What changed in this filing

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Item 7. Management’s Discussion and Analysis

2021-03-04 compared with 2020-02-27 · 162 added, 124 removed, 223 unchanged (56% of the section changed)

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The key determinants of our results of operations and cash flow from operations are as follows:

the price of primary aluminum, which is based on the London Metal Exchange ("LME"), plus any regional premiums and value-added product premiums;

• the price of primary aluminum, which is based on the London Metal Exchange ("LME") and other exchanges, plus any regional premiums and value-added product premiums;

• the cost of goods sold, the principal components of which are electrical power, alumina, carbon products and labor, which in aggregate represent more than 75% of our cost of goods sold;

• our production volume.

COVID-19 Update

In response to the COVID-19 pandemic, we have taken a number of actions to protect the health and well-being of our employees and to prevent the spread of COVID-19 within our operations.

As a result, our plants have not experienced any disruption in operations as a result of the pandemic, and we continue to sell all of our metal essentially as it is cast.

The COVID-19 pandemic has disrupted the global economy and created significant volatility in the primary aluminum industry.

Such adverse impacts to the global market include the drop in the LME price for primary aluminum to $1,457 in April 2020 from $1,772 at the start of 2020.

However, we have seen some measurable improvement in the global market for primary aluminum along with an increase in the price for our product and a return to more stability in the market in which we operate in recent months.

The LME price for primary aluminum averaged $1,702 per tonne for 2020 as compared to an average of $1,792 for 2019, due in part to the impacts that COVID-19 had on the LME price during 2020.

Because we sell our product on a one- to three-month lag to current prices, our results reflect the LME price on this one to three month lag basis.

Customer demand for value-added aluminum products and, in turn, the product premium we receive for such products, also have generally returned to first quarter 2020 levels after having been negatively impacted by the COVID-19 pandemic.

Decreases in the prices of our products have also been partially offset by decreases in the prices of our key cost inputs.

We have taken actions to mitigate the financial impact of the COVID-19 pandemic, including reducing discretionary spending, optimizing working capital and deferring non-essential capital projects.

The potential future impact of the COVID-19 pandemic on our business, results of operations and financial performance is difficult to predict and will depend on future developments, and such effects could exist for an extended period of time.

See I tem 1A.

Risk Factors for additional information on the potential risks associated with the COVID-19 pandemic.

Pricing of aluminum

The overall price of primary aluminum consists of three components:

(i) the base commodity price, which is based on quoted prices on the LME;

(i) the base commodity price, which is based on quoted prices on the LME and other exchanges;

plus (ii) any regional premium (e.g., the Midwest premium for metal sold in the United States ("MWP") and the European Duty Paid premium for metal sold into Europe);

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The average European Duty Paid premium was $126 per tonne in 2020 compared to $142 per tonne in 2019 and $164 per tonne in 2018.

We did see a decline in LME, MWP, and European Duty Paid premium prices beginning in the first half of 2020, with the LME price for primary aluminum falling from $1,772 per tonne, MWP price of $320 per tonne, and European Duty Paid premium price of $140 per tonne as of January 2, 2020 to $1,433, $176, and $98, respectively by May 15, 2020.

There were improvements in the global markets through the second half of 2020 resulting in an increase in LME, MWP and European Duty Paid premium prices by the end of 2020, with the LME price for primary aluminum at $1,978 per tonne, MWP price at $323 per tonne and European Duty Paid premium at $150 per tonne as of December 31, 2020.

Energy, Key Supplies and Raw Materials

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The pricing under our alumina supply contracts is variable.

A certain portion of our alumina requirements is indexed to the price of primary aluminum, which provides a natural hedge to one of our largest production costs.

A major portion of our alumina requirements is indexed to the price of primary aluminum, which provides a natural hedge to one of our largest production costs.

We also purchase alumina based on a published alumina index and at fixed prices.

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Various external events in the alumina markets during 2018 caused significant increases in the price of alumina resulting in the ratio of alumina prices to aluminum prices to well exceed historical levels, which persisted throughout 2018 and much of 2019.

By the end of 2019, the relationship between alumina and aluminum prices returned to historical levels following the resolution of these supply dislocations.

The average alumina index price for 2019 was $332 per tonne compared to $473 per tonne for 2018 and $354 per tonne for 2017.

By the end of 2019, the relationship between alumina and aluminum prices returned to historical levels following the resolution of these supply dislocations and remained stable during 2020.

The average market

alumina index price as a percentage of market LME price per tonne for 2020 was 16% compared to 19% for 2019 and 22% for 2018.

Electrical power is our other largest operating cost.

Currently, our Hawesville and Sebree plants receive all of their electricity requirements under market-based power agreements and our Mt.

