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Golden files for Chapter 11 by Jeff Manning The Oregonian, December 23, 2003

The smelter owner is the third Northwest aluminum company in bankruptcy court,
all victims of the region's high energy prices

The owner of aluminum smelters in Goldendale, Wash., and The Dalles filed for Chapter 11 reorganization in U.S. Bankruptcy Court in Portland. The company has been trying unsuccessfully for more than a year to restructure its debt load.

Golden failed to pay a $9 million semiannual payment to its bondholders in July and will miss the January payment, too.

"The price of power is by far the big issue facing this industry," said Brett Wilcox, owner and chief executive of Golden. "We also have a debt load that we can't sustain, particularly when we're not operating."

Golden's two smelters, which employed about 1,000 workers at full capacity, have been idle or operating at vastly reduced capacity since December 2000, when soaring electricity prices forced a shutdown. The company currently employs 147, most of whom work at a casting plant in The Dalles.

Wilcox said he expects Golden Northwest to emerge from Chapter 11 in 2004.

"We remain committed to restart smelter operations as soon as possible and to put our employees back to work," he said.

Aluminum makers flocked to the Northwest in earlier decades, when the dozens of dams on the Columbia and Snake drainage produced electricity at dirt-cheap prices. The giants of the industry -- Alcoa, Reynolds and Kaiser -- all built or bought Northwest smelters. The industry employed thousands.

Wilcox entered the aluminum industry in 1986, when his company purchased The Dalles smelter from Martin-Marietta. His company bought the Goldendale plant 10 years later.

But population growth, drought and the energy crisis of 2000-01 have changed the equation for the industry. Most of the region's plants remain idle. Though electricity prices have retreated significantly from the meteoric price hikes at the height of the crisis, it remains too high for most of the region's aluminum plants to make money.

Golden joins two other major Northwest aluminum operations -- Longview Aluminum and Kaiser Aluminum -- in bankruptcy. Longview owns a smelter in Longview, Wash., and Kaiser owns a plant in Spokane.

Golden owes its bondholders $150 million. It owes the Bonneville Power Administration about $17 million more for electricity and electricity transmission.

Wilcox stressed that another one of his companies, Northwest Energy Development, which is seeking to develop a large gas turbine power plant near Clatskanie, did not file Chapter 11.

The power plant is crucial to Wilcox's future plans. He hopes that the $400 million plant will one day provide all the electricity for his aluminum smelters at a price low enough to make production profitable again.

But Wilcox has been struggling to finance construction of the plant. And the bankruptcy is not likely to make would-be lenders any more confident in Golden's financial wherewithal.

Wilcox has been attempting for months to work out a "credit support" agreement with the BPA that could provide the additional security a lender would need. In particular, Wilcox would like BPA to step in and guarantee it will purchase the power produced by the new plant, he said.

So far, the two sides have not reached any agreement.

"BPA has made no commitment to (Golden Northwest) with regard to financing," said Ed Mosey, spokesman for the federal power agency. "Wilcox has brought several proposals to us for consideration. But no agreement has been struck and none is imminent."

The United Steel Workers of America, which represents many of the region's aluminum workers and has been harshly critical of other aluminum companies, praises Wilcox for his long efforts to secure an alternative supply of power.

Jim Woodward, subdistrict director of the union's office in Auburn, Wash., said Golden Northwest could survive if it manages to build the new power plant.

"If I'm optimistic about any of them, I'm optimistic about this one," Woodward said of the closed aluminum companies.