Alcoa to Lay Off Employees Due to Local Power Issues

Production reduced by half at Rockdale, Texas aluminum smelter

Alcoa said on August 25 it has set dates for the layoff of approximately 300 employees at its Rockdale, Texas, aluminum smelter where the company has idled half of its production. In addition, approximately 100 contract employees will be affected. The plant was partially shut in June 2008 because of ongoing supply issues with Luminants onsite power generating unit, Sandow Unit 4, which have exposed the plant to uneconomical power prices.

Three of the plant's six operating potlines were idled as a result of the ongoing unit outages and local energy market costs increasing to as much as $2,000 - $4,000 per megawatt hour during peak hours, which is about 100 times the norm. Since the lines were idled, representing approximately 120,000 metric tons per year of production, Alcoa has negotiated with Luminant to resolve the issues resulting from Luminant's inability to operate Unit 4 reliably and has not been able to come to a satisfactory conclusion.

"This is in no way a reflection on our workforce. They have been doing an outstanding job," said John Thuestad, President of Alcoa's U.S. Primary Products Division. "Unfortunately, the power plant that Luminant operates has not been reliable over the past year. The cost of power resulting from Luminants inability to consistently operate the Sandow Unit 4, has forced us to make this decision. Were continuing to speak with Luminant to see if we can secure competitive power to ease the impact on everyone involved -- and we have been forced to seek damages and other relief from them through ongoing litigation."

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