Now that Century Aluminum has a deal to bring electricity to its Mount Holly smelter for up to 18 months, the company hopes to win back some of the business it lost last year when it appeared the facility might permanently close.
“We’re going to go back to those customers now and say, ‘We can guarantee that we can supply you with that product,” said Mike Bless, Century’s president and CEO. “Now that we’re going to run for a certain amount of time, we can go to them with that confidence.”
Bless said Wednesday that Century renegotiated a power deal with an unidentified out-of-state utility that will supply most of the power Mount Holly needs to operate. The deal, which saves 300 jobs at the Goose Creek smelter, was struck just days before a deadline in which Century would have had to announce the plant’s closure.
“Fortuitously, we hit a nice sweet spot in the electric power market,” Bless said, referring to falling natural gas prices that have made electricity cheaper to buy on the open market. “We had more than one quality supplier that had large blocks of power they wanted to sell to us. This time we had fortune shining on us.”
With the smelter’s short-term future a certainty, Bless said he has more leverage to negotiate deals with customers looking to buy Mount Holly’s premium billet. Many of those customers abandoned Mount Holly last year when the plant’s future electricity needs were in doubt. The timing of the new power deal couldn’t be better, Bless said, because most contracts for the coming year are finalized in September and October — a period the aluminum industry calls the “mating season.” The new contract starts on Sept. 1.
In the meantime, Century will continue to closely watch expenses at Mount Holly, which has been operating at 50 percent capacity since one of the Berkeley County plant’s two pot lines was shut down in December.
“We’ve had to take expenses here really to the bone,” Bless said.
For example, Mount Holly has been cannibalizing parts from its inactive pot line to use when parts on the active line go bad. That can only happen for the next year or two, Bless said, before the parts start to run out.
By that time, Century hopes to have a long-term power deal that will let Mount Holly operate more efficiently. Electricity accounts for about 40 percent of the smelter’s operating expenses.
Mount Holly gets three-fourths of the 200 megawatts it needs to operate from an out-of-state supplier and the remaining 25 percent from Moncks Corner-based Santee Cooper. Century and Santee Cooper have been in sometimes contentious negotiations this past year over Mount Holly’s power needs.
Bless said Mount Holly ultimately needs to buy all of its power on the open market, where electricity made with natural gas is less than half the cost of Santee Cooper’s coal-generated power.
Santee Cooper has said it can’t afford to transmit all of Mount Holly’s power from an out-of-state provider without raising costs for other customers. Century has offered to pay Santee Cooper’s transmission costs, but both sides can’t agree on a price.
Legislation allowing Mount Holly to get all of its power on the open market was introduced this spring in both chambers of the General Assembly, but neither bill made it out of committee.
Bless said it is too soon to talk about Century’s next step.
“We’ll get to the fall, sit down and strategize and see what the best route forward will be,” he said.
Santee Cooper spokeswoman Nicole Aiello said the utility plans to continue operating under its current contract with Century to provide 25 percent of Mount Holly’s power.
That contract, identical to a deal both sides struck in 2012, extends through 2018. Santee Cooper has said the arrangement has saved Mount Holly more than $130 million since in a little over three years.
Aiello said the utility does “not have details on and cannot speak to Century’s third-party deal.”
Bless said he eventually hopes to operate Mount Holly at full capacity and bring back 300 workers who were laid off in December if the smelter can secure all of its power on the open market.
“Such an outcome would be beneficial to each and every constituency, including Santee Cooper and its entire customer base,” he said.
At full capacity, Mount Holly has a roughly $1 billion annual economic impact in the Charleston area, according to a University of South Carolina study.
Reach David Wren at 843-937-5550 or on Twitter at @David_Wren_