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From one crucible to the next

Bert Caldwell The Spokesman-Review

The faint pulse of the Pacific Northwest’s aluminum industry strengthened somewhat last week.

Golden Northwest Aluminum, owner of smelters at The Dalles, Ore., and Goldendale, Wash., emerged from bankruptcy. To what remains uncertain, but for former owner Brett Wilcox, approval of a reorganization plan at least preserves what he says has been a cause as much as a business since he bought The Dalles plant 19 years ago.

A businessman would have cashed out a long time ago.

The region’s aluminum industry was flat on its back in the mid-1980s. Aluminum prices had tumbled, and the Bonneville Power Administration was increasing electricity prices to reflect the cost of the Northwest’s disastrous adventure in nuclear power. When long-time smelter operators like Martin-Marietta and Anaconda wanted out, entrepreneurs like Wilcox purchased plants for a song and, when aluminum markets rebounded later in the decade, minted money. Times were challenging through most of the 1990s, but Wilcox added Goldendale to his holdings in 1996.

The 2000-2001 energy crisis put an end to the good times for smelter operators and, for companies like Kaiser Aluminum Corp., an end to smelting, period. At more than 3 cents per kilowatt-hour, electricity was just too expensive to keep aging Northwest smelters competitive with newer plants in China, Bahrain and Iceland. Only three of 10 smelters operate today, none at full capacity. Kaiser’s Tacoma and Mead smelters have been scrapped.

Neither Golden Northwest smelter has operated since March 2003. In December 2003, the company filed bankruptcy. “We went through incredibly good times and, with the power crisis, incredibly bad,” Wilcox says.

Reorganization wiped out all Wilcox’s equity in the old Golden Northwest, but he has reinvested with the new ownership, mostly creditors who exchanged debt for equity. No longer the chief executive, Wilcox remains as a consultant on many issues, just not day-to-day operations.

“It’s actually kind of a relief,” says Wilcox, whose efforts to sustain operations at The Dalles and Goldendale sometimes raised the eyebrows of his competitors. For example, he explored the possibility the company build its own wind or natural gas generation plant as an alternative to Bonneville, or at least as a resource he could use to trade for electricity other Bonneville customers no longer wanted to share. Golden Northwest has a permit for a natural gas generator, but with fuel prices high Wilcox acknowledges that Bonneville is the only hope for the smelters for the time being.

“The industry has to get enough electricity from Bonneville to keep a base load of production,” he says. When aluminum prices improve and cheaper natural gas brings generation costs down, smelter operators can buy additional power on the open market they can use to start more potlines.

Bonneville may not have much to give, and what it has to give may be out of the reach of Golden Northwest. Northwest smelters used 3,600 megawatts of power at full capacity. Bonneville has been suggesting perhaps 600 megawatts will be available after September 2006. Not only do the public utilities that buy most of Bonneville’s power object to that figure, competitor Alcoa wants to know why a company that still owes the agency millions of dollars should be allowed to get back in line.

Wilcox says some consideration should be given to smelters in rural areas, where they once provided the best-paying jobs around. Golden Northwest kept its 1,000-plus workers at full salary for more than two years after it shut down in December 2000, he notes, and helped arrange payment for retraining that has enabled workers to find new careers as nurses, mechanics and computer operators.

“It’s worked out well for a lot of them,” says Wilcox, who adds that Golden Northwest has endured not due just to his own efforts, but to that of employees who have made sacrifices to get the company to where it is today. Some owned preferred stock in the company rendered worthless by the bankruptcy.

Wilcox, 51, equates his personal losses with those of his employees. “I don’t know why I should be exempt from that,” he says.

Although the bankruptcy was resolved relatively quickly — Kaiser filed in February 2002 and has yet to file a reorganization plan — Wilcox bemoans the expense of a process not geared for swift outcomes.

“We got through because the important thing was survival,” Wilcox says. “The ability to survive depends on the will to survive.”

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