Century Aluminum Co (CENX) 2013 Q4 法說會逐字稿

Welcome to the fourth-quarter 2013 earnings conference call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Instructions will be given at that time.

(Operator Instructions)

This conference is being recorded. I would like to turn the conference over to out host, Mr. Peter Trpkovski. Please go ahead.

Good afternoon, everyone, welcome to today's call.

Before we begin, I would like to remind you that today's discussion will contain forward-looking statements related to future events and expectations including our expected future financial performance. Results of operations and financial condition. These forward-looking statements involve important known and unknown risks and uncertainties which could cause our actual results to differ materially from those expressed in our forward-looking statements. Please review the forward-looking statements disclosure in today's slides and press release for a full discussion of these risks and uncertainties.

In addition, we've included some non-GAAP financial measures in our discussion. Reconciliation to the most comparable GAAP financial measures can be found in the appendix to today's presentation in our website at www.Centuryaluminum.com. With that I'd now like to introduce Mike Bless, Century's President and Chief Executive Officer.

Thanks a lot, Pete, and thanks everybody for joining us again this afternoon.

If we could turn to slide 4 please, I'd like to give you a quick review of the last couple months which, as I think you will agree, have been busy and productive period for the Company. We're generally really pleased with the progress that we have made. Okay, let's start in. At the end of January, as you've seen, the Kentucky Public Service Commission approved a new power contract with Sebree and it was approved exactly as it was filed by ourselves and by the power company. This developmental allows us to move forward with long term plans and investments for this excellent plant. I'd like to note how extraordinary it was that our employees were able to work safely and productively through these uncertain times and they should be commended for that.

The plant is running extremely well. We've got great efficiencies in the potrooms and record production coming out of the casthouse. I'll give some more detail on that in just a few moments. I should note Hawesville is also firing on all cylinders now. We've got our record amount of high purity production coming out of that plant, again I'll make some more comments here in just a couple minutes. Let me talk about the power situation at Hawesville where we had some issues that impacted the full rate that we paid in the Q4 given some things that happened at the power company's generation station.

As you might remember we paid a net cost by contract of maintaining that power station next to Hawesville. It is obviously owned by the power company until the power station can be closed. And I'll update you on the status of that process in just a moment. In October the power company lost some generation units to unscheduled maintenance. At the same time they happened to have some transmission lines down for scheduled maintenance. They were thus forced to buy some replacement power for their other customers in the real-time market. For those of you who follow these markets know, the price in the real-time market is generally far greater than the price in the day-ahead market. And this resulted in $3 million of excess costs that we had to pick up under the contract.

That same incident also drove up power prices within the region significantly for the better part of that same week. And this resulted in $4 million of excess power costs to us in October. So at that the bottom line our power costs for Hawesville in October and that's obviously in the fourth quarter were $7 million higher than we expected. This obviously impacted Q4 results by $0.07 a share. Other than this incident the power costs for Hawesville were right on with the expectations that we had in the forecast that we made. Just to remind you this was for energy cost in the low $30 per megawatt hour and a fully delivered price in the range of $35 to $36 per megawatt hour.

I'll talk about this some more in a few minutes but quickly we believe the conditions ought to be satisfied sometime during the second quarter to allow the power company to close its generation station if they so choose. And at that time we'll stop paying this monthly holding cost. That's whether they actually choose to close the plant or not. There are some important transmission related issues that still need to be resolve to support reliable service to both plants in Kentucky over the long term and again I'll make more comments on this situation at the end of my remarks.

Okay. Moving along let me talk about Mt Holly a little bit. As you know, the current off system contract ends in December of 2015. That was put in place a couple years ago. We're working actively with the power provider with the state and multitude of third parties on a post 2015 structure that would put the plant in acceptable competitive position. Difficult to know at this point whether this particular structure will be successful. We and the power provider in December mutually extended notice date for termination of post 2015 service until June of this year.

That date is significant. We need to provide that termination notice or we're on the hook to continue to pay a demand charge to the power company after 2015, even if for whatever reason the plant were not to run. Moving along we completed the restart the Vlissingen anode plant in December. That project was on time and over $1 million under budget. The anode have been in the cells at Grundartangi for over a month and they're performing well. Next decision that we'll face is when to rebuild the second furnace. As you recall, the 150,000 metric tonne plant, two furnaces with 75,000 metric tonnes each. Shelly will discuss this when she talks about the CapEx budget for 2014.

Moving along, as you know, we had several important commercial agreements that were set to expire at the end of 2013 and we've successfully replaced these. First, we signed a new hot metal sales contract at Southwire at Hawesville. The new contract is for one-year duration. The volume is somewhat lower than the old contract, it's for about 40% of Hawesville production. The reason for this is that we've seen a significant increase over the last half a year in high purity production coming out of Hawesville. We obviously want to realize the highest net price for the products that we're able to produce at that plant. That being said Southwire remains an extremely important and valued customer and we hope to continue to do business with them for years and years and years to come.