Holly plant receives 75% of its electricity requirements under a market-based contract.

In the U.S., market-based energy prices are driven in large part by coal and natural

gas prices and weather-influenced electric loads.

In 2019 , both coal and natural gas prices were relatively low and weather conditions were moderate.

Holly aluminum smelter is currently required to purchase 25% of its power requirements from Santee Cooper at a standard cost-based industrial rate, which is substantially higher than the rate Mt.

Holly pays for market power.

Holly's inability to access the open market for 100% of its power requirements significantly impacts its ability to be competitive in the aluminum industry and puts its continued operation at risk.

As a result of such uncompetitive power prices, Mt.

Holly has already curtailed 50% of its production capacity.

We continue to seek the ability to access the open market for 100% of our power requirements at Mt.

Holly but there can be no assurance that we will be successful in these efforts.

Currently, our Hawesville and Sebree plants receive all of their electricity requirements under market-based power agreements.

In the U.S., market-based energy prices are driven in large part by coal, natural gas, wind, and other fuel sources, as well as weather influenced electric loads.

Extreme weather events, such as that experienced in mid-February 2021 throughout the United States, can result in power outages and/or significant increases in demand, which can result in significant increased power costs incurred in our operations.

Holly aluminum smelter is currently party to both a power agreement with a third party supplier (providing 75% of Mt.

Holly's power) and with Santee Cooper (supplying 25% of Mt.

Holly's power) to supply the Mt.

Holly smelter with all its power needs.

Both of these power agreements were set to expire on December 31, 2020 but were extended through March 31, 2021 as we finalize a new, three-year power arrangement with Santee Cooper that is expected to be effective April 1, 2021.

It is expected that under the new power contract with Santee Cooper, 100% of Mt.

Holly's electrical power requirements will be supplied from Santee Cooper's generation at cost of service based rates.

The new contract with Santee Cooper is expected to provide sufficient energy to allow the smelter to increase its current production to 75% of Mt.

Holly's full production capacity.

If we are unable to finalize this proposed new power contract with Santee Cooper and obtain all necessary government approvals, we may choose, or be forced, to further curtail operations at the plant.

Risk Factors .

If we are unable to enter into a long-term, market-based, power arrangement for Mt.

Holly, we may choose, or be forced, to further curtail operations at the plant.

In Iceland, approximately seventy percent (70%) of the power requirements for our Grundartangi plant is indexed to the price of primary aluminum, which provides a natural hedge of one of our largest production costs.

The price of the remaining thirty percent (30%) of Grundartangi’s power requirements is linked to the market price for power in the Nord Pool power market, the trading market for power in the Nordic countries and certain other areas of Europe.

In Iceland, approximately 70% of the power requirements for our Grundartangi plant is indexed to the price of primary aluminum, which provides a natural hedge of one of our largest production costs.

Since November 2019, the price of the remaining 30% of Grundartangi’s power requirements has been linked to the market price for power in the Nord Pool power market, the trading market for power in the Nordic countries and certain other areas of Europe.

Production/Shipment Volumes

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In normal circumstances, fluctuations in production and shipment volumes, other than through acquisitions or expansions, are generally small period over period.

shipments for 2019 reflect incremental production from the Hawesville restart project and return to full operations at Sebree after the equipment failure in 2018.

Any adverse changes in the conditions that affect shipment volumes could have a material adverse effect on our results of operations and cash flows.

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SHIPMENTS - PRIMARY ALUMINUM (1)

United States

United States Iceland Total

Tonnes Revenue $ Tonnes Revenue $ Tonnes Revenue $

(dollars in millions)

2020 495,433 $ 985.3 315,743 $ 570.8 811,176 $ 1,556.1

2019 495,096 1,143.8 316,148 628.3 811,244 1,772.1

2018 428,389 1,126.4 321,461 752.3 749,850 1,878.7

(1) Excludes scrap aluminum and alumina sales

Results of Operations

The following discussion for the year ended December 31, 2019 reflects increases from the Hawesville restart and return to full operation at Sebree after the equipment failure in 2018.

Results for the year reflect no change in Mt.

Holly or Grundartangi production capacities.

The following discussion for the year ended December 31, 2020 reflects restart activity at Hawesville and no change in production capacities at our other operating facilities.

Year Ended December 31, 2020 Compared to Year Ended December 31, 2019

Net sales (excluding alumina sales) decreased by $220.2 million for the twelve months ended December 31, 2020, compared to the same period in 2019, primarily driven by unfavorable LME and regional premium price realizations of $188.6 million and unfavorable volume and product mix of $31.6 million.

