Kaiser Halts Output of Northwest Smelter Dec 10 5:07pm ET

NEW YORK (Reuters) - Kaiser Aluminum & Chemical Corporation, a subsidiary of Kaiser Aluminum Corp. (KLU.N) said on Sunday that it is halting its Northwest smelter aluminum output as it prepares for a reduced power allotment in a new contract with Bonneville Power Authority (BPA).

The Houston-based company said in the coming days, it will temporarily discontinue production at its Mead, Wash. smelter, whitract with BPA that takes effect on Oct. 1, 2001, Kaiser said it will receive only enough power to operate at about 40 percent of the company's Northwest capacity of 273,000 metric tons.

Kaiser also said it had sold its December power provided by its existing contract with BPA, which runs through Sept. 30, 2001. The sale will be a benefit to the region, which is suffering from a widening energy crisis, the company said.

``The Northwest region needs energy now to cover its deficit, and we have energy that we believe can benefit the region and its residents,'' said Chief Executive Raymond Milchovich. ``At the same time, we intend to mitigate the impact on our employees and improve Kaiser's financial position.''

Kaiser said it will gain $52 million from the sale, which will be reflected in the company's fourth quarter financial results, along with employment costs and expenses from stopping production.

But Kaiser also warned it may decide to take a charge in the fourth quarter against part of the smelter's current book value of about $200 million because of the uncertain long-term outlook for power in the region.

It said that it expects to make additional power sales and to keep production halted at its Northwest smelters until the new contract with the BPA takes effect.

Kaiser said that it will maintain a salaried workforce at the Mead plant in anticipation of the plant's reopening next year.

The company said eligible hourly employees will continue to be paid up 70 percent of their base wage, and about 400 hourly staff are affected by the production halt.

Kaiser has previously said it will reduce jobs in the Northwest, although it has not yet specified how many jobs will go.

The aluminum company shut down its 73,000-ton Tacoma, Wash. smelter in June because of soaring power costs. In September, it settled a labor dispute with the United Steelworkers of America, in part, to end a labor lockout that had been in effect since January 1999. Kaiser took a one-time pre-tax charge of $38.5 million in the third quarter to settle its differences with labor.

http://www.siliconinvestor.com/headlines/financial/20001210/259369.html

-- Martin Thompson (mthom1927@aol.com), December 10, 2000