Also if you know, the original [toll] contract at Grundartangi expired in December. That was for 130,000 metric tons a year. We actually replaced that contract with a direct sales arrangement. There's two primary reasons for that. First, the market for tolling arrangements is much more limited than it was. When that toll was originally put in place was actually 15 years ago. More important reason is our intent to also move Grundartangi to more value-added product production, and this is the first step in that process. Again I'll give you more detail on that in just a couple moments.

In her remarks Shelly will provide some detail, including additional liquidity for the company we've created over the last couple of months. We feel really good about the company's financial condition given this and significant improvements you'll see on the cost side. As usual, Shelly will also give you some financial estimates for 2014 so you can build your models and based on these data you will be able to calculate the Company's break-even point and the Company's cash flow at any LME that you choose. Let me just give you a little bit of foreshadowing, so you don't have to calculate the numbers yourself.

If you look at bottom line cash flow, after everything other than working capital changes, which are difficult to predict, of course, and investment or non-maintenance CapEx. So after everything really including maintenance CapEx, the Company is free cash flow break-even in Q1. And Q1 will be significantly higher than the rest of the year given some high power prices we're seeing in Kentucky right now due to the cold weather. Shelly will give you more detail on that in a couple minutes.

The best breakeven cash flow will be $1,715 per metric roughly in Q1 and importantly for the full year we see a cash flow breakeven of around $1,600 per metric tonne. So you can see we brought the Company's cost structure down to a point where we feel like we're strongly protected on the down side but we've retained a tremendous amount of upside for our shareholders through commodity prices.

We can turn to Slide 5, please. Let me make a couple quick remarks on the market. It goes without saying, we've seen some real volatility in global economic data as late as today. Data going in each direction moving markets around, as you know. This has obviously been reflected in the price of industrial commodities. And aluminum specifically, the cash LME price during the fourth quarter averaged $1,768 per metric tonnes, down 1% from Q3. If you look at it, the price was relatively steady throughout the quarter but then as you know it fell after the turn of the year and bottomed out in about the mid $1,600s. The cash price found its way into the low $1,700s. That having been said, we're still looking at the lowest levels we've seen since 2009 due to spot prices.

Turning to regional premiums, these have been the subject of a lot of attention. If you look back to December, the US Midwest premium had support at the end of quarter, has been trading $0.10 and it wandered up to about $0.12 at the end of December. We saw rapid increase during January and it is currently sitting just shy of $0.20 a pound. There's been a lot of speculation as to what is behind this move. We think there are a whole bunch of factors at play, I'll name a couple of them.

One is on the actual business side demand earnings very good. Especially in the US Midwest and it is a driven principally by the automotive market amongst some others. A significant mass amount of metal remains tied up in financing transactions as you know supported by a wide contango and continuing low interest rates Scrap markets remain tight, obviously supportive of the premium. Based on all of this we believe a lot of consumers have waited to secure metal anticipating or hoping for lower premiums. When those didn't come the situation began to feed on itself.

In Europe the duty paid premiums [are also up] significantly lagging the Midwest premium sitting at $350 a tonne, little bit above that. Our own business planning we're -- Shelly will take you through these numbers, we're not planing on these types of elevated levels to persist. We do believe there are some structural changes that will support premiums comfortably above historical levels. But we also believe that market forces should drive down premiums from the current levels at some point. Obviously the art is going to be deciding when and to what extent those premium movements happen.

Turn to fundamentals on demand remains generally good, as I said, in the US led by aerospace and automotive markets. We’ve [read a lot] around fixing some real substitution towards aluminum that Ford's F150 is the most obvious example and you've probably seen GM's recent -- very recent announcement obviously aligns. The EU also looks like it could be building some momentum. But again, as I've said, the data are a little bit spotty.

Data out of China has also been inconsistent. We still see the potential for meaningful surplus in primary metal in Q1. In China the Q1 demand forecast for primary metal is about 12%. So at the end of the day a lot will depend on the supply side. Back at the global level Q4 demand in the aluminum rose 7.5%. That was 3.3% that is out of China.

Couple comments on the supply side. We've obviously seen an increasing number of curtailments over the last couple of months. Seen two plants in the US, one in Europe, a recent confirmation a plant in Australia intends to shut down by mid-year. We're also starting to see some real capacity come out in China, that is still not at the levels we need to have an impact on the global balance -- global inventory to be specific. Excluding China, we see no significant new capacity coming on in the foreseeable future.

In Q4 the global supply growth lagged demand. It was 4.5% up versus 7.5% increase in consumption about which I talked. Supply growth ex China in Q4 was 2%. As you read most forecasters are calling for a deficit in 2014 on the global basis certainly by 2015. To us it looks very certain there will be a deficit in the world excluding China and of course the global balance is going to depend upon China's ability at the very least to clamp down on new primary capacity.

