Century warns Hawesville smelter may close permanently on Aug 20 without power deal

If Century Aluminum's pending application with Kentucky regulators to access cheaper wholesale power is not approved by August 20, the company's 244,000 mt/year Hawesville smelter will close and probably never reopen, the company said in a new filing Friday with the Kentucky Public Service Commission.

On August 20 a longstanding power purchase agreement between Chicago-based Century and Big Rivers Electric is scheduled to expire. Big Rivers, a generation and transmission co-op in Henderson, Kentucky, has supplied about 550 MW to Hawesville for years.

In June, Big Rivers submitted an application to the PSC to allow Century to bypass the co-op and buy electricity directly from the market.

In the Friday filing, Sean Byrne, plant manager at Hawesville, said the smelter's current average power rate is about $49/MWh. Century advised Big Rivers last year it planned to terminate their PPA on August 20, citing the likelihood that Hawesville's power rate would rise to about $60/MWh, "about 80% higher than the world average power rate to aluminum smelters and 30% higher than the rate paid by other aluminum smelters in the United States."

The Hawesville smelter uses about 345 million kWh/month, enough to supply 265,000 homes. Century spends about $17 million/month, or more than $200 million/year, for power at the existing rate.

Byrne told the PSC that if the Big Rivers/Century application is not approved, the Hawesville smelter will cease operations and "will, very likely, never reopen."

He said that is partly because it would cost Century an estimated $100 million to restart the plant after it had been shut.

"In a globally competitive industry where margins are extremely thin, a capital investment of this magnitude is not recoverable," he said.

Southwire, a Georgia-based aluminum rod and wire producer and Century customer with a plant in Hawesville, told the PSC it supports Century's request.

"If the Century smelter's supply of molten aluminum were discontinued, Southwire itself would be forced to melt solid primary aluminum in order to maintain production at its Kentucky Rod Mills," the company said. "This would, in effect, increase Southwire's cost to produce aluminum rod and effectively negate the benefits of locating and operating our Kentucky Rod Mills in Hawesville."