Gross profit (loss) :

Gross loss increased by $12.6 million for the twelve months ended December 31, 2020, compared to the same period in 2019, primarily driven by unfavorable LME and regional premium price realizations of $188.6 million.

The increases to gross loss were offset by favorable raw material price realizations of $178.6 million.

Selling, general and administrative expenses:

Selling, general and administrative expenses decreased $3.9 million in 2020 compared to 2019, primarily due to decreases in compensation cost in the current year, partially offset by increases in professional fees.

Net (gain) loss on forward and derivative contracts:

In 2020, we recognized losses of $17.3 million primarily related to LME, MWP and Nord Pool fixed forward financial sales contracts.

The losses were primarily driven by fluctuations in forward prices.

In 2019, we had recognized gains of $12.0 million primarily related to LME and MWP fixed forward financial sales contracts.

The gains were primarily driven by decreases in the LME and MWP prices during 2019.

Income tax expense (benefit):

We have a valuation allowance against all of our U.S.

and certain foreign deferred tax assets.

We recognized a $ 3.1 million income tax benefit in 2020 as compared to income tax benefit of $ 8.4 million in 2019.

The decrease in income tax benefit year over year primarily relates to an increase in earnings of certain of our foreign entities.

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

Net sales for the twelve months ended December 31, 2019 decreased $56.6 million compared to the same period in 2018, driven by lower price realizations of $249.5 million primarily resulting from decreases in the LME price offset by $136.2 million in favorable volume and product mix year over year.

Gross profit :

Gross profit for the twelve months ended December 31, 2019 decreased by $1.0 million compared to the same period in 2018 , driven primarily by lower price realizations of $249.5 million due to decreases in the LME.

Gross profit for the twelve months ended December 31, 2019 decreased $1.0 million compared to the same period in 2018, driven primarily by lower price realizations of $249.5 million due to decreases in the LME.

The decrease to gross profit is offset by favorable price realizations of alumina and other raw materials of $170.7 million, power price realizations of $47.2 million, volume and product mix of $24.2 million, and operating expenses of $5.6 million.

Selling, general and administrative expenses:

Selling, general and administrative expenses increased $7.2 million in 2019 compared to 2018 , primarily due to increases in compensation cost in the current year (favorable stock compensation expense in 2018, reflecting our lower stock price).

Selling, general and administrative expenses decreased $7.2 million in 2019 compared to 2018, primarily due to increases in compensation cost in the current year (favorable stock compensation expense in 2018, reflecting our lower stock price).

Net (gain) loss on forward and derivative contracts:

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These gains were primarily driven by the increase in the Nord Pool price.

Income tax expense:

Income tax expense (benefit):

We have a valuation allowance against all of our U.S.

and certain foreign deferred tax assets.

We recognized a $8.4 million income tax benefit in 2019 as compared to income tax benefit of $0.2 million in 2018 .

We recognized an $8.4 million income tax benefit in 2019 as compared to income tax benefit of $0.2 million in 2018.

The increase in income tax benefit year over year primarily relates to a decrease in earnings of certain of our foreign entities.

Year Ended December 31, 2018 Compared to Year Ended December 31, 2017

Net sales for the twelve months ended December 31, 2018 improved $304.1 million compared to the same period in 2017 , driven by higher price realizations of $265.1 million primarily resulting from increases in the LME and U.S.

Midwest premium prices for primary aluminum and $39.0 million in volume and product mix year over year.

Gross profit :

Gross profit for the twelve months ended December 31, 2018 decreased by $154.2 million compared to the same period in 2017 , driven primarily by higher alumina and other raw material price realizations of $301.7 million, unfavorable operating expenses of $92.7 million (due to increased production volume at Hawesville, the Sebree equipment failure, and lower of cost or net realizable value from increasing alumina prices), and unfavorable power prices of $28.8 million.

These decreases to gross profit are partially offset by favorable price realizations of the LME and U.S.

Midwest premium of $265.1 million and net favorable volume and product mix impacts of $3.9 million.

Selling, general and administrative expenses:

Selling, general and administrative expenses decreased $4.6 million in 2018 compared to 2017 , due primarily to favorable decreases in stock compensation expense (reflecting our lower stock price) and professional fees.

Helguvik (gains) losses:

During 2018 and 2017, we extinguished a portion of our contractual commitments associated with the construction of the Helguvik project.

Such extinguishment resulted in a gain in 2018 of $4.5 million recognized in Helguvik (gains) losses in the consolidated statements of operations compared to a gain of $7.3 million for the year ended 2017.

Ravenswood (gains) losses:

In 2017, the Ravenswood retiree medical class action lawsuit was settled.