Okay let's move onto slide 6, talk a little bit about the operations. Most important we continue to have a very good safety performance across the plants. We remain very focussed principally on the identification of hazards and behaviors that could lead to serious injuries in our plants. We've had a lot of programs focussed at that. Looking at production volume, as you'll see Grundartangi up1%, this is a quarter-over-quarter, so these data would be Q4 over Q3. This is obviously from the continuing capacity creep program.

In Q4 the plant produced at an annualized rate of 297,000 metric tonnes. Hawesville and Mount Holly were steady. Great improvement at Sebree. The plant is now operating a stable manor. It is producing at record hot metal and cast-outs volumes. As you'll remember, we had a tough couple months right after the acquisition but the team down to Sebree did a superb job of getting the plant quickly into good shape, really proud.

On production metrics you've also seen an improvement there at Sebree, a meaningful one. I'll give you just a few examples. Those of you who follow the year technical side of the industry. Current efficiency was up 2 points, quarter-to-quarter. Power and carbon efficiency, obviously critical, improved between 4% and 6%. We had 4% more average operating sales in Q4 over Q3. And as you see Hawesville, Mt Holly, and Grundartangi were nicely stable.

Couple comments on cash production costs, we see good performance on Hawesville, this is was driven principally by decrease maintenance spending, was down by $40 per metric tonne between maintenance and supplies. As I said, power went the other way, it was up $25 per metric tonne and Shelly will elaborate further on this. Sebree that nice improvement comes from most areas in the plant. At Grundartangi [the data] are a little bit funny. The actual operating performance Q4 or Q3 was flat so stable operating performance, no increase. What you see there is just a bit of anomaly. The plant, just quickly -- the plant actually built some inventory purposely at the end of Q3 principally in the rodding shop.

We knew we had to take the rodding shop down a couple of days in Q4 to do some major upgrades consistent to support the capacity creep. Thus, we had a lot of rodded anodes at the end of Q3 and when those blew through the [cost] statement in Q4 that obviously impacted costs. So really a one time issue event having to do with inventory movement. The real operations were flat quarter-over-quarter from a cost standpoint.

Okay, let's move along to slide 7, please. I'd like to talk about just some of the major items before I turn it over to Shelly to go through the numbers. Just one of the major items we think will impact the business in 2014. First on the revenue side, as I mentioned a couple of times here, we're very focussed on maximizing our production of premium products. We will also be making targeted investments to increase future production of value added products. The chart you see here shows monthly production of high purity metal at Hawesville. Our ability to produce high purity at the plant consistently is based on maintaining very soft stable operations in the potrooms and is also the result of modest investments we successfully made in 2013.

Customer requirements are driving increasing demand for very pure metal, just principally in the aerospace and some other specialty markets. And as many of you know Hawesville is one of the very few volume high purity suppliers in the world. The premiums in this market, of course on top of the Midwest transaction price, are very attractive. And the incremental cost to make these products is small. Seeing the same trend in billet production at Sebree and we'll talk to you about that as we move through the year. The improvement in the net realized prices from these premium products in 2014 is embedded in the forecast that Shelly will share with you in just a couple of moments.

Moving to slide 8, please, that was on the revenue side. Here is the major issue on the cost side obviously. I want to give you a sense of what we're dealing with on the power side in Kentucky. The chart here shows the price for energy alone and this is at the Indiana hub which is the liquid node near our plant. The actual energy price at either Hawesville or Sebree can vary a little bit during normal times from these data but this shows you the trends. As you remember the forecast that we provided you assumed energy prices in the low $30 per megawatt hour. But we still think that is a good number. That having been said, you can see, no great surprise, for those of you who follow the markets, you see impact of weather on January and regrettably February has continued at these kind of elevated levels.

On the other side, the forward screen shows prices reverting to more normal levels by April and May. That having been said, in Q1 our power costs will be a good deal higher than our prior forecasts and our forecasts for the rest of the year. And I'll turn it over to Shelly now who will provide the detail on that and other items.

Thanks, Mike. If you can turn to slide 9 please I'll take you through the Company's financial performance for the quarter. Our US shipments up 2.5% in Q1, and this was largely due to higher production volume at Sebree. In Iceland we had direct shipments of approximately 3,400 tonnes in Q4. The total volume for Grundartangi was up just about 1% as a result of the additional volume from the ongoing expansion project.

So overall global shipments were up 2% quarter-over-quarter. On a one-month lag basis the average cash LME price was down about 1% from Q3 to Q4. When you look at our realized unit prices they were down 2% in the US, and essentially flat in Iceland. But both pretty much in lined with the change in LME. Our net sales were essentially flat quarter-over-quarter with a slight increase in shipments offsetting decline in LME.

Continuing down to the operating loss line, in addition to our normal adjustments for depreciation and amortization and lower cost of market inventory adjustments, this quarter we had $8 million charge related to the separation of our former CEO in 2011. After backing out these three item we have adjusted operating loss of $8 million in Q4, which compares to an adjusted operating loss of $4.5 million in Q3.

