Arbitrator Orders Alcan to Pay Sum to Powerex

On January 17, 2003, an arbitrator ordered Alcan Inc. to pay to Powerex Corp. the sum of US$100 million. The dispute stemmed from the 1997 settlement arrangements involving Alcan and Powerex’s parent company, BC Hydro & Power Authority, following the B.C. government’s cancellation of the Kemano Completion Project. As part of the settlement, Alcan had been granted the right to transfer to a third party a portion of its obligations to supply power to BC Hydro. Alcan’s power supply obligations were taken up by Enron Power Marketing Inc. (EPMI), a subsidiary of Enron Corp., and Powerex became the power purchaser. Under the agreement, Alcan was required to retain residual liability for any payments due from EPMI under the power supply contract, subject to a monetary cap of US$100 million.

After Enron and EPMI began Chapter 11 bankruptcy proceedings in New York on December 2, 2001, Powerex terminated the power supply agreement and demanded a termination payment. Powerex then made a claim against Alcan for payment of the full US$100 million. Powerex began the arbitration, when Alcan did not pay. The arbitration hearings took place in Portland, Oregon during December 2002.

Although Alcan initially indicated that it was “reviewing the decision” to determine what to do, more recent announcements have suggested that Alcan does not intend to challenge the award. Discussions between Alcan and Powerex are in progress.

Borden Ladner Gervais LLP in Vancouver acted for Powerex, with a team led by Gerry Ghikas, Q.C., and assisted by Robert Deane and Paul Lowry. Also acting for Powerex were Jay Waldron, of Schwabe, Williamson and Wyatt, P.C., in Oregon; Howard Weg (bankruptcy) of Peitzman, Glassman, Weg & Kempinsky LLP in Los Angeles, and in-house counsel David Facey.

Alcan was represented by James S. Smith, Everett Jack, Jr., and John Cameron of Davis Wright Tremaine LLP in Portland.