NEW YORK - Century Aluminum Co., the third-largest U.S. producer of the metal, said Monday it plans to buy Rio Tinto Group's Sebree smelter in Kentucky for $61 million and agreed to a new power supply accord in the state.
Rio will retain all historical environmental liabilities for the plant and will fully fund the pension plan being assumed by Century, Monterey, Calif.-based Century said in a statement. Century, which will also get $71 million in working capital as part of the deal, rose the most in more than a year.
Century said in a separate statement that it reached an accord with Kenergy Corp. and Big Rivers Electric Corp. to supply power to its Hawesville smelter in Kentucky. Century had said April 16 it would curtail operations at Hawesville unless it secured competitively priced electricity before the Aug. 20 expiration of an existing power contract.
Sebree "was a non-core asset which meant that Rio Tinto wanted out as soon as possible," said Lloyd O'Carroll, an analyst at Davenport & Co. in Richmond, Va. "Both of these smelters are going to be profitable under the new contract."
Sebree has a production capacity of 205,000 metric tons a year, according to the statement. Hawesville supplies metal to the electrical, defense and aerospace industries, according to its website.
"We believe Sebree, like Hawesville, is globally competitive in every area other than the cost of power," Century Chief Executive Officer Michael Bless said in the statement about Sebree. "Gaining access to competitive energy is a crucial for the continued viability of these plants, and we hope that the tentative agreement we have reached for Hawesville will be the first step towards obtaining market-priced power."
Century also owns an idled aluminum smelter in Ravenswood, which was shuttered when aluminum prices plummeted in early 2009.
The company worked with West Virginia officials last year to restart that plant, but plans halted when the state Public Service Commission rejected a company proposal to pass some of its power costs on to regular consumers.
Century said in its earnings report last week that restarting the Ravenswood plant remained a priority and said it was working with power company officials to secure a favorable power agreement for the plant.