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Restart of Alcoa smelter still on the table in PUD contract talks

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WENATCHEE —  Alcoa has asked for more time to decide the future of its mothballed Wenatchee Works facility as it faces a $67 million payment to the Chelan County PUD

Chelan PUD officials said Friday in a press release that it’s been discussing ideas in recent months with Alcoa Corporation representatives on “how to preserve the opportunity for a restart in the future.”

The talks are underway, said the release, as the June deadline approaches for Alcoa to pay $67 million to the PUD if Wenatchee Works operations remain curtailed through June, a stipulation of the power contract between the aluminum maker and the utility.

No firm decision by the global company has yet been made, said PUD General Manager Steve Wright. Any possible agreement on the smelter’s future would be subject to negotiation, he added.

Slumping aluminum prices on the world market pressured Alcoa to halt aluminum production at Wenatchee Works in December 2015. The company laid off all but 11 of its 428 employees by January 2016.

The PUD has supported a restart of the 64-year-old aluminum smelter as long as “the financial principle (of the power contract) can be achieved,” said Friday’s press release. That would mean any negotiations would need to produce “a neutral to positive financial impact on Chelan PUD customer-owners,” said the release.

In December, Alcoa paid the PUD $8 million for allowing Wenatchee Works to remain idle for a year. The $67 million payment due in June would mark 18 months of curtailment for the plant.

PUD officials don’t consider these payments penalties, since Alcoa agreed to pay them as part of its 17-year contract to buy power from the PUD. But the payments aren’t associated with any dam cost and exist only to encourage Alcoa to keep operating to avoid the big payments, PUD officials have acknowledged.

Stretching through late 2028, the Alcoa-PUD contract stipulates that the aluminum company will receive 26 percent of the electricity made at Rocky Reach and Rock Island dams, and in return pay 26 percent of costs associated with those dams whether the smelter is operating or not.

Since the facility’s halt in production, the PUD has been selling Alcoa’s share of power on the open market at rates that, for the most part, have equaled Alcoa’s payments to the PUD.

Both Wright and Alcoa spokeswoman Joyce Saltzman declined to give details of the ongoing discussions. But the talks over the last few months became more focused in December after Alcoa completed a corporate split into two separate companies.

In the split, Wenatchee Works became its own separate company to produce aluminum under the new Alcoa Corporation. Alcoa formed a second company called Arconic Inc. for semi and finished products.

Mike Irwin: 665-1179

irwin@wenatcheeworld.com

 

Reporter Christine Pratt contributed to this report.

 

 

Reach Mike Irwin at 509-665-1179 or . Read his blog Everyday Business. follow him on Twitter at @MikeIrwinWW.