By Dow Jones Business News, October 29, 2013, 02:50:00 PM EDT
By Stephanie Gleason
A new problem has emerged for Ormet Corp. as the aluminum producer begins winding down its operations: power to its
Ohio smelter could be shut off on Friday, potentially flooding the groundwater with chemicals such as arsenic and
At a hearing Monday, American Electric Power Co. Inc. ( AEP ), Ormet's electricity provider, told Judge Mary Walrath of
the U.S. Bankruptcy Court in Wilmington, Del., that without payment of at least $1.4 million, electricity to Ormet'sHannibal, Ohio, facility would be shut off on Friday.
That facility, which has halted operations and is being liquidated, has maintained interceptor wells since 1973 to
prevent harmful chemicals from leaching out of the facility and into Ohio groundwater. Those wells require electricity
to continue pumping.
"We are very concerned about the dispute because it threatens the [interceptor wells]," Alan Tenenbaum of the U.S.
Department of Justice said Monday at the hearing.
The EPA wasn't able to provide additional information on the situation Tuesday, but it said in court documents that
stopping the pumping system "could pose substantial risks to public health and safety."
Judge Walrath, however, said she can't hold another hearing on the issue before Friday because she'll be attending the
National Conference of Bankruptcy Judges' annual conference in Atlanta. She's the group's secretary.
That leaves Ormet and its lenders with only a few options: pay the bill, let the power be turned off or negotiate a
deal to keep the power on until everyone can return to court.
A deal with AEP would require the approval of the Ohio regulator, which isn't likely to happen before Friday, Ormet's
bankruptcy lawyer said during the hearing.
Neither Ormet nor its lawyers responded to requests for comment Tuesday.
AEP and Ormet haven't had success negotiating other deals recently. Earlier this year, the companies were unable to
reach an agreement on discounted electricity for Ormet to compensate for low aluminum prices. That caused Ormet's$221
million deal to sell its assets to Wayzata Investment Partners LLC to fall apart.
The utility said it's owed close to $40 million in unpaid electric bills and wants $1.4 million to keep the power on.
The power company said it can't guarantee that power won't be turned off if it doesn't receive payment.
"Ormet has an outstanding bill for electric service, and we intend to disconnect service unless the company pays at
least the uncontested portion of its bill. We are abiding by our contract with Ormet and if they don't pay their bill,
we have a responsibility to our other ratepayers to disconnect a non-paying customer. The earliest we could disconnect
service is Friday," the company said in a statement Tuesday.
Ormet is out of cash, meaning payment of the bill would have to come from Ormet's lenders, Wells Fargo & Co. ( WFC ) and
Wayzata, which together are already owed more than $180 million.
At Monday's hearing, a lawyer representing for Wayzata said he couldn't guarantee that either lender would step up and
pay the bill.
"I'm not going to sit here and say that Wayzata and Wells are prepared to ultimately fund those payments under the
budget," said Scott Alberino of Akin Gump Strauss Hauer & Feld LLP. "It would be incredibly helpful if we had the
ability to avoid a power cut off. Give us a week, 10 days to move to an alternative arrangement here."
(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection. Go to
Write to Stephanie Gleason at firstname.lastname@example.org
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