As a result, we recognized a non-cash gain of $5.5 million in 2017 reflecting the present value discount of the original settlement agreement of $23.0 million which was recorded in 2016 - see Note 15.

Commitments and Contingencies .

There were no gains or losses recorded for the year ended 2018.

Net (gain) loss on forward and derivative contracts:

In 2018 , we recognized gains of $6.3 million primarily related to Nord Pool and LME fixed forward financial sales contracts entered into in early 2017 for power consumption starting November 2019 through December 2020;

the gains were primarily driven by the increase in the Nord Pool price during 2018 .

In 2017, we recorded losses of $16.5 million primarily related to LME fixed forward financial sales contracts that were entered into in early 2016 for shipments through December 31, 2017;

the losses were driven by the increase in the LME during 2017.

Income tax expense:

We have a valuation allowance against all of our U.S.

and certain foreign tax assets.

We recognized a $0.2 million income tax benefit in 2018 as compared to income tax expense of $7.6 million in 2017.

The reduction in tax expense year over year primarily relate to a decrease in earnings of certain of our foreign entities.

Liquidity and Capital Resources

Our principal sources of liquidity are available cash and cash flow from operations.

We also have borrowing capacity under our existing revolving credit facilities.

We have also raised capital in the past through the public equity and debt markets, and we regularly explore various other financing alternatives.

Our principal uses of cash include the funding of operating costs

(including post-retirement benefits), debt service requirements, the funding of capital expenditures, investments in our growth activities and in related businesses, working capital and other general corporate requirements.

Although we believe that cash provided from operations and financing activities will be adequate to cover our operations and business needs over the next 12 months, adverse changes in the price of aluminum or our principal costs of production could materially impact our ability to generate and raise cash.

For an analysis of risks facing our business see Item 1A.

Risk Factors .

We also have access to our existing revolving credit facilities and have raised capital in the past through public equity and debt markets.

We regularly explore various other financing alternatives.

Our principal uses of cash include the funding of operating costs (including post-retirement benefits), debt service requirements, capital expenditures, investments in our growth activities and in related businesses, working capital and other general corporate requirements.

We believe that cash provided from operations and financing activities will be adequate to cover our operations and business needs over the next 12 months.

As of December 31, 2020, we had cash and cash equivalents of approximately $81.6 million and unused availability under our revolving credit facilities of $100.6 million, resulting in a total liquidity position of approximately $182.2 million.

Adverse changes in the price of aluminum or our principal costs of production could materially impact our ability to generate and raise cash.

Furthermore, the COVID-19 pandemic could continue to impact the economy which may impact the price of our products as well as our ability to access capital and/or the terms under which we can do so.

In 2020, we took preemptive action to preserve our liquidity and manage our cash flow.

Such actions include reducing discretionary spending, optimizing working capital and deferring non-essential capital projects.

To preserve liquidity in light of the uncertainty in the global markets due to COVID-19, in March 2020, we drew down a total of $90.0 million under our U.S.

and Iceland revolving credit facilities.

We have since repaid $45.0 million on our U.S.

revolving credit facility.

As of December 31, 2020, the remaining outstanding borrowings on the Iceland revolving credit facility were $45.0 million.

We also effectively extended the maturities of our principal debt obligations.

On July 1, 2020, we issued $250.0 million in aggregate principal amount of our senior secured notes that will mature in 2025 (the "2025 Notes") and used the proceeds, together with cash on hand, to purchase all of our 7.5% senior secured notes that were set to mature in 2021 (the "2021 Notes").

In connection with the offering of the 2025 Notes, we also entered into Amendment No.1 to our U.S.

revolving credit facility extending the maturity date to May 16, 2023.

As the impact of the COVID-19 pandemic on the economy and our operations is fluid and constantly evolving, we will continue to assess a variety of measures to improve our financial performance and liquidity.

Risk Factors for additional information.

Available Cash

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Twelve months ended December 31,

2020 2019 2018

(dollars in millions)

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Year Ended December 31, 2020 Compared to Year Ended December 31, 2019

Net cash provided by operating activities for 2020 was $42.9 million, compared to $17.7 million for 2019.

The increase in net cash provided by operating activities was primarily driven by improvements in working capital.

The improvements in working capital were primarily attributable to timing of raw material receipts and the timing of trade receivable collections, offset by increasing raw material prices.

The decrease in net cash used in investing activities during 2020 was due to lower capital expenditures related to Hawesville restart activities and deferral of capital projects in response to COVID-19.

Net cash provided by financing activities decreased by $7.6 million during 2020 primarily due to payments made on our term loan with Glencore Ltd.

("the Hawesville Term Loan"), offset by net borrowings on our U.S.

revolving credit facility and Iceland revolving credit facility.

