Aluminum down and likely out
• Last smelter in region lays off final workers, who don't expect a call back
This region's aluminum industry is about to breathe its last.
The only aluminum smelter close to Portland that's still operating Ñ one of only three left in the Northwest Ñ is shutting down.
Golden Northwest Aluminum Inc., owned by Portlander Brett Wilcox, announced Wednesday that the last few dozen workers at its Goldendale, Wash., aluminum smelter were being laid off.
The action was described in a media statement as a 'temporary curtailment,' and Wilcox said he hoped to restart smelter operations as soon as possible.
The other two smelters still running, Alcoa's Intalco plant near Bellingham, Wash., and Columbia Falls Aluminum in Montana, both are operating at only partial capacity.
It is widely believed that the 33-year-old Goldendale plant will not reopen, particularly if power costs, demand and world aluminum prices stay at current levels and competition from lower-cost foreign competitors, including China continues to rise.
There also are indications that Wilcox, sole owner of Golden Northwest, is wallowing in financial quicksand.
One laid-off smelter worker said, 'I'm riding the horse until it croaks.' But he added that he doesn't expect the plant to reopen and intends to go back to school to retrain for another job.
Even before the layoff notice, drastic cost-saving measures were put in place at Goldendale Aluminum, the company's smelter. Vending machines were removed, microwave ovens and refrigerators unplugged, and lights dimmed in the employee locker room.
The second smelter Wilcox owns, Northwest Aluminum Co. in The Dalles, has been shut down since December 2000.
'The longer they stay down, the more costly it will be to restart them, which raises the odds against them,' said Lloyd O'Carroll, a metals industry analyst with BB&T Capital in Richmond, Va.
Few people in The Dalles expect that the smelter ever will make aluminum again.
Wilcox rejects such talk as doomsaying.
'You write negative stuff, people believe it and they give up hope,' he said, calling it a 'self-fulfilling prophecy É I don't think people have given up. I certainly haven't given up.'
But he has been late making the last two payments, due in June and December, on the company's $150 million first mortgage note, which is secured by Golden Northwest's real property, plants and equipment.
On Dec. 17, Standard & Poor's lowered the company's credit rating from 'CC' to 'D' after it missed the deadline for a $9 million interest payment on the mortgage bonds.
Wilcox dismissed the downgrading as 'old news'; he said he exercised a 30-day grace period and made the payment.
But during that same time period, Wilcox sold his year-old Klondike Wind Power Plant in Oregon for $16.8 million to Scottish Power's PPM Energy Inc., a transaction that may have provided all or part of the bond interest.
The 24-megawatt project, which was intended to diversify Golden Northwest's power sources, cost $24 million to build. Its first 20 years of power output will be sold under contract to the Bonneville Power Administration, which also contributed to the project's construction costs.
Wilcox has another, larger, bill still looming: He owes BPA $13 million, plus interest, for power his company contracted to buy in fiscal year 2002. The bill came due on Dec. 5, and since a 90-day deadline passed on March 5, BPA has the right to terminate its contract to sell power to Golden Northwest.
The federal power marketing agency moved to terminate its contract with Longview Aluminum, which owes $16 million, but was stymied in its collection efforts when Longview filed for Chapter 11 bankruptcy reorganization.
Owner looks to BPA
Wilcox, who said he disputes the BPA charges, is working to find financing for his proposed Summit Westward power project, a $350 million, 520 megawatt gas turbine project at the Port of St. Helens.
He's hoping to get BPA support for that project. But BPA spokes-man Ed Mosey said that's not likely unless BPA's other customers agree to the scheme.
'We've made it clear to Wilcox there would have to be some kind of customer review and approval,' he said.
Mosey said he wasn't familiar with all of Wilcox's proposals. 'What he's trying to work out is an agreement where we would basically extend or even, in some of his proposals, we would forgive the ($13 million) obligation.
'He's just basically trying to come up with a deal,' Mosey said.
At one point, it appeared Wilcox might have gained support, Mosey said, 'but then customers after taking a closer look apparently reversed themselves.'
Jerry Leone, the executive director of the Public Power Council, a trade association that represents the interests of 114 consumer-owned utilities in Oregon, Washington, Montana and Idaho, said Wilcox and his attorney met with a group that included other trade association representatives and officials from a few utilities more than a month ago to discuss his plan.
'It was Brett who called the meeting,' said Leone, who said her response to Wilcox and his attorney, after hearing the proposal, was: 'Surely you jest.'
Leone, whose clients purchase electricity directly from BPA, said Wilcox is looking 'for some sort of special deal or another. The No. 1 road block that the public (utilities) see is that he owes Bonneville about 13 million buckarooneys for the power. We have not been inclined to agree to anything until he agrees to pay up what he owes.'
BPA's own financial troubles, which could prompt a 41 percent rate increase later this year, eclipse other issues for the public power council, Leone said.
'It's not as if anybody is thrilled to see the plants go idle,' she said.
With $13 million due to BPA and another $9 million interest payment looming on June 15, 'it's hard to see where the money's coming from,' O'Carroll said. 'What other assets does he have that he can sell? '
In Klickitat County, where the Goldendale smelter is located, economic development officials are gloomy about the impact of the shutdown.
'From 1965 to 1983, we were in the top 10 percent of per capita income in Washington,' said Tom Seifert, the county's head of business retention and expansion. 'Now we're in the bottom 10 percent, and that's because of the loss of manufacturing jobs Ñ four to five lumber mills, the smelter, the railroad.'
O'Carroll, the industry analyst, praised Wilcox for 'resurrecting' The Dalles smelter and keeping Goldendale operating.
'The problem is that aluminum prices aren't high enough, power prices are far too high. In the meantime, the world competitive landscape in that industry has worsened. Those are not good trends for somebody in the Northwest.'