Update: On June 14, 2013, Ormet Corporation (“Ormet”) filed another motion to amend its 2009 unique arrangement that it has with Ohio Power Company (“AEP-Ohio”).  Recall that the PUCO approved Ormet’s unique arrangement for electric services received at its aluminum producing facility located in Hannibal, Ohio from 2010 through 2018 with the price of aluminum as reported on the London Metal Exchange (“LME”).  To date, the subsidy has saved Ormet more than $150 million.  AEP-Ohio recovers the costs of this rebate through its economic development rider charged to all residents and businesses in its service territory.

Also recall that in October of 2012, the PUCO approved Ormet’s motion to modify the unique arrangement that allowed Ormet to defer its October and November 2012 bills capping the deferral at $20 million.  Ormet agreed to pay those bills in the twelve months of 2014 and the first five months of 2015 in equal monthly installments equal to 1/17th (or 5.88235 percent).  The PUCO denied the OMAEG’s motion to intervene finding that the motion was untimely filed and should have been filed prior to the April 28, 2009 deadline.

On February 25, 2013, Ormet filed for Chapter 11 bankruptcy status citing the drop in aluminum prices, increased electricity costs, and significant pension expenses as reasons for the bankruptcy.  Shortly after filing bankruptcy, Ormet signed an Asset Purchase Agreement (“Agreement”) with Smelter Acquisition, LLC (“Smelter”), a portfolio company owned by private investment funds managed by Wayzata Investment Partners LLC.  The Agreement is subject to certain conditions, including Bankruptcy Court approval, collective bargaining agreements, and satisfactory amendments to Ormet’s unique arrangement.

Ormet’s most recent motion to amend the 2009 unique arrangement requests approval of the following emergency relief:

1. Shorten the duration of the unique arrangement by three years so that it terminates on December 2015 rather than 2018;
2. Receive an advancement of the payment of the remaining $92.5 million in economic development discounts previously approved by the PUCO so that they are received by December 2014 rather than 2017;
3. Lift the prohibition which forbids Ormet from purchasing power from standard service tariffs as of the January 2014 billing cycle; and
4. Fix the price per MWh of the standard service electricity it purchases for the five billing months remaining in calendar year 2013 to reflect $45.89 per MWh.

In its motion, Ormet also seeks approval of the following non-emergency relief:

1. Allow Ormet to receive a monthly discount of $4.5 million for the first five months of 2015;
2. Permit Ormet to reopen its last two pot lines and to purchase from a CRES provider up to the full requirement for those lines at market rates, which would include a shopping credit of $9 per MWH through May 31, 2015;
3. Authorize Ormet to repay the October and November 2012 deferred payment beginning January 2014 through December 2015 in equal installments of 4.1667% of the cumulative amount;
4. Lower the target price for aluminum based on the LME which would trigger a premium payment by Ormet from $805/metric ton to:

1. $2650/metric ton for 2013;
2. $2490/metric ton for 2014 and the first five months of 2015;

5. Submit under seal 30 days from the filing of this application, a business plan that demonstrates the sustainable energy price post 2015 from a newly constructed on site power plant which would achieve power prices to support the ongoing operations of the Hannibal Facility;
6. Submit a detailed construction plan for an onsite power plant which lists specific milestones and pricing projections that confirm that the onsite power plant would be sustainable without incentives; and
7. If construction of the onsite power plant is not completed and fully operational by May 31, 2015, authorize Ormet to purchase up to its full 540 MW power requirement from a CRES provider which includes a shopping credit of $6/MWh to terminate either when the plant is fully operational or December 31, 2015.

Ormet alleges that closing the Agreement and emerging from bankruptcy is contingent upon the PUCO approving its request by July 31, 2013.  OMAEG counsel recommends filing a motion to intervene and argue that the filing of Ormet’s motion presents an extraordinary circumstance in which the motion to intervene should be granted.  In the meantime, we will continue to monitor developments and provide updates accordingly.