WENATCHEE — Alcoa is facing millions of dollars in penalties for not keeping its Wenatchee Works smelter operating and its employees on the job, community leaders learned Tuesday.
The Pittsburgh-based, global aluminum company faces in December an $8 million payment to the Chelan County PUD for 12 consecutive months of idled operations at Wenatchee Works.
If the plant has not restarted within 18 months — by about June 2017 — it will owe the PUD a $67 million penalty, PUD officials said during a joint meeting of commissioners from Chelan County and the county’s PUD and port district. Mayors from all five Chelan County cities also attended.
Alcoa idled the plant in December after world aluminum prices dipped below the break-even level for the aged Wenatchee smelter. All but a handful of its 428 employees were laid off by mid-January.
Company spokesman Josh Wilund told the group Tuesday that the status of the smelter is unchanged, even though world aluminum prices increased a bit over the past year.
Both penalties are conditions of Alcoa’s 17-year contract to power its smelter with Chelan PUD electricity.
Alcoa gets 26 percent of generation from Rocky Reach and Rock Island dams in exchange for covering that same share of costs to operate the dams.
The contract was crafted with strong incentives to keep the plant operating and local workers employed, officials have said. It expires in 2028.
Alcoa is responsible for its share of contracted costs even though the plant is idle. In the meantime, the PUD is selling Alcoa’s share of electricity on the regional energy market and using proceeds to cover Alcoa’s share of costs — another contract requirement, Kelly Boyd, the PUD’s chief financial officer, told the group.
Given the seasonally low market prices, proceeds from electricity sales have not been enough to cover those costs, so Alcoa has been paying the difference, she said.
Local uncertainty continues over Alcoa’s announcement last year that it will separate the primary metals — aluminum smelting — part of its business, from the part the manufactures finished and semi-finished products.
The split has not yet been completed. Boyd said Alcoa intends to create a new corporation for the primary metals division and call it “Alcoa Corporation.” The Wenatchee Works smelter will become a new corporate entity called “Wenatchee Works LLC under the Alcoa corporation.
PUD General Manager Steve Wright said Tuesday that Alcoa has asked the utility to agree to transfer the power sales contract into the name of the new corporation. It’s a request the PUD, by contract, can refuse, but he said utility officials will study it.
Alcoa has agreed that Alcoa’s financial obligations to the PUD will remain at least the same as they are now, Wright said.
Considering it’ll take months to get an idled smelter operational again, Wright said Alcoa will have to decide to restart the plant by about March to avoid the looming 18-month idle penalty.
