Ormet: Buyer won't waive sale agreement conditions after PUCO ruling

By Caroline Salls

Pittsburgh, Oct. 9 - Ormet Corp. said proposed asset buyer Smelter Acquisition LLC will not waive asset purchase agreement conditions not met as a result of last week's Public Utilities Commission of Ohio (PUCO) transition plan ruling, leaving the company unable to close the sale, according to a Wednesday filing with the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, Ormet announced on Oct. 4 that it cannot emerge from bankruptcy and must immediately shut down operations after PUCO denied the majority of the company's request for an energy transition plan that would allow it to operate while constructing an onsite natural gas based power generation facility.

According to a company news release, PUCO's decision came on Oct. 2.

The company said it was forced to file bankruptcy in February 2013 as a result of historically low metal prices and exceedingly high and uncontrollable power costs.

The Ohio Power industrial rate, which establishes the base rate for Ormet to procure power, increased to $60.83 per MWH in September from $39.66 per MWH in 2009, the release said.

During the same period, the company said wholesale power costs in the region have decreased by more than 10%.

At full operations, Ormet said its projected 2014 energy cost would reflect an increase of $108 million, before a potential $54 million discount provided for in the PUCO ruling.

"The economic impact of PUCO's decision is simply a restructuring of the existing economic incentives already pledged to Ormet for maintaining the jobs and does not address the continued rate increases," Ormet chief executive officer and president Mike Tanchuk said in the release.

"It is not sufficient to maintain, let alone increase, operating levels at [Ormet's Hannibal, Ohio, plant] and begin construction of an onsite power plant."

The company said a restart of the Hannibal smelter in the future would be contingent upon obtaining a long-term economical power supply and an improving aluminum pricing environment.

The $130 million sale of substantially all of Ormet's assets to Smelter Acquisition was approved by the bankruptcy court in June.

Ormet, a Hannibal, Ohio-based producer of aluminum, filed for bankruptcy on Feb. 26, 2013 in the U.S. Bankruptcy Court for the District of Delaware. The Chapter 11 case number is 13-10334.

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