Conference Transcript - CENX 2026-02-24

Katia, Analyst

Hello, everyone. So next up, we have Century Aluminum. Century is one of the largest U.S.-based or the largest U.S.-based primary aluminum producer. And with us today is CFO, Peter. Peter, over to you.

Peter Trpkovski, CFO

Thank you, Katia. Good morning, everyone. We're Century Aluminum Company. We are the current U.S. largest aluminum primary producer today. As you can see here on the map, we have assets in the two shortest markets in the world. The U.S. is the number one shortest market, and Europe is the second shortest. We have two operating smelters, one in Seabree, Kentucky, and one at Mount Holly, South Carolina. And we have a new smelter announced to be built in Enola, Oklahoma. We also have an operation in Grand Nurtungi, Iceland. That's 300,000 tons of primary aluminum that goes straight into the European market. In the U.S., by the way, we have 450,000 tons once Mont Holly is up and running, and I'll talk about that in a moment. And then we also moved upstream a little bit in Jamaica. We have the bauxite mines and aluminum refinery. That's 1.2 million tons of annual production, and I'll talk about it in a moment. We're on our way to 1.4 million tons of nameplate capacity. As I said, we announced recently a partnership with EGA, the Emirates Global Aluminum Company. They have the premier technology, and we're bringing that technology into the United States. It'll be the largest aluminum smelter in the Western world, 750,000 tons. EGA will own 60% of the project and will own 40% of the project. Recently, we also announced the sale of Hawesville. This was an idle site in 2022 due to the Ukraine-Russian war and high power prices. It's been idle for four years. We sold Hawesville to TerraWolf. TerraWolf is a HPC AI data center company. Century will retain a 6.8% interest in the fully completed data center. Last week, we had our earnings call. This is a normal slide that we put in the deck when we talk about the next 90 days. So looking ahead here on the left-hand side, this is what we just had put out. We're expecting to do $225 million at realized prices. And what that means is Century receives its revenue on a lag. So most of our revenues are lagging current spot prices in the aluminum markets. So if you just took today's spot price environment, global aluminum prices are $3,100 LME. U.S. Midwest prices are 104 cents a pound, and the European premium is $365 a ton. If you take those and you just use our sensitivities, which is just based on production and is found in the appendix of all of our earnings materials, you'll see that we'll have an incremental $55 million uplift to that guide. And the last thing here that we have is the power. In the first quarter, we had about a two-week temporary price hike to power prices due to winter storm fern. We saw about a $20 million headwind there. If you just marked, this is the Indy Hub price under MISO for our sea breeze smelter. It's our only market exposure on power. If you just took that and marked it to a normal forward-looking quarter, you'll see here about another $25 million uplift. So combine $80 million to our Q1 guide, total of $300 million of quarterly run rate adjusted EBITDA at spot prices. And this is before the expansion at Mount Holly. And I'll just end on that and turn to Katia. The Mount Holly expansion will begin in April. We're taking the last 25% of idle capacity and we'll be ramping that up. So when that's complete in end of June, we're also bringing a line back up from some transformer failures in Iceland. Around the middle of summer will be about 770,000 tons of annualized capacity on current production. And that'll be the first time all of our operating assets will be up and running at 100% in nearly 10 years. So thank you for the time here. And Katia, I'll turn it to you.

Katia, Analyst

So you mentioned on the slide $300 million in quarterly EBITDA on current spot prices, and that's before the restart on Mount Holly. How much, if you look at the restart, the incremental volume, how much of EBITDA could that add on spot?

Peter Trpkovski, CFO

Yeah, great question. We didn't guide exactly how much incremental EBITDA Mount Holly would provide. It's 50,000 tons. It'll take it to about 220,000 tons of annual production. On our last, I guess, two calls ago in November when we announced the restart, we said the payback would be before the end of this year. So ramping up in the second quarter, payback before the end of the year, that was at the lagged aluminum price environment that I was showing on the screen as well. Today, prices are much higher. So I would expect that to pay back even sooner, even earlier before the end of the year.

Katia, Analyst

it's a very very high profitable high return project for us those incremental tons are the most profitable and we're excited to get them back on and then you mentioned the price of aluminum is pretty healthy right now the midwest premium is more than covering the imports the cost of imports how are you thinking about the prices for the rest of the year do you think on the aluminum side, is the elevated pricing impacting demand in any way? And then are you starting to see or hear about more imports coming into the U.S. market?

