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AEP Fires Back at Ormet

Says aluminum producer’s demands for rate cut going too far

August 27, 2013

HANNIBAL — American Electric Power officials say they don’t want to see Ormet Corp....

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(24)

electrichead03

Aug-28-13 12:35 AM

1000+ jobs gonna be lost and some of you don't even care....not to mention how bad the schools and children its gonna hurt...shame on you!

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atoddh

Aug-27-13 11:35 PM

Rag totally get it. The public and/or AEP can not be expected to make contributions to a private company. Note Ormet has not paid into the Fed retirement plan lately. It may not be available. The solution is for the staff take major pay cuts to compensate for the electric increases: if they want to save their jobs. Something has to give:1. materials ,2.electric, or 3. labor(payroll.)It may not be #2.

Rag is right on target.

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LogHog

Aug-27-13 7:36 PM

I for one do not want one dime of my electric bill money going to pay any of Ormets bills. If ormet can make it on their own great. If not too bad.

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Ragnar

Aug-27-13 6:43 PM

Those of you who rely on coal for your living should know that AEP generates 66% of its' electricity from coal.

Who owns AEP and receives those 4.58% dividend yields? Retirees, for the most part. AEP is not some greedy, ruthless corporate ogre. Rather, it is a heavily regulated public utility employing more than 18,000 Americans in good paying jobs with benefits.

Last year, AEP paid $604 million in income taxes and paid $915 million in dividends.

How much did Ormet pay out? How many jobs does Ormet support?

In 2010 and 2011 combined, Ormet paid no dividends. It also had combined pre-tax income of $23.8 million and POST TAX net income of $168.7 million!

If only Ormet ran their aluminum business as well as they run their tax subsidy affairs, they would not need handouts from AEP.

What they are saying, in effect, is "you subsidize me for the next 4 years until I can build my own plant to supply my own power, at which time I will stop purchasing anything from you. De

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Ragnar

Aug-27-13 6:30 PM

CraigL50

You defended Wayzata/Ormet trying to dump their legacy costs onto taxpayers by stating, in effect, everyone else is doing it. That does not cut it in the real world.

Second, look at the financing for this deal. One of the reasons why the PBGC opposed this sale was because of the financing issues I mentioned. Wayzata is putting up almost no cash. Instead, they are signing for a loan and then shopping the rest of the financing around as a loan packaged as securities. They are not putting in sufficient liquid capital to keep the company operating.

It is all right there in black and white, if you care to read it.

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Randazzo

Aug-27-13 4:04 PM

Almost one year ago, the PUCO allowed AEP-Ohio to, among other things, siginficantly increase its rates and to make the increases non-buypassable (unavoidable) for customers that switch to a competitive supplier. The purpose was simple, to protect AEP-Ohio's revenue from being reduced by competitive pressure that is working in other areas of Ohio to help customers reduce their electric bill. While Ormet has many challenges, the PUCO's bailout of AEP-Ohio and its only shareholder, AEP, has caused a massive wealth trasnfer from all AEP-Ohio consumers (including Ormet) to AEP-Ohio. If you want the root casue of a large part of Ormet's problems you need to start here (a place that neither the PUCO nor AEP-Ohio will likely want you to look). Century Aluminum's plant in Kentucky (a regualted state where customers can't shop) has been able to stay open becuase the Kentucky PUC approved a structure that allows Century to shop. Do the Kentucky regualtors know more than the Ohio regualtors?

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dyingov

Aug-27-13 3:10 PM

craigl50, What other company is available in Monroe County that can provide the power needs of Ormet? So Ormet made a sweet deal and now they want out of it? I read it as they just want to keep the rates subsidized by the other customers! AEP is a wholesale electric generating company that can also sell on the "open" market.

Has deregulation of the electric industry kept prices down?

The middle-man is taking a cut, too! Your boys had $1.4 billion in income for 2012, not bad for a middle-man!

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CraigL50

Aug-27-13 1:15 PM

DyingOV. Puco is keeping Ormet from buying on the open market by way of the agreement they made in 2009. If AEP wants Ormet to buy on the open market, then they should allow Ormet out of that agreement. They broke the agreement first.

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CraigL50

Aug-27-13 1:13 PM

Dying OV. I was being charged almost 9 cents per kw/h by AEP and now am being charged 6.49 cents from IGS. Where I live in Ohio, you can use AEP, IGS, Direct Energy or DPL. I chose the one that gave me the lowest bid which was IGS. IGS is an energy partner based in Dublin, Ohio. AEP is not the only service in Monroe County either. Do your homework.

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dyingov

Aug-27-13 1:05 PM

mikeyd, No matter the gender.....

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nobama

Aug-27-13 11:27 AM

As the looming shortage of power grows closer....why would AEP lock in sales at a lower rate. In just a matter of time we will all be paying through the nose for power thanks to O bummer and the EPA and AEP will hold all the aces. It's called business even if the takes out Ormet.

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mikeyd

Aug-27-13 11:08 AM

lover's spats!

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dyingov

Aug-27-13 10:28 AM

who is IGS? They be energy "suppliers" middle-men in the grand plan!

CraigL50, what company are you with? First Energy (AKRON -- FirstEnergy Corp. reported a $164 million loss during the second quarter of the year.

In a report issued this morning, the company said its sales during the April-May-June period were $3.5 billion but expenses connected with its decision to close older, coal-fired power plants more than wiped out net profits.

