Century Aluminum may shut Mt. Holly smelter if power deal not reached

Pittsburgh — Century Aluminum may need to further curtail or close its Mt. Holly smelter operations in South Carolina due to high energy costs, if the company is unable to secure a more favorable power supply agreement, the company said Friday.

"If we are unable to secure a long-term power arrangement for 100% of Mt. Holly's power requirements on competitive terms, we may choose, or be forced, to further curtail operations at the plant," Century said in an SEC annual report filing.

"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."

Century originally curtailed Mt. Holly's operations in 2015 following an agreement with power supplier Santee Cooper, the South Carolina Public Service Authority, which allowed the smelter to continue operating at 50% of its capacity. Prior to the agreement, Century said the smelter was in danger of full closure if a deal was not reached.

The Mt. Holly facility has since continued to operate at approximately 50% of its capacity while Century pursues a long-term power solution, according to the filing.

"Mt. Holly's inability to access the open market for 100% of its power requirements significantly impacts its ability to be competitive in the aluminum industry and puts its continued operation at risk," Century said.

Century reached a new power agreement with Santee Cooper in 2016 and came to terms on an additional two-year power extension plan in 2018.

Under the current contract, 25% of Mt. Holly's electric power requirement is supplied by Santee Cooper's generation at cost-of-service based rates, and the remaining 75% of its electric power requirement is supplied from third-party generation at rates based on natural gas prices.

The agreement's term ends December 31, 2020.

"There can be no assurance that future deterioration in the price of aluminum or increases in our costs of production will not result in additional production curtailments at our smelters," Century said.

A representative for Century was not immediately available for comment Friday.

The Mt. Holly smelter is one of seven remaining smelters still operating in the United States.