Let me take you through some of the changes quarter-over-quarter. Lower LME prices in Q4 reduced operating income by about $5 million but raw material costs were favorable by $3.5 million primarily due to lower carbon costs at all facilities. At Hawesville, power costs were up about $1 million in the fourth quarter. Given that Q4 was the first full quarter with Hawesville market base power, we expected power costs to go down by $6 million. The difference between our expected power costs -- sorry, between our expectations and actual results for Q4, relates to issues with the power plant next door and higher energy costs that Mike mentioned. Partially offsetting this power impact, maintenance spending at Hawesville was improvement of $3 million quarter-over-quarter.

At Sebree, power costs were down about $1 million due to a refund of excess charges in Q3 while the rate case was still pending. Sebree also had an improvement of about $2 million in the quarter for maintenance and other costs driven by improved efficiencies at the plant. The last item I wanted to note for operating income was inventory draw down Mike mentioned at Grundartangi. This is a timing difference related primarily to reduction in anode inventories that impacted costs by $4 million in the fourth quarter.

Moving on to the EPS data, for Q4 we have an adjusted loss of $27 million or $0.28 per share. In addition to the items I just mentioned we also had a $3 million reduction in income taxes quarter-over-quarter, primarily due to lower taxable income at Grundartangi. Continuing down to the balance sheet info, in the fourth quarter we entered into a new $50 million revolving credit facility secured by the current assets of our Grundartangi plant.

We also increased the size of our US revolving credit facility from $137.5 million to $150 million. At the end of the year we have $6 million borrowed on our Icelandic revolving credit facility and nothing outstanding on US revolver other than letters of credit. So while cash was down $57 million for the quarter, our available liquidity actually went up by $11 million.

Moving on to slide 10, please, here we show our normal cash flow waterfall bridging Q3 to Q4. Capital spending in Q4 was the highest of the year with almost $10 million for the restart of our anode plant in the Netherlands. We spent $14 million in CapEx at our smelter facilities and that include $7 million for investment in the expansion project at Grundartangi. During Q4 we received a refund $22 million for withholding taxes in Iceland. At this pointer we have about $10 million in withholding taxes that were paid in 2013 and will be refunded to us in Q4 2014. We also received a refund almost $10 million in prepaid income taxes for Grundartangi.

Moving on to the right, we have an $11 million net reduction in debt as we repaid the Q3 balance on our US revolver and borrowed $6 million on our new Icelandic facility. Quarter-over-quarter cash is down $57 million and we ended the year with $84 million of cash on the balance sheet. While we're discussing cash flow, I wanted to mention that the $10 million payment related to the separation of our former CEO, will be made in the first quarter of 2014. So the cash impact will lag the accounting charge that occurred in Q4.

Okay, if we can move on to slide 11, I'll take you through the Company's full year performance. Total shipments were up 18% in 2013 primarily due to the acquisition of Sebree in June. We also saw 3% increase in shipments from Iceland as a result of the ongoing expansion program. We had about 13,000 tonnes in direct shipments from Iceland and that number will increase significantly in 2014 as the first of our tolling contract expired at the end of the year. In 2013 the one month lag LME price was down 7% year-over-year. When you look at realize prices down 5% in the US and 6% in Iceland reflecting the improvement in regional premiums in 2013.

Net sales were up $182 million primarily due to the Sebree acquisition, and this was partially offset by lower LME prices. Adjusted operating income was down $27 million in 2013 with the most significant impact coming from the decline in LME. Lower metal prices reduced operating income by $52 million including the impact of our LME based Alumina Power contract.

Partially offsetting this decline was improvement of $24 million in raw material costs across all facilities and a $13 million decrease in power costs primarily at Hawesville. We also saw an improvement of $11 million in higher shipments from Iceland and another $11 million at Grundartangi for lower pot lining, maintenance and supplies cost.

The acquisition of Sebree negatively impacted operating income by $28 million due to high power costs under the previous contract and low LME prices. We also had an $8 million increase in SG&A in 2013 due to activities at our anode plant in the Netherlands that preceded the start-up of operations.

We're moving on to slide 12, please. Here we have the full year cash flow waterfall and I'll just call out a couple items to note. We spent $18 million in 2013 on the restart of our anode facility in the Netherlands. The entire project cost is about $28 million. You'll see an additional $10 million cash outflow in early 2014. We also spent $49 million in CapEx at our smelters in 2013 and that includes $24 million for the multi-year expansion program at Grundartangi.

For the full year we had a net inflow of $3 million related to withholding taxes in Iceland. We also received the $10 million prepaid income taxes that I mentioned earlier, but this was offset by $10 million in Icelandic income tax payments. In the US we also received a $5 million income tax refund and that related to a loss carry-back. Moving to the right we spent approximately $48 million for the Sebree acquisition and that amount still subject to working capital adjustments which have not yet been finalized. We spent $8 million in the year to finance our bonds that were maturing in 2014.

