Noranda seeking help from state government

NEW MADRID, Mo. -- To say that one of the leading employers in New Madrid is facing hard times may be putting it lightly.

Noranda Aluminum Holding Corporation, a leading producer of value-added primary aluminum products, has been facing declining revenue, been forced to lay off employees, deal with rising energy costs, and most recently, a major reduction in aluminum production capacity resulting from a loss of incoming electrical power caused by the ice storm in late January. But company officials are making strides to remain a sustainable business -- and getting some help from the General Assembly along the way.

"We recently lost 75 percent of our production capacity as a result of losing incoming power to our facility. All of our employees remain on the job trying to restore our plant to normal operating levels," said Keith Gregston, president and general manager of the facility. Following 228 layoffs beginning in November, due to economic conditions, there are now just over 900 workers there.

Since July, the price Noranda receives for its aluminum has decreased from $1.49 per pound to about 60 cents per pound today, said Gregston. And since the Public Service Commission recently made a decision to grant AmerenUE a rate increase, the largest customer of the utility company, faces an increase in what it pays for electricity each year.

"That is the main expense for them," said state Rep. Steve Hodges, a Democrat from East Prairie. "They have negotiated a good, lower rate, but for them to be successful and keep the jobs that they have and stay competitive ... it may not be good enough."

The thought of losing a business such as Noranda has motivated Hodges and other state legislators to work with the company.

"If we lost Noranda, I cannot imagine the financial impact it would have in Southeast Missouri," said Hodges. "Through taxes, Noranda annually provides $2.5 million to the New Madrid County Schools."

Officials including Gregston and CEO Kip Smith have made visits to the Capitol to let their voices be heard about rate increases, or talk about other solutions to survive the current economy. "Our intention is to weather the storm and keep good employees so they can support our customers and contribute to the cities and schools in the area," Smith said in a news release. "We are trying everything that we can to survive during this economic downturn. We know that our state government will do everything that they can to support us while we get back on our feet."

Two issues currently under consideration in the General Assembly could have a big effect on the company. Those include tax credits, and another rate increase through AmerenUE.

This week, Senate committees met in a standing-room-only crowd to receive testimony about repealing the CWIP, which stands for construction work in progress.

The CWIP bill was passed several years ago and prohibited utility companies from getting rate increases to pay for projects that were going to be done, explained Hodges. However, Ameren wants that done, in order to finance the building of a nuclear plant in Calloway County.

Hodges agreed that nuclear energy is a good way to go. "But do I want to see my people pay for it ahead of time?" he said. "No. That's wrong."

Noranda officials were among those to testify against the bill.

"We need relief, not rate increases," the St. Louis Post-Dispatch quotes Smith. "We believe that this bill is an inappropriate removal of the protections the consumer has in place."

And they weren't the only group against the possible repeal. "Almost every party that made testimony was anti-rate increase," said Hodges.

Utility representatives say raising rates for CWIP costs less in the long-run.

Rep. Ellen Brandom, R-Sikeston, noted that, when the CWIP was passed, it originated by a petition by the people. She agreed there are plusses and minuses.

"Everybody that uses Ameren will be paying on it before it's built," she said. "But when you start talking about facilities that cost billions of dollars, borrowing all that money costs billions more. If you don't do it up front, then you are going to pay more in future years."

The bill still has quite some way to go, as it has not yet been voted on by the full Senate, nor even heard by full committee in the House.

Another bill under consideration that could give some relief to Noranda is a section of the Quality Jobs Act. Brandom recently was able to amend House Bill 191 to include the company in those eligible to receive temporary tax relief, with the idea of saving jobs.

"Initially, the way this bill was written, to qualify for the tax relief, you had to have a minimum of 1,000 employees for the prior 12 months," she said. "Which (Noranda) did, until recently."

Under the amendment, companies need to employ 1 percent of all workers in the county where it's located -- in this case, 750 workers. If passed, businesses that qualify will be credited 50 percent of the state withholding tax, for a maximum of $1 million per year for company.

"This can apply not only to Noranda, but other companies that are faced with maybe having to leave Missouri and go to other states," said Brandom.

Hodges said he was also in support of the amendment, which qualifies Noranda. "This is a positive move for Southeast Missouri," he said.

The bill has been passed by the House, but not yet appeared on the Senate floor, said Brandom. "We still have a long way to go and it's still subject to modification," she said. However, Brandom said she and other legislators hope to have both bills passed and to the governor by the mid-March spring break.

And in the meantime, Noranda will continue to move forward -- and clean up from issues caused by the ice storm.

According to Kyle Lorentzen, chief financial officer for Noranda, the outage affects about 75 percent of the plant capacity and restoring capacity may take up to 12 months, based on preliminary information and management's initial assessment.