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Ormet Is Looking to Sell Smelter

February 23, 2014
By CASEY JUNKINS Staff Writer , The Intelligencer / Wheeling News-Register

HANNIBAL - Several months after shuttering its local plant and almost one full year since it filed for bankruptcy, Ormet Corp. has announced the smelter plant and surrounding property - including land on which natural gas currently is being produced - is up for sale.

The company, in noting the plant's assets for a potential new buyer, is touting the ability to restart each of its closed smelter's six potlines independently, as well as expected natural gas royalties from the adjacent land.

Calibre Group, the company's investment bank, already has begun to reach out to prospective purchasers and investors and is assisting Ormet with other strategic initiatives that may add value for a potential buyer.

Article Photos

Ormet Corp. officials hope a royalty stream from natural gas drilling on the
company’s property will help entice someone to purchase the closed
Hannibal smelter.

Photo by
Casey Junkins

To help pay off debts, the aluminum producer, which filed for bankruptcy on Feb. 25, 2013, has sold many of the raw materials required to make aluminum, including copper rods, carbon anodes, and alumina. It also sold its former Burnside, La. facility in December to Almatis for $39.5 million.

Amid rising electric costs and declining aluminum prices, Ormet filed for bankruptcy last year. The company reduced its workforce throughout 2013 to cut costs.

Following an October ruling by the Public Utilities Commission of Ohio, the company suspended all operations just a few days later. This left nearly 1,000 employees wondering if they had worked their final shifts at the Hannibal smelter.

Now, company officials say they hope to sell the facility, with an annual capacity of 270,000 metric tons of aluminum, to a new operator.

"The outlook for aluminum demand is strong, driven by increased use in automobiles, changing demographics in the developing world and a robust aerospace industry," Ormet officials said.

When Wayzata Investment Partners offered $221 million for Ormet last year, part of the new business plan involved eventually powering the aluminum smelter plant with a natural gas power plant. Although this did not materialize, Magnum Hunter Resources is pumping about 11.7 million cubic feet of natural gas daily from Ormet property directly across Ohio 7 from the Hannibal plant.

Magnum Hunter is the parent company of Triad Hunter, which drills and fracks wells in the Upper Ohio Valley, as well as Eureka Hunter, which processes and transports natural gas via pipelines.

Ormet "is anticipating a royalty stream from oil and natural gas production from its Marcellus Shale leases with additional opportunities available that can help to offset purchase and restart costs," the company said.

Although company officials at Ormet have been unavailable for additional comment, the bankrupt firm should be receiving production royalties for gas drawn from its property. Lease contracts throughout eastern Ohio have paid from as low as 12.5 percent to at least as high as 20 percent.

Ormet also said its current relationship with the United Steelworkers is "very good."

"We are hopeful that a buyer will step forward with a plan to restart operations so that the Ohio Valley men and women who have dedicated their lives and careers to Ormet can get back to their jobs," USW spokesman Tony Montana said.

Union officials believe Ohio Gov. John Kasich should have worked to get the Public Utilities Commission of Ohio, Ormet and American Electric Power to find a solution that would have kept the plant running. However, the governor has no direct authority over the PUCO.

Ohio Rep. Jack Cera, D-Bellaire, is hoping to change that through legislation he introduced in the Ohio House that would allow the governor to override the PUCO in certain cases, such as Ormet's dispute with AEP.

"The USW will continue to press Gov. Kasich, the PUCO and AEP to negotiate a fair electricity supply arrangement," Montana said.

 
 

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