If you can turn to slide 13, please. On the next couple of slides I'll take you through the Company's expectations for financial measures in the coming year. There is a lot of data on these pages, so I'm just going to focus on some of the key points. In 2014 we anticipate all operating facilities will be producing above their rate of capacity levels.

In Iceland, the severe lack of rain this winter has impacted water levels. As a result we expect to have reduced power availability over the next few months which will have a modest impact on volumes. The numbers shown here include the expected loss of about 2,000 tonnes due to extremely low water levels.

As Mike mentioned, value-added products are becoming a much more meaningful part of our business, so we've now included premium product volume in the shipment section on pricing information below. For 2014 we expect to earn an additional $250 per tonne above the Midwest price, and that is on average over all our premium product volumes.

For power we've broken this out by Q1 and then balance of the year due to the high energy prices we recently experienced in Kentucky as a result of the harsh winter weather. For Q1 we're forecasting that fully delivered power prices will be $50 per megawatt hour on average for both Kentucky smelters. And then we expect prices to revert to more normalized level and average around $37 per megawatt hour in Q2 through Q4.

Down at the bottom of the slide we've updated our forecast for net cash costs. As in past years we're presenting these costs net of all premiums that we receive above the LME price. That way this number is directly comparable to the LME meaning that if you take the LME and deduct this number the resulting amount is our expected cash margin per tonne with no further adjustment needed for regional or value-added premiums.

Turn to slide 14, please. For CapEx in 2014 we expect to spend $15 million to $20 million on the Grundartangi expansion and another $10 million to wrap up spending on the first furnace at our anode facility. We also plan to spend about $10 million on other investment projects that are quick pay-back, high-return projects.

As Mike mentioned we're also analyzing the restart of the second furnace of our anode facility which is expected to cost around $15 million. At this point we have not included these costs associated with the project in our capital forecast. Moving down to the amortization line, we amortized the remaining balance of the power contract liability for Sebree in January. We will have a credit of $5 million in Q1, but no further amortization in Q2 through Q4.

Lastly, on taxes we continue to expect our US NOLs to shelter essentially all of our US taxable income. In Iceland we'll pay some cash taxes related to 2013 income. These payments will be more than offset by the withholding tax refund we expect in November. With that I'll hand it back to you, Mike.

If we could just turn to slide 15, please, we want to get to your questions, so I'm going to quickly go through some of these items that we'll be spending time working on certainly in early 2014. I covered most of these already so I think I can go through this reasonably quickly.

As I said, we've got meaningful issues still in Kentucky in the realm of power. First, as I briefed earlier we need to complete the process of allowing the power company to close generation station next to Hawesville if they choose to do so. We installed the physical infrastructure that's required to do this and regulators have approved that. So that part of it is done; it's behind us.

What is remaining now is regulators need to sign off on the operating protocols that are required if we were ever forced to cut power during a great emergency. After the regulators approved those protocols, as I said, we'll stop paying the monthly support cost of that generation station. And again, let's sit that is the problem that hit us during the fourth quarter. Again, we believe this whole process will be wrapped up sometime during the second quarter.

Remaining issue in Kentucky to which I referred is the maintenance on the regional transmission system and the potential impact it could have on both Hawesville and Sebree. Thus far the power company has maintained its insistence on de-energizing the transmission lines when they perform maintenance, even on a scheduled basis. If an unscheduled event were to occur during this period, we'd be at risk and have curtail one or both plants potentially a significant amount of power. Working on energize lines is a proven and safe practice and it is done by utilities across the country. So we need to find a solution to this issue which puts our plants at some unnecessary risk in the future.

We're also importantly, will be working on alternatives for managing the price risk on power in Kentucky. We're buying over 850 megawatts on an around the clock basis. It goes without saying it is a significant issue for us. We're looking hard at a range of alternatives including bilateral physical purchases, financial hedges, and other transactions. And we'll be updating you on this as we move throughout the year.

As I said, we're in detailed discussions on a post 2015 power arrangement from Mt Holly. This is a terrific plant with excellent group of employees, great safety performance and production efficiencies, a good cost structure other than power, and also a premium product mix, about half of its products are billet. Under the power company's tariff, Mt Holly would have one of the highest if not the highest power price of any North American smelter. Obviously that would not support the plants operations post 2015.

In this case the state of South Carolina has a major role to play. They, obviously, like any state, would be concerned about the preservation of the substantial economic benefit that are provided by the plant. But here the state actually owns the generation system, so they have a unique role to play in these discussions. A complex structure is now being negotiated, as I said, multiple parties are involved. We need to find a solution here, either this one or if this one doesn't work, an alternate solution. We'll be working hard on that, obviously with our partners at Alcoa.

We'll continue to press forward on the hot metal expression at Grundartangi, it's been a great success thus far. As Shelly said, we were looking for [providing] an additional 5,000 metric tonnes from this program in 2014 versus 2013. And we'll still get those but we'll get some back due to the impact of the curtailment of power from the national power company due to the unusually low reservoir level which again Shelly mentioned that.