In contrast, during the second quarter of 2012, FirstEnergy's sales were $3.8 billion and net profits were $188 million, or 45 cents per share.

The company characterized the extraordinary loss in the second quarter of this year as a one-time event, and reported that without the expenses, net profits would have amounted to 59 cents per share.)

I got some bad news for the IGS customers, the only provider available in Monroe County Ohio, AEP! Welcome to the show..........

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dyingov

Aug-27-13 9:33 AM

craigL50, Who is stopping Ormet from buying on the open market?

What does IGS charge per killowatt/hour? Do they have the generating capacity to supply Ormet?

Where is ISG?

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Jessie26

Aug-27-13 9:18 AM

Sad that AEP is threatening to raise EVERYONE's rates so they can make their $1 BILLION profit like last year. Raising rates is up to PUCO. Does AEP stand for Another Enormous Profit?!?!

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Unitas

Aug-27-13 8:21 AM

Lucid- When AEP presented their latest Electric Service Plan (ESP) they convinced PUCO that AEP shareholders demanded a 10% return each year on their investment, thus the 45% rate increase over the next three years. Then, AEP gets out of the generation business, and can buy electricity at reduced rates and resell at their higher now non existing generation costs. This is all deflection by AEP to hide their real agenda.

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LucidNitemares

Aug-27-13 7:44 AM

Ragnar seems to have a hard on for Ormet! He wants to talk about sweet deals, AEP made a deal with PUCO when OH went to a de-regulated state for power. AEP had to invest hundreds of millions to upgrade their facilities to be able to provide electricity on the open market. PUCO granted them the ability to recapture their investments in their own company by giving them permission to adjust rates to recover that investment within a 2-3 year period. When OH went open market, AEP lost a lot of customers because their rate went up... so, they raised their rates again... and again... and again. That is how Ormet went from paying $39 / MWh to $58 / MWh. If Ormet closes, they will raise thier rates by a lot more than $3-4/month for their existing customers. Remember their deal with PUCO... They will not lose profits. $1.3 Billion profit in 2012 just isn't enough... Wait, they made $1.9 Billion in 2011. AEP really is struggling.

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CraigL50

Aug-27-13 7:41 AM

Hey dyingov, if you live in Ohio, you can buy it on the open market. I just switched from AEP to IGS so I don't have to pay the thugs at AEP any more money. If AEP losest it's largest customer in Ormet, who do you think is going to make up their slack. WE ARE, and it will be more than the $40 bucks a month they are talking about now. Just allow Ormet to shop their electric now just like everyone else in Ohio. Oh and Ragnar, Wyzatta has brought many companies out of bankruptcy back and made them profitable. If you look at all the data available online, you will see that what you are saying isn't very true. Nobody who buys bankrupt companies assume the legacy costs. It's how it's done in this country. They also didn't ask Ormet for a cheaper labor deal either. All they did was stop pension funding which is the way all companies are going anyways. Just funding 401K's instead. Ormet's union ratified this.

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electrichead03

Aug-27-13 7:32 AM

Well everyone is worried about rates going up...wait and see how it goes up when ormet shuts down...not to mention the tons of jobs being lost and schools being shut down. ...but nobody cares about that...they are just worried about the extra 3 or 4 dollars a month they have to pay on their electric bill

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dyingov

Aug-27-13 7:18 AM

electrichead, How about we all get to buy electric on the "open" market? Sign me up for electric from the TVA!

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electrichead03

Aug-27-13 7:07 AM

Ormet goes down...rates will go up...I promise you that..if aep is so worried about ormet..why not let ormet just buy on the open grid next year? I mean aep only made 338 million off everyone in 3 months

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Ragnar

Aug-27-13 6:05 AM

AEP should ask why it should sacrifice tens of millions of dollars now, only to lose Ormet as a customer in a few years. What Ormet is saying is "give us cheap electricity now, at a loss to you, so that we can cease to buy electricity from you in a few years." Ah, no.

Wayzata is putting up almost no cash. Since the local unions are all geniuses and CEOs and such are greedy idiots, why not let the USWA run the plant? Then we can watch them crash and burn, as always.

I don't see why AEP should stick it to other ratepayers in order to line Wayzata's pockets. If Wayzata gets their way and if the aluminum market makes a slight comeback in the next 4-5 years, they will exit with a huge profit.

Why should I subsidize that?

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Ragnar

Aug-27-13 6:02 AM

This is nothing more than a private equity group looking for a subsidy in order to line their pockets.

Ormet cannot run its' business profitably and it should not be in business.

AEP will not have to raise rates in such a dramatic fashion if Ormet goes belly up. AEP sells electricity across the grid and can move more of that to other areas of the country, if need be.

Wayzata is not putting up a lot of cash. They first demanded a sweetheart power deal and a cheaper labor deal. Next, they are lending Ormet $30 million during the bankruptcy proceedings, with another $60 million coming from Wells Fargo. They will also provide $1 million in securities, with a completed sale resulting in Wayzata assuming all of the $90 million in loans and ongoing liabilities but NOT THE LEGACY COSTS. They will also engage in "credit bidding" of $130 million in Ormet loans held by Wayzata managed funds (in other words, they will borrow money to pay themselves back).

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LogHog

Aug-27-13 5:43 AM

There are laws for companies and people that cannot pay their bills. It's called bankruptcy.

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