Borrowings on our revolving credit facilities are available, if needed, for working capital requirements, general corporate or other purposes.

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

Net cash provided by operating activities for 2019 was $17.7 million, compared to net cash used in operating activities of $69.1 million for 2018.

The increase in net cash provided by operating activities was primarily driven by lower inventory costs and a decrease in accounts receivable due to timing of receivable collections.

The decrease in net cash used in investing activities was due to lower capital expenditures related to Hawesville restart activities and the receipt of $20.8 million from the sale of our interest in BHH during 2019.

("BHH"), a former joint venture with Guangxi Qiangqiang Carbon Co., Ltd.

("GQQ") during 2019.

Net cash provided by financing activities decreased by $2.6 million during 2019 due to lower net borrowings under our U.S.

revolving credit facility, offset by proceeds from the term loan agreement with Glencore Ltd.

pursuant to which the Company borrowed $40.0 million (the "Hawesville Term Loan").

revolving credit facility, offset by proceeds from the Hawesville Term Loan.

Borrowings on our U.S.

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Borrowings on our Hawesville Term Loan are required to be paid ratably over 24 months beginning in January 2020 and are used to partially finance the second phase of the Hawesville restart project.

Year Ended December 31, 2018 Compared to Year Ended December 31, 2017

Net cash used in operating activities for 2018 was $69.1 million, compared to net cash provided by operating activities of $51.5 million for 2017 .

The increase in net cash used in operating activities was primarily driven by the year-over-year net loss compared to net income.

The increase in net cash used in investing activities was due to higher capital expenditures related to our investment in the Hawesville restart project in 2018, compared with proceeds from the sale of our Ravenswood facility received in 2017 that partially offset purchases of property, plant, and equipment.

Net cash provided by financing activities increased by $23.3 million during 2018 due to outstanding borrowings on our U.S.

revolving credit facility.

Borrowings are short term in nature to fund working capital requirements and are repaid on a continuous basis.

Availability Under Our Credit Facilities

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revolving credit facility by up to $50.0 million, subject to agreement with the lenders.

revolving credit facility matures on the sooner of May 2023 or six months before the stated maturity of our outstanding senior secured notes.

revolving credit facility matures in May 2023.

Any letters of credit issued and outstanding under the U.S.

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The availability of funds under our credit facilities is limited by a specified borrowing base consisting of certain accounts receivable, inventory and qualified cash deposits which meet the lenders' eligibility criteria.

Restarts of previously curtailed operations increase our borrowing base by increasing our accounts receivable and inventory balances;

whereas, curtailments of production capacity decrease our borrowing base by reducing our accounts receivable and inventory balances.

Increases in the price of aluminum and/or restarts of previously curtailed operations, for example, increase our borrowing base by increasing our accounts receivable and inventory balances;

decreases in the price of aluminum and/or curtailments of production capacity would decrease our borrowing base by reducing our accounts receivable and inventory balances.

As of December 31, 2020, our U.S.

revolving credit facility had $4.0 million in borrowings and $ 41.4 million in letters of credit outstanding.

Of the outstanding letters of credit, $ 24.1 million related to our domestic power commitments and the remainder secured certain debt and workers’ compensation commitments.

revolving credit facility had a borrowing base of $129.9 million, no outstanding borrowings, and $34.3 million in letters of credit outstanding.

Of the outstanding letters of credit, $16.2 million related to our power commitments and the remainder are primarily for the purpose of securing secured certain debt and workers’ compensation commitments.

As of December 31, 2020, our Iceland revolving credit facility had a borrowing base of $50.0 million and $45.0 million in outstanding borrowings.

As of December 31, 2020, our credit facilities had $100.6 million of net availability after consideration of our outstanding borrowings and letters of credit.

We may borrow and make repayments under our credit facilities in the ordinary course based on a number of factors, including the timing of payments from our customers and payments to our suppliers.

Our credit facilities contain customary covenants, including restrictions on mergers and acquisitions, indebtedness, affiliate transactions, liens, dividends and distributions, dispositions of collateral, investments and prepayments of indebtedness, including, a springing financial covenant that requires us to maintain a fixed charge coverage ratio of at least 1.0 to 1.0 any time availability under the U.S.

revolving credit facility is less than or equal to $17.5 million.

Our Icelandic credit facility also contains a covenant that requires Grundartangi to maintain a minimum equity ratio.

As of December 31, 2019 , we were in compliance with all such covenants.

revolving credit facility, a springing financial covenant that requires us to maintain a fixed charge coverage ratio of at least 1.0 to 1.0 any time availability under the U.S.

revolving credit facility is less than or equal to $17.5 million, or 10% of the borrowing base but not less than $12.5 million.