We'll work hard to try to make up part of that volume loss. As I said a couple of times, we'll continue to work hard to increase the value of each our plants. We see, I think you can tell, a major, major opportunity here at each of the plants. At Hawesville it is high purity. At Sebree where we want to maximize the current billet production. Plus we see some real opportunities for other value-added products that we're working on now.

Lastly, at Grundartangi we're working on a really exciting trial with a customer that could lead up to 20% of the plant's production going to high value European auto markets. This likely wouldn't come until 2015 or late this year so we haven't -- thus not reflected it in any of the forecasts that Shelly took you through but it is indeed an exciting opportunity for us.

At Helguvik we continue to work with the two contracted power providers as you know. We really do still believe we should be able to eventually reach an arrangement which works for ourselves and for each of these companies. This will, however, take some time, and it also, however, will be for an aggregate amount of power we believe in the foreseeable future far short of what we are required to get this project up and going again. Thus as we've said, we really do need the support of the national power company here. We're not looking for a subsidy or any kind of special deal from them. We're just looking for terms that we believe should work for each side in our strong opinion. But we do need first though their willingness to stand up and support the project in a major way and we're working with them on that.

At Ravenswood, we're still actively working with all of the important constituencies with the power company, with the state, with the union, and importantly with the retiree group. We really do see a path to get this plant restarted and remain committed to doing so. Ravenswood should be able to produce a good return at a reasonable metal price. As you know we have a high quality customer next door who we continue to believe would be interested in taking a significant amount of the output in the form of molten metal.

With that we'll wrap it up. Pete, we can turn it over for questions.

Thanks, Mike, if you could take the first question in queue.

(Operator Instructions)

And our first question comes from the line of Mr. David Olkovetsky.

Hi guys. How is everybody doing?

Sorry, David, we missed that one.

Yes. It is David Olkovetsky. It is all good. My first question is around the revolving credit facilities, so Shelly you mentioned the US facility was increased to $150 million, I think you said?

Yes, that's right.

I didn't catch the number for the Icelandic one. How big was that?

$50 million.

$50 million. Got it. Can you give us some metrics around those facilities? Are they both asset-based? What are the interest rates? What are the advance rates? Are they 85% AR, 70% inventory, so on?

They're both backed by receivables and inventory. They are both variable rates over LIBOR. US is 1.25% to 1.75% depending upon availability. Iceland is 3.75% over -- typical advance rates, 85% on receivables in the US. I believe it's 70% on inventory. Iceland is a little lower, 65% on both, but no ineligibles.

And are they both fully available with the exception of the $6 million or so that's drawn in Iceland and the LCs in the US?

Yes, there are things we have to look at like different reporting requirements at different levels and dominions and things like that that you get into, but otherwise fully available.

Perfect. Are there any financial covenants, like a minimum liquidity requirement or a fixed charge coverage ratio or something like that?

No fixed charge coverage ratio, there is a minimum liquidity requirement, but again that is when you get into the dominion issues that I mentioned before.

And that is just on the US side. Iceland side, nothing like that.

The dominion issues, what is that? What do you mean?

Basically if you get down to a certain level the bank will come in and take dominion over your cash accounts as well as your receivables and inventory.

Okay. And what's that level?

I believe it is $35 million.

So, in other words, you need to maintain at least 35 million of cash or revolver availability before the banks come in and say; we're pulling your line.

Yes, yes, all of this stuff is online so you can get all of the details, they're filed.

Okay. Perfect. With respect to -- maybe we could talk little bit about Helguvik?

When I first started looking at Century, that was supposed to be the huge growth project. I just want to get a bit of an update on where the conversations are with the Icelandic government, what is sort of stalling that and are there any potential breakthroughs on the horizon with respect to restarting it?

Sure. David, it is Mike. There is two separate buckets of issues as it relates to power, and really three, but to compartmentalize it, the first bucket is the discussions, as I said, with the existing power providers.

As you know the national power company owned by the state is not a current supplier to Helguvik. Two contracts were signed, I'm sure you know this, in 2007 with two geothermal companies, and we've continued to talk with them.

The biggest issues with those guys, as we've said repeatedly, has been they're weakened financial state after the financial crashes. They've gotten a little bit better, but not materially so, and that's impacted greatly their financing of their own power projects, and thus our being able to reach a final agreement -- or a modified agreement. As it relates to the national power company, I mean, the issue there is how that company wishes to allocate the power both that it has available to sell today on the one hand, and that it can and wishes to develop in the future.

And there, the issues are complex but they're no different than anywhere in the world that I've seen. It's simply how a company and in this instance, a state, wishes to use its power resources. So there's a political debate going on, and we have to be mindful of that and respectful of that. And so that is simply -- it sounds simple; it is a zillion complex issues that are embedded in this, but you see these kind of public discussions and debates going on all over the world. Appropriately so.

