HANNIBAL - As Ormet Corp. sees electric bills skyrocket by up to $20 million per year, an investment firm with offices in New York City, London and Rio de Janeiro will help the aluminum producer "explore strategic alternatives."
A first round of layoffs at Ormet's Hannibal Primary Aluminum Reduction Plant is scheduled to happen by Tuesday, and Chief Executive Officer Mike Tanchuk said the company issued an additional Worker Adjustment and Retraining Notification Act notice for 250 employees at the Ormet Burnside, La., aluminum refinery. These job cuts have resulted primarily from the shutdown of two of the six potlines at Hannibal.
A WARN notice filed in July states that following the first round of job cuts at Hannibal, a total of nearly 1,000 job cuts could occur by the end of the year. It further states the "curtailment of operations and reduction in force is expected to be indefinite." Tanchuk continues to blame escalating AEP costs - as well as an August ruling by the Public Utilities Commission of Ohio - for the planned reductions at both Hannibal and Burnside. Lower worldwide aluminum prices are also part of the problem, he said.
Photo by Casey Junkins
The cost of energy provided by American Electric Power to the Ormet Corp. Hannibal Primary Aluminum Reduction Plant may increase to such a rate that Ormet is forced to cut nearly 1,000 employees.
AEP officials acknowledge the rate increase will occur, but they decline to confirm its amount. It is the result of a recent PUCO ruling, which froze AEP's base generation rate at current levels until May 31, 2015. Under the terms of the order, AEP is directed to file with the PUCO a detailed competitive bidding process by Dec. 31. Customers will still see a 6 percent to 7 percent increase in monthly bills this year, but no resident or business will be responsible for more than a 12 percent increase.
"We are still hopeful that we can all find short and longer term solutions to the substantial increase in our power costs and save these jobs," Tanchuk said, while noting Ormet continues to pursue alternatives with the PUCO and AEP over the projected $20 million per year increase in electric bills.
Tom Byers, president of United Steelworkers Local 5724 at Ormet, was not available for comment regarding the layoffs. Jason Gilham, PUCO spokesman, said there has been no change in the situation with Ormet and AEP.
As Ormet moves forward, the aluminum producer has hired Evercore Partners to help determine its long-term course of action. According to the firm's website, Evercore handles "mergers and acquisitions; divestitures and restructurings."
Tanchuk could not be reached for comment Tuesday regarding Ormet's possible actions, but a potential divestiture would involve selling some of the company's assets. As part of Ormet's 2004 bankruptcy filing, the company closed and sold its former rolling mill to the south of the reduction plant at Hannibal.
In 2009, fears grew that Ormet might shut down all six of its potlines due to a disruption in the worldwide supply of alumina. However, the company ultimately decided to keep at least four of the lines going before eventually restarting all six when the alumina supply issue ended.
Ormet posted a $1.1 million net loss for the first three months of 2012, but company officials spent $1.9 million during this time to reline 22 pots at the Hannibal facility during that time. In the first three months of the year, workers shipped 67,981 metric tons of product, compared to 58,079 tons during the same time in 2011.