In February of 2013, Ormet, a massive aluminum smelter along the banks of the Ohio River, filed for Chapter 11 bankruptcy due to a lack of liquidity caused by low London Metal Exchange (LME) pricing of aluminum and increased rates of electricity.
Ormet has dealt with low LME pricing for decades, but with the inconsistent and ever increasing cost of electricity, the company’s ability to remain viable was no longer possible.
In the spring of 2013, Mark Kvamme, then the head of Jobs Ohio, challenged the USW, Ormet management and Wayzata to reduce operating costs and other financial liabilities. In exchange for reaching those goals, the State of Ohio, American Electric Power (AEP) and the Public Utilities Commission of Ohio (PUCO) would do their parts to reduce electric rates.
The USW and management developed a five-point plan that includes:
Reduce operating costs: Ormet will reduce operating costs by $30 million per year by reducing power consumption, increasing cell life reducing carbon usage, and reducing other fixed costs.
Reduce term debt obligations: Wayzata agreed to reduce term debt by $94 million over 5 to 7 years.
Reduce labor costs: A new labor agreement was overwhelmingly ratified by the membership of Local Union 5724 that reduced pension and retiree health care costs by $183 million.
Reduce power costs: AEP would relieve Ormet from their “Unique Arrangement” and moving forward, Ormet will purchase power from AEP at market based rates or purchase power from other producers at market based rates.
A long term solution to power supply and cost: Ormet/Wayzata will construct its own gas fired power plant on Ormet property. The CAPEX project will cost an estimated $500 million and would be in operation before the end of 2015 (creating another 200 jobs).
The union, management and Wayzata met the challenge as outlined by Jobs Ohio; we are waiting for Jobs Ohio and the Governor to meet their commitment.