Sure. And then if I may just one more? I just want to make sure I'm understanding correctly. Earlier you were saying that there were $3 million and the $4 million associated with the power contract. Is that -- are you guys adjusting for that?

No, -- thanks, David. So we haven't adjusted for that because we felt like even though it was an unusual circumstance, and I'll repeat again what it was, it -- and it wasn't just the contract so much as that it drove up -- actually that is not true. It drove up our price.

Part of it was the contractual obligation to the power company on that power station and part of it was just an increase in general prices in the region as a result of that unanticipated series of events. But we haven't adjusted for it because it is power costs and it hit us and we just didn't feel like it was appropriate to adjust for it. But if you believe it is a one-time event, you might adjust for it.

It was $0.07 or $7 million bucks of EBITDA. And again, just to break it out, $3 million of it was the incremental cost that the power company bore to replace that power to their other customers.

Again, we're on the hook for that until, we believe, in the second quarter when we finish the process of getting other regulatory approvals. And $4 million was simply market power prices being driven up by that unanticipated event.

Okay. Perfect. I'll turn it over because I don't want to hog the queue. Thanks very much, guys.

Thanks, David.

Next question comes from the line of Timna Tanners, Bank of America/Merrill Lynch, please go ahead.

Good afternoon. I have a couple of questions. You threw a lot at us and we're trying to get smarter about these power arrangements, so if these are really basic questions I apologize.

Not a problem.

Lot of moving parts. On page 13, I just want to make crystal clear here, when you talk about the footer here of C, and you say an LME price of $1,700 and $1,900 per ton, [was] your cash costs. That LME price also includes -- that's net of a Midwest premium, that is net of any premiums? That's the total aluminum price?

$1,700 to $1,900 is the LME price, and then any Midwest premium or any other premium we receive above that LME is a reduction to the cash costs that are shown on the page.

This is consistent with the way we've shown it the last at least three or four years. The way you've been building your models, if you've been using these data to build your models based on that, what won't change this year. Again, as Shelly said, we think it is the most helpful to those looking at the Company and modeling it because as Shelly said it is a directly LME comparable cost.

In that cost you don't have to make any adjustments, you can just assume whatever LME you can, you've got your sensitivity right on there and you can calculate what the cash costs would be at any LME.

I got it. Obviously with the volatility in the Midwest premium, I just wanted to make crystal clear what that was and entails, so that was helpful.

Sure. You see the Midwest (inaudible), we just used the CLU estimate and so you can -- you know it yourself, you see the US tons, for example, that we have. So if you want to sensitize that number by a penny or $22 a metric ton, it is easy to do, you just multiply for every penny $22 bucks times the number of US tons, for example.

Okay That was helpful. And then a couple of other questions.

One is you talked in the third quarter call about concern over supplying sourcing aluminum, there's been some [box sight pricing] on what's happening in [Asia], so I just wanted an update on how that is fairing for you?

It is going very well. Thanks. I skipped over it quickly, part of it was embedded in my comments, Timna, on Grundartangi, which implicitly we replaced the total so we got Alumina in and sold metal there.

But we got the Alumina contracts now covering all of what you'd expect, all of our production in the US and in Iceland. We replaced expiring contracts in the US, as well, as the [de facto] expiring contracts in the toll in Iceland. It is all embedded in the cost data that Shelly has given you there.

So the market remains -- although it has trended up a bit, as we've said, I didn't make any comments in the index price. It was up a little bit during the quarter, but tax prices net about $335 now, it was up a little bit during the quarter. It is easily procurable.

We have got [importantly] the right material for our plants despite the fact that it is a commodity, as you know. Each alumina performs a little bit differently at each plant, and so it's important that we get the right source, and so net-net we're covered through 2017 now, and we feel good about -- we feel good about our alumina supply.

Okay. And last one, I'm sorry if I missed this. Just on the SG&A guidance of course a lot lower. Sorry if I missed why that would be the case from 2013.

So in 2013, excluding any unusual items that we've called out specifically, the biggest difference is SG&A related to listing in the Netherlands, that is our anode plant that we were starting up last year. I think that was about $7 million to $8 million that we had in SG&A that will basically go away in 2014 now that the plant is up and running.

Okay. Thank you.

Thanks.

(Operator Instructions) Next question comes from David Gagliano with Barclays. Please go ahead, sir.

Same line of questioning as Timna a minute ago on the 2014 targets on the cash cost side. I just want to make sure I got it right, too. So if I -- if you back into the math, and I'm doing it in pennies per pound, I apologize.

I'll give it to you in dollars per ton, whatever is easier. It works out to a weighted average cash cost target of, let's call it $1,560 a ton. But what you're saying is that number already includes, let's call it $325 reduction associated with the premiums. Correct?

Correct -- same presentation as always, David. So you take the gross cash costs and you -- in order to get the data you reduce it by all premiums, not just, as Shelly said, not just physical premiums to which you're referring, but the product -- the value-added product premiums, as well.