We intend to maintain availability to comply with these levels any time we would not meet the ratio, which could limit our ability to access the full amount of our availability under our U.S.

revolving credit facility.

Our Iceland revolving credit facility contains a covenant that requires Grundartangi to maintain a minimum equity ratio.

As of December 31, 2020, we were in compliance with all such covenants or maintained availability above such covenant triggers.

Senior Secured Notes

We have $250 million aggregate principal of 7.5% senior secured notes that will mature in June 2021 ("2021 Notes").

Interest on the 2021 Notes is payable semi-annually.

We have $250.0 million aggregate principal of senior secured notes that will mature on July 1, 2025 (the "2025 Notes"), unless earlier refinanced in accordance with their terms.

Interest on the 2025 Notes is payable semi-annually on January 1 and July 1 of each year, beginning on January 1, 2021, at a rate of (i) 10.00% per annum in cash and (ii) 2.00% per annum in the form of additional notes or in cash, at Century's option.

The indenture governing the 2025 Notes contains customary covenants which may limit our ability, and the ability of certain of our subsidiaries, to:

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and (ix) effect a consolidation or merger.

We applied the net proceeds from the offering of the 2025 Notes described above, together with cash on hand, toward payment of the total consideration amount to holders whose 2021 Notes were accepted and purchased in the tender offer and to fund the redemption of any remaining 2021 Notes.

As a result, the Company's and the guarantors' obligations under the indenture governing the 2021 Notes have been fully discharged.

Hawesville Term Loan

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pursuant to which the Company borrowed $40.0 million.

Borrowings under the Hawesville Term Loan are being used to partially finance the second phase of the Hawesville restart project.

The Hawesville Term Loan matures on December 31, 2021 and is to be repaid in twenty-four (24) equal monthly installments of principal beginning on January 31, 2020.

The Hawesville Term Loan bears interest, due monthly beginning on April 30, 2019, at a floating rate equal to LIBOR plus 5.375% per annum.

Borrowings under the Hawesville Term Loan were used to partially finance the second phase of the Hawesville restart project.

The Hawesville Term Loan matures on December 31, 2021, and is being repaid in 24 equal monthly installments of principal that began on January 31, 2020.

The Hawesville Term Loan bears interest, due monthly, at a floating rate equal to LIBOR plus 5.375% per annum.

The Hawesville Term Loan is not secured by any collateral.

As of December 31, 2020, the outstanding balance of the Hawesville Term Loan was $20.0 million.

Contingent Commitments

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This contingent obligation consists of the aggregate payments made to Big Rivers by the third party on CAKY’s behalf in excess of the agreed upon base amount under the long-term cost-based power contract with Kenergy.

As of December 31, 2019 , the principal and accrued interest for the contingent obligation

was $ 25.2 million , which was fully offset by a derivative asset.

As of December 31, 2020, the principal and accrued interest for the contingent obligation was $26.6 million, which was fully offset by a derivative asset.

We may be required to make installment payments for the contingent obligation in the future.

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All imports that directly compete with our products are covered by the tariff, with the exception of imports from Australia, Argentina, Canada, and Mexico or imports that receive a product exclusion from the Department of Commerce.

On May 22, 2019, Century Aluminum Asia Holdings Ltd.

("CAHL"), a wholly-owned subsidiary of the Company, entered into an equity transfer agreement ("the Equity Transfer Agreement") with Guangxi Qiangqiang Carbon Co., Ltd.

("GQQ") pursuant to which GQQ acquired all of CAHL’s forty percent (40%) interest in Baise Haohai Carbon Co.

Ltd ("BHH"), a carbon anode and cathode facility in China.

Prior to the sale, BHH was operated as a joint venture between CAHL and GQQ.

GQQ paid CAHL the full purchase price of RMB144.9 million ($20.8 million) in cash in 2019.

In connection with this sale, a loss of $4.3 million is recorded in the Consolidated Statements of Operations during the twelve months ended December 31, 2019 .

We previously announced our intention to return our Hawesville smelter to full production and upgrade its existing reduction technology.

We project that the total cash requirements for the restart project, including the technology upgrade, will be approximately $150.0 million from the commencement of the project in 2018 through its completion.

The first phase of the project, which involved the restart of the three potlines that had been curtailed in 2015, was successfully completed on budget and ahead of schedule in early 2019.

This restart of 150,000 tonnes of curtailed production cost approximately $75.0 million.

The second phase is expected to cost an additional $75.0 million and involves the rebuilding of the pots associated with the 100,000 tonnes of production from the two potlines that had continued to operate past their expected life cycle and the implementation of certain new technology across all production.

