By Carole Vaporean
NEW YORK, Oct 2 (Reuters) - The Public Utilities Commissionof Ohio voted on Wednesday to approve Ormet Corp's revised power deal with energy supplier American Electric PowerCo Inc, saving the U.S. aluminum producer from likelyclosure.
The commission added, however, that it was modifying partsof Hannibal, Ohio-based Ormet's request for a unique subsidizedpower arrangement, as it works to emerge from bankruptcy.
PUCO Chairman Todd Snitchler said at the commission's weeklymeeting, monitored by webcast, that approval was also contingenton Ormet employing at least 650 full-time workers through 2018.
Ormet is the region's largest employer, as well as Ohio'slargest energy user.
In February, Ormet filed for bankruptcy protection. Cuttingthe high cost of energy to run its 270,000-tonne-per-yearaluminum smelter was the final hurdle on the path to emergingfrom bankruptcy.
On June 3, Smelter Acquisition, LLC, a portfolio companyowned by Wayzata Investment Partners, said it would acquireOrmet. U.S. based Wayzata's requirement to close on theacquisition also depended on approval of Ormet's new power plan.
"We authorize Ormet to assign its interests to SmelterAcquisition, LLC, according to terms under the existing uniquearrangement," Snitchler said.
He added that the commission granted Ormet relief with theunderstanding the aluminum company, or its successor, "wouldmaintain employment levels at or above 650 full-time employeesthroughout the term of the agreement ending Dec. 31, 2018."
The commission said it recognized Ormet's economicimportance to the region, but wanted to balance those interestswith the concerns of local rate payers, who would be subsidizingpart of Ormet's power costs with increases to their own bills.
Ormet's request for a new unique rate arrangement was valued between $56 million and $119 million dollars, over and abovethe $346 million in financial support already granted by thecommission since 2009.
Given that Ormet's latest request for subsidies would add toearlier increases in the monthly bills of individual ratepayers, the commission voted to approve a modified arrangementfor the aluminum producer, Snitchler said.
Ormet had asked for an average fixed rate of $45.89 permegawatt-hour, but the commission capped the rate at $50 permegawatt-hour, excluding the discount, through Dec. 2014.
From January 2015 through 2018, Ormet will be billedaccording to the terms of the current arrangement, keeping itspricing in line with other large industrial power users.
The commission also approved Ormet's request to front load adiscount that would have been spread over the next five years.Instead, $66 million will be moved up to 2013 and $54 million to2014, giving Ormet, "time to sustain operations until it returnsto profitability, make its deferral payments, and construct itsown power plant to mitigate and stabilize its power costs."
The commission also modified Ormet's discounts to say thatAEP Ohio ratepayers would receive a refund if benchmark aluminumprices exceed Ormet's break even level of $2,200 per tonne.
With London Metal Exchange aluminum prices at $2,200 to$2,500 per tonne, Ormet will pay 104 percent of the AEP Ohiotariff rate. If aluminum rises above $2,500 a tonne, Ormet willpay Ohio ratepayers at 108 percent of the rate.
LME aluminum closed on Wednesday at $1,838 pertonne.
"While repayment is not typically required, theextraordinary relief offered to Ormet creates a question offairness that should be resolved in favor or ratepayers,"Snitchler added.
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