NEW HAVEN, W.Va.--(BUSINESS WIRE)--Felman Production, LLC (“Felman” or the “Company”) submitted an application today to West Virginia’s Public Service Commission for a 10-year special rate electric contract. If approved, the special rate would enable Felman to restart production and save up to 200 jobs, while ensuring other West Virginia ratepayers do not incur any higher cost than they would incur if Felman were forced to shut down permanently.
Felman announced a temporary shut down on June 28th due to challenging ferrosilicomanganese market conditions and rising manufacturing costs, and was recently forced to lay off 107 employees. The Company previously laid off 38 employees in May.
“We continue to face very challenging conditions in the ferrosilicomanganese market, impacting our overall profitability and viability as a manufacturing site in West Virginia,” said Mordechai “Motti” Korf, Chief Executive Officer of Felman’s parent company, Georgian American Alloys, Inc. “We remain committed to the New Haven operation, where we’ve made significant capital investments in recent years. But unless we can obtain more flexible electricity rates, which account for more than 20% of our cost, our continued operation is in jeopardy.”
Felman’s special rate request is specifically tied to a target margin that will be derived from independent indices related to the selling price of silicomanganese and costs of raw materials, excluding electricity. If the market index is less than the target margin, Felman would receive a discount. If the market index is greater than the target margin, Felman would pay a premium to the benefit of other customers. The discount is limited to $9.5 million per year, which is the amount of Appalachian Power’s fixed cost that Felman currently covers and the amount of fixed costs that would be incurred by other West Virginia ratepayers if Felman were forced to shut down. If the full discount was used, the cost to the average residential customer would be about $0.55 per month. This is also the same cost to residential customers if Felman were to shut down permanently.
“We believe this is a very fair and reasonable way to address our energy cost issue, which is one of our major operating expenses, while also helping to preserve good paying manufacturing jobs in this area,” said John Konrady, Plant Manager at Felman. “The West Virginia legislature enacted new legislation in 2010 to permit large industrial employers in commodity industries to obtain more flexible power rates. Felman believes this proposal is consistent with what the Legislature had in mind. When prices are low, Felman will get a discount on its electric rate. When prices are high, Felman will pay a premium. This arrangement should be very helpful in enabling us to operate continuously in varying market conditions,” Konrady continued.
The New Haven plant was built in 1952 and was acquired and reopened by Felman in September 2006. It has operated at a sizable loss in five of the past six years. The plant is strategically located along the Ohio River in Mason County, WV, and is accessible by major transportation modes including rail, water and truck. Felman is one of two companies in the US that produces ferrosilicomanganese, an essential deoxidizer and alloy additive used in the manufacturing of steel.
At peak capacity, the facility produces an average of 9,000 metric tons per month. The Felman site makes a significant contribution to the West Virginia economy according to a study* conducted by West Virginia University and commissioned by Felman. The study estimates the economic impact of Felman’s operations in 2012 on Mason County as generating a total business‐volume impact of $165.3 million that supported 391 jobs and $26.2 million in employee compensation. Furthermore, the study determined that on a statewide basis Felman’s operations generated a total business volume impact of $187.2 million that supported 524 jobs and $31.2 million in employee compensation.
The study concludes that the permanent absence of Felman would significantly increase the already high unemployment rate in Mason County. In 2012 Felman accounted for more than 40 percent of the Mason County manufacturing sector and supported the state and local economy by generating approximately $2.7 million in taxes each year.
Felman has requested the special rate contract through an expedited process. The Public Service Commission is expected to hold public hearings on the request and receive written comments. Felman requested that the PSC issue a final decision before the end of 2013.
About Felman Production, LLC:
Founded in 2006 and headquartered in New Haven, WV, Felman Production, LLC is a leading producer of high-quality ferrosilicomanganese, an essential deoxidizer and alloy additive used in the manufacturing of steel. When utilizing multiple furnaces in around-the-clock operations, the company has the capacity to produce approximately 105,000 metric tons of silicomanganese annually at its 190 plus acre facility. Felman Production’s products are distributed to steelmakers across North and South America through its sister company Felman Trading, Inc., an international ferroalloys trading company. Felman Production is one of only two companies in the United States that produces critically important silicomanganese. Felman Production is a wholly-owned subsidiary of Miami-based Georgian American Alloys, Inc. For more information, please visit: www.gaalloys.com
*Economic Impact of Felman Production LLC on West Virginia 2012, Dr. Christiadi, Research Associate Demographer, West Virginia University