The first of the these potlines is currently in the process of being rebuilt and is expected to return to production in early 2020.

In December 2020, we announced a preliminary agreement with Santee Cooper on a new three year power agreement that is expected to be effective on April 1, 2021.

This new power contract is expected to provide sufficient energy to allow the smelter to increase its production to 75% of Mt.

Holly's full production capacity.

We anticipate spending approximately $50.0 million in 2021 to bring Mt.

Holly's annualized production capacity to 170,000 tonnes.

For certain risks related to the anticipated restart, see Item 1A.

Risk Factors .

In March 2018, we announced our intention to return our Hawesville smelter, which since 2015 had been operating at approximately 40% capacity, to full production and upgrade its existing reduction technology.

The first phase of the project,

which involved the restart of the three potlines and approximately 150,000 tonnes of production capacity that had been curtailed in 2015, was successfully completed on budget and ahead of schedule in early 2019.

The second phase of the project involves the rebuilding of the pots from the two potlines that had continued to operate past their expected life cycle and the implementation of certain new technology across all production.

These two potlines were taken out of production in February and September 2019, respectively.

The rebuild of the first of these potlines was completed in the second quarter of 2020.

With the restart of this potline, the Hawesville smelter is currently operating at approximately 80% production capacity, with total project costs to date of approximately $108.3 million.

The rebuild of the fifth and final potline and the completion of the technology upgrades is expected to be completed over the next several years, subject to market conditions.

In April 2019, we entered a term loan agreement, of $40.0 million to partially finance the cost of the second phase of the project.

Debt to the consolidated financial statements included herein for additional information.

We expect to fund the remaining amounts required to complete the project through operating cash flows and existing cash.

In May 2018, we temporarily curtailed one potline at our Sebree aluminum smelter due to an equipment failure.

We returned the curtailed potline at Sebree back to service during the third quarter.

We expect all losses arising from the Sebree equipment failure will be covered under our insurance policies, less $7.0 million in deductibles.

As of December 31, 2019 , we received $18.4 million of insurance proceeds to offset against such losses.

Sebree was returned to full capacity by the end of the third quarter of 2018.

As of December 31, 2020, we received $19.9 million of insurance proceeds.

In January 2021, the claims process was concluded and a final payment of $1.4 million of insurance proceeds was received on January 21, 2021.

In 2011, our Board of Directors approved a $60.0 million common stock repurchase program and subsequently increased this program by $70.0 million in the first quarter of 2015.

Under the program, Century is authorized to repurchase up

to $130.0 million of our outstanding shares of common stock, from time to time, on the open market at prevailing market prices, in block trades or otherwise.

Under the program, Century is authorized to repurchase up to $130.0 million of our outstanding shares of common stock, from time to time, on the open market at prevailing market prices, in block trades or otherwise.

The timing and amount of any shares repurchased will be determined by our management based on its evaluation of market conditions, the trading price of our common stock and other factors.

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The repurchase program may be expanded, suspended or discontinued by our Board, in its sole discretion, at any time.

In November 2009, Century Aluminum of West Virginia ("CAWV") filed a class action complaint for declaratory judgment against the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union ("USW"), the USW’s local and certain CAWV retirees, individually and as class representatives ("CAWV Retirees"), seeking a declaration of CAWV’s rights to modify/terminate retiree medical benefits.

In November 2009, Century Aluminum of West Virginia, Inc.

("CAWV") filed a class action complaint for declaratory judgment against the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union ("USW"), the USW’s local and certain CAWV retirees, individually and as class representatives ("CAWV Retirees"), seeking a declaration of CAWV’s rights to modify/terminate retiree medical benefits.

Later in November 2009, the USW and representatives of a retiree class filed a separate suit against CAWV, Century Aluminum Company, Century Aluminum Master Welfare Benefit Plan, and various John Does with respect to the foregoing.

On August 18, 2017, the District Court for the Southern District of West Virginia approved a settlement agreement in respect of these actions.

Under the terms of the settlement agreement, CAWV agreed to make payments into a trust for the benefit of the CAWV Retirees in the aggregate amount of $23.0 million over the course of ten years.

On August 18, 2017, the District Court for the Southern District of West Virginia approved a settlement agreement in respect of these actions, pursuant to which, CAWV agreed to make payments into a trust for the benefit of the CAWV Retirees in the aggregate amount of $23.0 million over the course of ten years.

Upon approval of the settlement, we paid $5.0 million to the aforementioned trust in September 2017 and agreed to pay the remaining amounts under the settlement agreement in annual increments of $2.0 million for nine years.

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Capital Resources

We intend to finance our future recurring capital expenditures from available cash, cash flow from operations and available borrowing capacity under our existing revolving credit facilities.

