number could be in the neighborhood of $221 million. The bankruptcy court must approve the deal, which Tanchuk said he expects.
Tanchuk acknowledged the company’s high level of debt and legacy costs have been obstacles to achieving profitability.
He said relatively low aluminum prices on the London Metal Exchange, combined with increased electricity rates, have made it impossible for Ormet to continue on its current course.
Officials with the Washington, D.C.-based Pension Benefit Guaranty Corp. confirmed Ormet owed at least $1 million worth of required pension payments.
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 management workers. The WARN notice expired Dec. 31. At the time, Tanchuk said Ormet’s American Electric Power bills were going to increase by about $20 million per year.
The Public Utilities Commission of Ohio previously approved Ormet’s request to defer paying electric bills that would be due for October and November in 17 monthly installments during 2014 and 2015. The company said these bills total about $27 million.
As Ormet’s electricity rate debate continues with the PUCO and AEP, the Ohio Consumers’ Counsel has 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 have to pay more than $305 million in higher rates over the 10-year period in order for Ormet to receive lower power rates.