Okay. Okay. Essentially what I'm getting at, and I think what we're trying to figure out here is, relative to 2013 -- I mean obviously I'm guessing the premium assumption you're making for 2014 is actually meaningfully higher than the premium assumption made for 2013.

It is right there on the page.

For 2013? For 2013, the previous assumption?

Oh, what was embedded in 2013 --

Yes, the Midwest pricing around the time we put out our last numbers was around $0.11 per pound.

$0.11. So than that went to $0.15?

Yes.

Okay. I got it. Understood. And then just on the pricing side, the other question I had, I appreciate the breaking out the shipments by higher quality shipments and also the value added number, $250 a ton on all premium tons.

What I'm trying to get at -- figure out, what was that value added number in 2013? Is this all incremental? I'm assuming it is not, but --.

No, I can tick it down for you really quickly. At Hawesville -- let me do it one by one -- so at Hawesville, as you see, we're predicting about 120,000 tons of purity this year. That number was less than half of that last year, a little less than half of that.

And so the plant, as I said, I can't say it enough, and I don't say it enough to them, they've made just extraordinary strides there. At Sebree, it's all new, it is on there since June, it is seven months new. We had Sebree -- it will be five months incremental. We had Sebree for seven months as the deal closed on the 1st of June.

So it's about the same -- a little bit more than the plant produced last year, but it's just we'll have owned the plant for five months more. And Mt Holly that is pretty comparable what we did in billet last year.

At Grundartangi, as I said, it is essentially nothing this year. We're doing some small trials, but the big stuff -- the big volume stuff, if the trials are successful, won't come until 2015.

Okay. And so when you do that math on the US value added line at $250 per ton on average over all premium tons -- was that a $250 per ton number as well last year? It sounds like that's probably gone up as well, correct?

It's gone up as well. Just trying to guess, David, where you might be heading, let me give you what I think at least might be a helpful statistic. So the last time we talked about our breakeven, and this was a breakeven pro forma for market power, so it is comparable for the numbers that I just gave you a couple minutes ago. It was $1,775. Hold that number.

The new number I just gave you, again, after we get through the cold weather in Q1 we believe -- and get back to power prices, as Shelly said, at $37, is $1,600. So $175 difference. If you look at that -- and again that is comparable power for power, so there is no difference in the power there, that $1,775 was pro forma for market power in both plants in Kentucky.

If you look at that $175 improvement, about half of it is from, as you correctly pointed out, the better assumption in regional delivery premiums. Regional delivery premiums and the assumptions are up about $90. And about the other half is due to a richer product mix and better high purity billet and better high purity and billet premium.

That is exactly what I needed, thank you very much.

Cool. You bet.

Our next question comes from the line of David Olkovetsky with Jeffries.

That's actually the exact line of questioning I'd like to go down is the $135 you just went over. So in any case maybe I'll just ask something else.

Let's see. Let's talk maybe a little bit about working capital. How do you guys envision working capital sort of playing out over the next quarter or so with all of the various moving parts?

Obviously, working capital can swing significantly from quarter to quarter. There's nothing we can think of dramatically we know of in Q1 that would be a big swing. There's a little bit of that inventory build maybe, but nothing huge.

No, as Shelly said, you're going to get variations just because you'll have disbursements that are scheduled on the last day of the quarter or a customer payment or two will be lumpy, but if you ask over the course of the next couple of quarters -- as you know, you've watched the Company, basically our working capital over the long term, meaning longer than a quarter or two, goes up or down in symphony with the LME price.

And then with respect to that $37 per megawatt hour that you guys have alluded to a few times, what -- I mean, how confident are you about being able to get down to that, what are sort of the parameters under which it will still stay high, obviously cold weather is having an impact. How confident are you guys that you can get down to that $37?

Sure. One level of confidence is based on the forward screen and our discussions with dealers. We could create that price right now. We could hedge -- we could buy forward at that price right now.

So that $37 is made up -- it's actually been a little bit conservative, prices are sort of $32, $33, $34, when you get to the [board] screen and then up by April and then for the rest of the year, and once that support cost for the generation station goes away, the remaining costs are just another couple bucks, $2 or so for a transmission and $1 or so of ancillary costs. I mean, one level of confidence is, if we so chose, we could go out and create that price today.

Any -- and have you guys made that decision to do that with at least part of your requirements?

We haven't done any transactions yet. But I think it's safe to say -- it is very safe to say we've done a lot of work on it. And as I said, we'll be reporting to you -- I wouldn't be surprised if the next time we report to you we'll have put some of that in place.

And then with respect to the breakeven, what is the maintenance CapEx level you guys are assuming for that breakeven cash cost?

Yes, we use $20 million of the breakeven.

Okay. Perfect. That's it. Thanks so much.

Thanks.

And there are no further questions in queue.

Very good. We appreciate everybody's time and we look forward to talking with you in April, if not before. Take care.

That does conclude our conference for today. Thank you for your participation and for using AT&T executive teleconference. You may now disconnect.