May 30--Century Aluminum announced Friday that it will be unable to move forward on a long-term power contract with Western Kentucky Energy, a subsidiary of E.ON U.S., Big Rivers Energy and Rio Tinto Alcan, because of "unfavorable business conditions."

"We are disappointed that we cannot proceed with the transaction at this time," said Matt Powell, Hawesville vice president and plant manager. "All parties have been working hard for a long time to create a mutually acceptable agreement."

The companies had been working for five years to "unwind" an existing contractual arrangement between Big Rivers and Western Kentucky Energy and define a new agreement that would provide long-term and affordable power to Century Aluminum and Alcan, according to a Century Aluminum press release.

Century Aluminum operates a smelter in Hawesville, and the Rio Tinto Alcan smelter is in Sebree.

When Century Aluminum officials first announced the potential agreement, they said a long-term energy contract was essential for the Hawesville smelter to continue operations. In 2005, they told state and local officials that the 750 good-paying jobs at the Hawesville smelter were in jeopardy if the company couldn't find an affordable long-term electricity contract.

"We are still committed to the Hawesville plant," Michael Dildine, director of corporate relations for Century Aluminum, said Friday afternoon. "We are still committed to gaining a long-term energy contract for the smelter. We will continue to work hard with the parties to hopefully get that accomplished."

Century Aluminum opted to back out of the unwind because of the weakness in both aluminum prices and wholesale electric prices, according to the company's press release.

"The proposed contract might support Hawesville's viability over the long term, but the contract's take-or-pay requirement, in its current form, could create financial hardship for the company in the short term," Powell said.

The smelter's current power supply agreement, which is with Kenergy (a Big Rivers member) and Western Kentucky Energy, expires at the end of 2010.

Rio Tinto Alcan officials say they were prepared to move forward under the terms outlined in the unwind document, according to a Big Rivers press release, but because Century Aluminum has backed out of the unwind, the other companies can't proceed.

Big Rivers and E.ON are assessing their options to move forward without Century Aluminum, officials at Big Rivers said.

"As the uncertainty continues, we must stay concentrated on our normal operations," Chip Keeling, a spokesman for E.ON, said Friday afternoon.

Beth Wilberding, 691-7307, bwilberding@messenger-inquirer.com

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