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Columbia Falls Aluminum Co. Avoids Closure by Nancy Kimball Daily Inter Lake, February 13, 2009

Columbia Falls Aluminum Co. is staying open - at least through June.

CFAC officials succeeded in 11th-hour negotiations Friday, crafting a supply contract with Bonneville Power Administration that averted an announced plant closure Feb. 20.

"Bonneville just posted the contract," CFAC Manager of External Affairs Haley Beaudry said late Friday afternoon. "We're going to keep the plant open. It will be at a reduced production capacity, but it will be open and operating through June, at least."

If negotiations had failed, CFAC would have begun the process of shutting down its pots today.

At issue was a "bridge" agreement with Bonneville Power Administration that now assures more affordable electricity rates to Columbia Falls Aluminum through September.

Slumping aluminum prices and growing inventories worldwide, combined with resilient prices for raw materials including electricity, were reasons Beaudry cited in a Dec. 23 announcement that the plant would close in 60 days.

That announcement came one week after a 9th U.S. Circuit Court of Appeals decision that would have led to even higher power prices for CFAC, a major electricity consumer.

The court had ruled against the way Bonneville structured contracts with direct service industries in the Northwest, including CFAC and Alcoa's two Washington aluminum plants at Ferndale and Wenatchee.

"Last week's 9th Circuit ruling was a significant setback for us," Beaudry had said at the time.

He has been in Helena this week, mustering unanimous backing from the Flathead's legislative delegation for the bridge agreement covering Dec. 1, 2008, through Sept. 30, 2009, the end of the federal fiscal year.

"It's been an arduous negotiation with Bonneville, but we've had a lot of help, I believe, from Senators Baucus and Tester and Congressman Rehberg.

"We agreed to more or less accept the same terms Alcoa has, although since Alcoa is a much different company with much different circumstances it makes it quite expensive" for CFAC, Beaudry said.

"We finally decided to recognize that we're not going to be able to do much better than that now."

When the aluminum smelters signed their five-year power contract from 2006 through 2011, "Alcoa and CFAC had slightly different contracts with Bonneville and managed those contracts quite differently," he said.

But then the 9th Circuit Court's Dec. 17, 2008, opinion forced a rewrite. The proposed bridge agreement replaces the original contract and does the calculations for power costs from Dec. 1 forward. The result, Beaudry said, is that Alcoa loses no money but CFAC does.

"It's just that BPA wasn't even willing to give us the same deal as Alcoa," he said. "It just got tougher and tougher."

A key sticking point was keeping Columbia Falls Aluminum a Montana-based company when viewed in terms of the power contract.

Ever since the plant signed its first power agreement upon opening 55 years ago, Beaudry said, it has been a signatory to all Bonneville contracts.

"Now Bonneville would like us not to do that any more, [instead] to have our parent company be the signatory," he had said Thursday.

Columbia Falls Aluminum is owned by Glencore AG, a global natural-resources conglomerate based in Baar, Switzerland. It does business in the United States from headquarters in Stamford, Conn. Bonneville may view Glencore's deep pockets as a safeguard in the event legal disagreements arise, Beaudry had speculated.

"From our point of view we always have been a Montana company, we've always been the one that's the signatory for all 55 years. We don't see how we can give that up," he said.

"It's not good for us to no longer be a Montana company. If that were the case, we'd have Bonneville in Washington signing an agreement with Glencore in Stamford or in Switzerland.

"We'd lose all the stature we have as a significant Montana company," he said.

By Friday noon, Beaudry remained hopeful that something would be worked out between CFAC and Bonneville.

"If you're one word apart and neither side is willing to budge, you're a long ways apart," he had cautioned. "But I think we might be" making progress.

By Friday evening, his hope was rewarded even if production levels will be reduced.

"We're running out of raw materials and money," he said. The pot lines started using up their raw material inventory when the company made the decision to shut down. Ore must be bought by the rail-car load, a significant investment to be sitting idle without a power contract.

"We want a deal to give us the ability to keep the plant going," Beaudry said. "We want to keep going at some level. It's much easier to gear back up later than to start from a dead-cold stop."