Century Aluminum Reopening Pushed back

Dec 15, 2010 (Charleston Daily Mail - McClatchy-Tribune Information Services via COMTEX) -- CHARLESTON, W.Va.--The now-closed Century Aluminum plant in Ravenswood will not be able to profitably reopen until 2013, according to an analyst hired by the company.

And if it were to reopen, it would probably have only about 10 years worth of use left in it.

That was the assessment of Joseph Kettell, a business valuation specialist working with the International Appraisal Co., which was hired last year to appraise the Ravenswood plant.

Century closed the plant in February 2009, laying off nearly 650 workers in the process.

Century hired the appraisal firm last year to challenge the state tax department's $73.1 million appraisal of the Jackson County plant.

Using the separate appraisal, Century was hoping to get the value of the plant decreased by $49.6 million to $23.5 million.

The Jackson County Commission, acting as Board of Review and Equalization, affirmed the tax department's appraisal value following a hearing earlier this year.

During that hearing, Kettell delivered his analysis for the future of the plant.

Kettell projected that, given labor and electricity costs as well as expected price trends in the aluminum market, the Ravenswood plant could reopen and turn a profit beginning in 2013.

His analysis was conducted in 2009, and while he projected that 2013 was the likely start date, it could change should there be unexpected swings in the market.

"The prices of aluminum could skyrocket and the plant might open up a year from now, or this facility may never open up. I'm assuming that (2013) is a reasonable estimate," he testified.

He said in February that the price of aluminum would have to stay above $1 a pound to turn a profit. Since he testified, the price has traded both above and below that level.

It currently stands around $1.17 per pound, having stayed above the $1 level since late summer.

Kettell also estimated that Century, or any potential buyer, would have to invest more than $90 million to restart the plant. That figure includes $44 million in startup expenses in rehiring employees and firing up equipment, as well as nearly $50 million to purchase raw materials and other capital costs.

But Kettell said that even if the plant, which was built in the 1950s, were to reopen, the equipment might have only about 10 years of life left.

"Everything dies, and this plant will die," he said.

He said 23 aluminum smelters around the age of the Ravenswood plant were operating in the United States in 1999. Since then 10 had shut down. Of the 13 remaining, four, including the Ravenswood plant, had been temporarily shut down.

Given the startup costs and short lifespan of the plant, Kettell estimated that any company operating the plant could expect to make about $14.9 million over the next decade of the plant.

Century used that $14.9 million profit forecast, combined with the cost of current inventory at the site, as the cornerstone for seeking to have the plant's value reduced.

The state tax department's appraisal was based on the fair market value of the plant and surrounding property as outlined in state code.

County commissioners sided with the state tax department's $73.1 million appraisal.

Century appealed that decision to circuit court in Jackson County this fall, and Kettell's testimony was entered into the record as a basis of the appeal.

Judge Thomas Evans upheld the decision in a ruling last month.

Though Kettell's forecast for the plant was grim, Jackson County officials said his analysis should be taken with a grain of salt.

"When they're saying things like that, you have to keep in mind they're here trying to get their tax bill lowered," commissioner Don Stephens said.

Had the judge ruled in the company's favor, the tax bill would have dropped from $1.09 million to roughly $350,000.

That $740,000 drop in the tax base would have been a significant hit for the county and could have led to layoffs in county government as well as local schools.

Besides the Century appeal, the neighboring Alcan plant also was seeking to have its property value reduced because of damage and maintenance to its 30-million-pound aluminum stretcher.

County Assessor Brian Thomas said the companies were simply trying to use legal maneuvers and creative accounting to get around paying their taxes.

"I am greatly alarmed and concerned at the apparent attitude by these corporate CEOs come budget time that their property tax bill is a controllable cost," Thomas said. "It's very, very presumptuous."

He described Kettell's analysis as a "gloom-and-doom," worst-case scenario meant to make the plant look less valuable than it really is.

"Unfortunately that's what a lot of those income-approach appraisals do; it's just a dog-and-pony show," he said.

"When they first came into the meeting, they said $13 million. I'm telling you there's more than $13 million in scrap copper in those potlines."

Kettell's estimate was made prior to the state Legislature passing a bill last year allowing companies to renegotiate power contracts based on commodity prices. That bill was designed to ease cost burdens on manufacturers like Century.

Century Aluminum, which has maintained in statements that it is committed to reopening the Ravenswood plant, declined to comment on the lawsuit or Kettell's analysis. citing pending litigation.

The company can appeal Judge Evans' ruling to the state Supreme Court.