American aluminium maker Century Aluminum said in a filing to the SEC on Friday that obtaining a more friendly power agreement is critical to the future of its smelter in Mt. Holly, South Carolina.
In its annual 10-K filing, the firm said that continuing to purchase one-quarter of its total power output from the South Carolina Public Service Authority (Santee Cooper) instead of on the open market as it does with the remaining portion is likely to lead to even greater production curtailments.
At present, the Mt. Holly plant is operating at only half its nameplate capacity of 229 thousand metric tons per annum.
“Closure of the Mt. Holly facility would impose various costs on us that could have a material adverse effect on our business, financial condition, results of operations and liquidity and could cause us to write down the book value of the Mt. Holly facility,” noted the firm in the filing.
“In addition, the ongoing uncertainty regarding the future operation of Mt. Holly may damage our relationships with our customers, suppliers, employees and other stakeholders and decrease the price we receive for our products, whether or not Mt. Holly is ultimately closed. Such actions and events could have a material adverse effect on our business, financial condition, results of operations and liquidity.”
At present Century’s deal with Santee Cooper has the power company supplying Mt. Holly with 25 percent of its electricity at cost-of-service rates. The remaining 75 percent is purchased on the open market and generally tied to the cost of natural gas. This agreement ends on December 31.
Mt. Holly currently produces standard-grade aluminium cast into tee bars. The plant also produces value-added products, such as aluminium billet and various foundry products. The smelter was first commissioned in 1980 but curtailed production 5 years ago in an agreement with Santee Cooper. Century struck a new deal with Santee Cooper the following year, followed by another two-year agreement in 2018.