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PUD News

Chelan PUD plans to use Alcoa payment to invest in strategic priorities

by Kimberlee Craig | Jun 18, 2018
$62 million contract payment is due on June 19

Alcoa Corporation announced today that it will make the $62 million payment tomorrow, June 19, as part of its power sales agreement, a payment that will have a modest impact on the District’s finances.

“While $62 million is a large amount of money, the payment amounts to less than one year of our annual capital investment and barely moves the needle in terms of PUD future borrowing from the capital markets,” said PUD General Manager Steve Wright.

“We will use these dollars to stay focused on implementing our strategic priorities of investing in our assets and people, reducing our debt and implementing the Public Power Benefit program.”

Alcoa’s Wenatchee Works smelter has been curtailed since December 2015. The power sales contract included an $86 million deferred upfront charge that was specifically designed to encourage Alcoa to operate the plant. Alcoa earned a payment discount each year the smelter operated from 2011 to 2015.  Last year, PUD Commissioners agreed to defer the bulk of Alcoa’s remaining charge until June 2018 as Alcoa considered whether to restart the facility. The invoice for $62 million represents the remainder of the deferred upfront charge.

The payment under the contract does not prevent the possibility of a restart, and Alcoa’s contract with the PUD remains in place until 2028.

Alcoa receives 26 percent of the electric generation from the Rocky Reach and Rock Island hydropower projects for its Wenatchee Works aluminum smelter, which is about enough power to operate three potlines. During the curtailment, the PUD sells unused power on Alcoa’s behalf, and the proceeds are applied toward Alcoa’s monthly contract costs. 

Chelan PUD views Alcoa as a valued community partner with a shared history of providing economic benefits to the Wenatchee Valley.