We intend to finance our future capital expenditures from available cash, cash flow from operations and if necessary, borrowings under our existing revolving credit facilities.

For major investment projects, we would likely seek financing from various capital and loan markets and may potentially pursue the formation of strategic alliances.

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and international markets and economies may adversely affect our liquidity, our ability to access the debt or capital markets and our financial condition.

Capital expenditures for the year ended December 31, 2019 were $28.2 million, excluding expenditures of $34.4 million associated with the restart at Hawesville.

We estimate our total capital spending excluding the Hawesville restart in 2020 will be approximately $20.0 million, primarily related to our ongoing maintenance and investment projects at our smelters.

Capital expenditures incurred for the year ended December 31, 2020 were $8.7 million, excluding expenditures of $5.6 million associated with the restart at Hawesville.

We estimate our total capital spending excluding the Mt.

Holly restart project in 2021 will be approximatel y $25.0 million , related to our ongoing investment and sustainability projects at our plants.

Critical Accounting Estimates

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Pension plans 2.58% 3.26%

OPEB plans 2.34% 3.07%

A change of a half percentage point in the discount rate for our defined benefit plans would have the following effects on our obligations under these plans as of December 31, 2020:

Effect of changes in the discount rates on the Projected Benefit Obligations for:

50 basis point increase

50 basis point decrease

50 basis point increase 50 basis point decrease

(dollars in millions)

Pension plans $ (26.7) $ 30.4

OPEB plans (5.6) 5.9

Medical Trend Rate

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Changes in the health care cost trend rates have a significant effect on the amounts reported for the health care benefit obligation.

Medical cost inflation is initially estimated to be 6.4% and 7.05% for pre and post-65 participants, respectively, declining to 4.5% over eleven years and thereafter.

Medical cost inflation is initially estimated to be 6.1% and 6.7% for pre and post-65 participants, respectively, declining to 4.5% over ten years and thereafter.

A one-percentage-point change in the assumed health care cost trend rate would have had the following effects in 2020:

1% Increase 1% Decrease

(dollars in millions)

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These estimates of future cash flows include management’s assumptions about the expected use of the assets (asset group), the remaining useful life, expenditures to maintain the service potential, market and cost assumptions.

Determination as to whether and how much an asset is impaired involves significant management judgment involving highly uncertain matters, including estimating the future sales volumes, future selling prices and costs, alternative uses for the asset, and estimated proceeds from the disposal of the asset.

Determination as to whether and how much an asset is impaired involves significant management judgment involving highly uncertain matters, including estimating the future sales volumes, future selling prices and estimated raw material and conversion costs, alternative uses for the asset, and estimated proceeds from the disposal of the asset.

Other Contingencies

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Payments Due by Period

Total 2021 2022 2023 2024 2025 Thereafter

(dollars in millions)

Long-term debt (1)

$ 323 $ 20 $ 45 $ — $ — $ 250 $ 8

Estimated interest payments (2)

138 32 31 30 30 15 —

Operating lease obligations (3)

44 3 3 3 3 3 29

Purchase obligations (4)

1,557 543 318 256 220 72 148

Other long-term liabilities (5)

Long-term debt includes principal repayments on our 2021 Notes, Hawesville Term Loan, and the IRB.

22 6 4 6 3 3 —

Total $ 2,084 604 401 295 256 343 185

(1) Long-term debt includes principal repayments on our 2025 Notes, Hawesville Term Loan, Iceland Revolving Credit facility, and the IRB.

Payments are based on the assumption that all outstanding debt instruments will remain outstanding until their respective due dates.

For our contingent obligation, based on the LME forward market prices for primary aluminum at December 31, 2019 and management's estimate of the LME forward market for periods beyond the quoted periods, we believe that we will not have any payment obligations through the term of the agreement, which expires in 2028.

For our contingent obligation, based on the LME forward market prices for primary aluminum at December 31, 2020, we believe that we will not have any payment obligations through the term of the agreement, which expires in 2028.

(2) Estimated interest payments on our long-term debt assume that all outstanding debt instruments will remain outstanding until their respective due dates.

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(4) Purchase obligations include long-term alumina and power contracts, excluding market-based power and raw material requirements contracts.

For contracts with LME-based pricing provisions, including our long-term Icelandic power contracts, we assumed a LME price using the LME forward curve as of December 31, 2019 .

Purchase obligations not executed or legally binding as of December 31, 2020 have been excluded from this table.

For contracts with LME-based pricing provisions, including our long-term Icelandic power contracts, we assumed an LME price using the LME forward curve as of December 31, 2020.

(5) Other long-term liabilities include asset retirement obligations.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis