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June 21, 2002 An Open Letter to Employees, Customers, Suppliers, and Friends of Kaiser Aluminum: This is the first in a series of regular monthly updates. In these letters, I will aim to summarize the most recent activities in our restructuring, along with business and product highlights. While many of the matters in our Chapter 11 proceedings are administrative and technical, I will focus on those matters that have a broader interest. As always, we will do our best to keep you informed of our progress. First off, I am pleased to report that Chapter 11 has not had any material impact on the way we are operating our facilities. I have had the opportunity to meet with several major customers recently to reinforce the company’s continuing commitment to meeting their needs – and I am encouraged by their feedback. I want to thank them --- as well as employees, vendors, and others – for their support as we move forward. Restructuring Update At this point in the restructuring process, we are having regularly scheduled monthly hearings before the court. This month’s hearing took place yesterday. Our next hearing date is July 23 and after that we are scheduled to appear before the court on August 27, September 23, October 29, November 26, December 17 -- and on January 28, 2003. The agenda items that will come before the court are typically filed at least a month in advance in order to satisfy the court’s notice requirements. Sometimes the items on the agenda are subsequently deferred to a later court date if the interested parties are in on-going discussion. Because of the notice requirements and the rescheduling of items, you may hear about motions or specific matters well before they are taken up by the Judge. We distributed a press release on June 12 to say that we have filed a motion with the Court to extend the exclusivity period for filing a plan of reorganization until December 12. (In essence, this means that no one but Kaiser can propose such a plan during this period.) For complex cases involving large companies such as Kaiser, the time frame is routinely extended because the reorganization process requires additional time to complete. During the hearing on June 20th, the court ruled favorably on a number of technical, legal, and procedural issues relating to a variety of matters, the net effect of which was to reaffirm “business as usual” operations. Among these items was a ruling that gives Kaiser the ability to move forward in concluding a $26.5 million Gramercy-related class action settlement we had negotiated in 2000. Moving forward will have no cash impact on the company because the settlement was funded in an escrow account by Kaiser’s insurers well before the company filed for Chapter 11. Also, within the next couple of weeks, the company expects to file a motion for approval of a retention program for key employees, as is standard for companies in Chapter 11. The intent of the program, which is being formulated with assistance from a leading consulting firm and our advisors, is to maintain continuity of key personnel during the Chapter 11 case. Although the details are still being finalized -- and are subject to review and approval by the Court -- the program would be comparable to programs adopted by other companies that are similar to Kaiser and that are also in Chapter 11. Kaiser Company News Kaiser has launched a new series of advertisements in key trade publications focusing on the company’s fabricated products that highlight our industry leadership and best in class customer service. The initial ads have featured our work with Honda Motorcycles on the development of a customized alloy that optimizes performance. Separately, I have been asked to deliver a presentation at this year’s National Association of Aluminum Distributors conference to take place in November. This is an important event for Kaiser and is a testament to continued marketplace recognition of our superior products and focus on customer service. On June 6, the company completed the sale of Trentwood’s coating line and related assets. As previously reported, this transaction will enable the plant to concentrate further on its core heat-treat business. The decision to sell the coating line resulted from the company’s strategic decision to exit the lid and tab stock business. Other Developments Kaiser has been the subject of a number of press stories in the past few weeks, and I wanted to provide you with background information on issues you may have read about. On June 11, the Clark County (Oregon) Public Utility District said it would pursue a claim through bankruptcy court for what it claims is about $60 million in refunds from Kaiser in connection with Clark’s purchase of power in 2001. The company believes there is no basis for the claim and that the amount cited is speculative and calculated to attract publicity. The transaction was expressly permitted by the company’s contract with the Bonneville Power Administration (BPA) and, in fact, it was BPA that sold the power to Clark. On May 28, Washington Senator Maria Cantwell issued a press release calling for an independent investigation of whether Kaiser fulfilled the “letter and intent” of its contract with the BPA. The company sees no need for an independent investigation because its remarketing of power was in full compliance with the BPA contract – and because Kaiser is already participating in an orderly process to respond to BPA’s request for information about use of proceeds that were generated by the power sales. On May 11, as previously reported, a National Labor Relations Board (NLRB) administrative law judge issued a ruling unfavorable to the company. The ruling was in connection with a two-year labor dispute that ended in 2000. We continue to believe that the allegations are without merit and will vigorously defend our position. The company intends to file an appeal by the deadline of October 14, 2002. The NLRB decision had no cash or balance sheet impact on the company. The ultimate resolution of this matter may take years. Any amount ultimately determined by a court to be payable in this matter would be dealt with as an unsecured pre-petition claim in the overall context of the company’s Chapter 11 case. I hope this update has proved helpful. Should you have any comments, questions or suggestions please visit our website at www.kaiseral.com. Jack A. Hockema
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