UPDATE 1-Ormet cutting Ohio aluminum operations, cites high power rates

Thu Aug 1, 2013 1:16pm EDT

By Carole Vaporean

NEW YORK Aug 1 (Reuters) - Ormet Corp was beginning on Thursday to shut down half of the existing operations at its lone 260,000-tonne-per-year aluminum smelter at Hannibal, Ohio, according to documents filed a day earlier with Ohio state utility regulators.

Low metal prices and high power rates prompted the decision, Chief Executive officer Mike Tanchuk said in a notice posted on the aluminum producer's website. On Wednesday, the Public Utilities Commission of Ohio denied Ormet's request for an emergency reduction in electricity rates.

While it did not grant the emergency reduction, the commission still plans to consider lower rates for Ormet at a full hearing on Aug. 27.

Late on Wednesday, Ormet submitted a motion asking that payment of its August and September power bills be deferred to provide liquidity for the aluminum producer to operate its Hannibal, Ohio aluminum smelter.

Deferral would also give the commission time to conduct a full hearing on Ormet's requested relief, regulatory documents said.

Ormet, which has filed for bankruptcy protection, needs "immediate relief from AEP Ohio payments due in August and September, 2013 to continue operating on a limited basis at its facilities in Hannibal, Ohio," and to keep it from shutting down all remaining operations by early September, the filing said.

The Ohio facility is Ormet's only aluminum smelter. The company also operates an alumina refinery in Burnside, Louisiana that is not affected by the AEP Ohio power agreement.

Ormet had sought an expedited ruling to cut its power rates, but the commission denied the request for emergency relief and affirmed its agreement with AEP Ohio, a unit of American Electric Power Service Corp.

At Wednesday's hearing, the PUCO commissioner said the commission thought the issues pertaining to Ormet's power rate application required more in-depth discussion at the formal hearing set for Aug. 27.

"The consequence of this decision is Ormet must immediately begin the shutdown of half of our existing operations to conserve cash," said Mike Tanchuk, Chief Executive Officer and President in its website posting.

Ormet filed for bankruptcy on Feb. 25, 2013 due to low metal prices and high power costs.

The Ohio Power industrial rate, which establishes the base rate for Ormet to procure power, increased to $62.83 per megawatt hour in June from $39.66 per megawatt hour when the company's Unique Arrangement was established in 2009 with AEP Ohio, according to Ormet's notice.

Lowering those rates is one of several requests that will be considered on Aug. 27 in its efforts to restructure its power agreement.