Peter Trpkovski, CFO

Yeah, I think demand is really strong, especially here in the United States. The tariffs are certainly working and has not hurt demand whatsoever. The tariffs have been around since 2018 when President Trump first came in administration and we've only seen aluminum prices strengthen um so we think demand is good um you know we can talk about supply you know globally first and you know in china we've seen the the 45 million cap be implemented and because of that and the discipline that we're seeing in in china you know we're not seeing excess supply coming coming over to the u.s um so yeah i think i think that speaks to the price environment and then there's this ongoing conversation about sustainability of tariffs or it comes and goes we we heard a few weeks ago a potential of some of the downstream products receiving some exemptions how are you thinking about tariffs environment especially after the friday's changes yeah i i sort of i sort of mentioned it um on the previous question but tariffs are especially section 232 steel and aluminum tariffs are here to stay you know they've been around like I said since since the first Trump administration so eight years now and they've only strengthened since Trump 2.0 has come back into office and if you look at they also survived the Biden administration so they've survived both sides and they've lived their day in Court. So when we hear about other tariffs and the Supreme Court ruling down, this has nothing to do with Section 232 steel and aluminum tariffs. We feel really good about those. And I think the big change this time around is that all the exemptions have been removed, and that's with no exception. And I think going from 25 percent to 50 percent leads to the price environment we're seeing today and we truly believe that these are here to stay and we're doing our part to deliver units into the US with the Mount Holly expansion and our new project announced in Oklahoma.

Katia, Analyst

And you mentioned a new project partnering with EGA. Why the decision to partner?

Peter Trpkovski, CFO

Yeah EGA is one of the premier technology providers in the world. They're great you know Western producer. We wanted to de-risk the project and make sure that this project does get built and so when we're looking around to technology providers ega stood out far far and ahead and we wanted to partner with them de-risk the project and ensure that we can build the largest aluminum smelter in the western world ever and can you just remind us maybe and i know this is still early on the the project financing side are there opportunities for you to get any type of project level financing from the government? Yeah, there's three major milestones. The first is the power contract that we're finalizing. The second is the engineering so that we can get the capex. We announced that we're working with Bechtel on that. And the third is the financing of the project. All options are available to us. We have the $500 million grant from the DOE, and we're excited to put that to use and apply it to the project. And we're also looking at a myriad of different opportunities within the Department of Energy, as well as other opportunities within the U.S. government to get very attractive, excuse me, borrowing rates for the project. And I think all those three major milestones should wrap up within this year. We're looking to do a final investment decision with EGA in the fourth quarter this year.

Katia, Analyst

And then on the HOSWELL, you received $200 million in cash, but then you also are maintaining a minority interest. Can you tell us how we should think about the value of that minority interest?

Peter Trpkovski, CFO

Yeah, good question. The way you should think about the value of the minority interest is really in excess of the upfront contribution that we received. So we didn't guide exactly on what that is, but we have an option to put to TerraWolf sort of a floor, if you will, one-year anniversary from energization of that fully completed data center. And if you think about what we received up front and what I just said about being in excess of that, sometime in 2028 we could probably look at that option or we could retain it or we can monetize it in other ways but with that floor and that strike that gives us liquidity assurance towards potentially a new smelter in the u.s and funding for that capital allocation is topical in the space especially with the profitability as it is how are you thinking you're getting towards your targets right now on the debt level how are you thinking going forward especially between maybe further debt pay downs and showholder returns yeah great question um last week on our earnings call we talked a little bit about this we fell just short of our net debt target at year end and that due to some of the mismatched timing as a result of the iceland equipment failure you know we had the lost margin and then we get insurance proceeds thereafter and so we had a little bit of mismatch So if you look at our insurance proceeds in the first quarter, coupled with our 45X receivable, $175 million, also looking at the Hawesville proceeds, we're certainly at our net debt targets today. And I think what we said is we'll update on our Q1 call, but we're looking forward to these investments that we have organically, mainly the Mount Holly aluminum expansion. That's about $45 million. We're also doing multi-year projects at Jamalco. We have a new power generator beginning in April of this year that will lower the cost structure at Jamalco immediately, start to move it towards the second quartile, which has been our objective since we bought it. We're also going to be bringing Iceland back on. It's going to be a very busy Q2 for us, but we're excited to get there. And I think on the Q1 call, you'll hear a lot about us prioritizing those investments and then also looking at potential distributions to shareholders. The overwhelming feedback has been a form of a buyback. So I would say look ahead to the Q1 call for us to provide more information on that.

Katia, Analyst

Perfect. Thank you so much, Peter.

Peter Trpkovski, CFO

Thank you, Katya.