DJ Century Aluminum Unable To Reach Power Deal For Smelter

SYDNEY, May 31, 2009 (Dow Jones Commodities News via Comtex) -- CENX | Quote | Chart | News | PowerRating -- U.S.-based Century Aluminum (CENX) has failed to reach a new, long-term power contract for its Hawesville smelter in Kentucky, citing unfavorable business conditions, the company said in a statement dated Friday. Stable, long-term power supply agreements are paramount to the aluminum smelting industry, which consumes vast amounts of electricity. Century along with Rio Tinto PLC (RTP) has been working for more than five years to negotiate an unwinding of the existing contractual arrangement with E.ON AG unit Western Kentucky Energy and Big Rivers Energy, it said. Rio Tinto owns the Sebree smelter in the region, producing almost 200,000 metric tons last year. Century's Hawesville smelter produces around 250,000 tons of primary metal from five potlines, but curtailed one potline in March this year because of depressed metal prices. "We have consistently supported the transaction based upon the expectation that it would produce a power contract that would support Hawesville's long-term profitability," said Hawesville vice president and plant manager Matt Powell. "Current and expected economic conditions, however, have created the perfect storm - significant weakness in both aluminum prices and wholesale electric prices. The proposed contract might support Hawesville's viability over the long-term, but the contract's take-or-pay requirement, in its current form, could create financial hardship for the company in the short-term," Powell said. Hawesville currently receives its power from Kenergy Corp, a member of the Big Rivers system, under a power supply agreement between Western Kentucky Energy and Kenergy. The power supply agreement expires at the end of 2010.