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August 27, 2002 Monthly Update to Customers, Employees, Suppliers, and Friends of Kaiser Aluminum: Kaiser Aluminum continues to focus on the factors essential to our goal of emerging from Chapter 11 as a successful enterprise. These factors include: customer service, quality, efficiency, and cost reduction. I have had the opportunity recently to reinforce this message personally to a number of customers and have been pleased by the support we continue to receive. Restructuring Update Our most recent Court hearing was held today. The Court ruled on a number of items, the most notable of which include: Approval of two “ordinary course of business” motions related to the retention of customer and supplier contracts in our Alumina business unit, Approval of our request to retain a real estate broker to investigate the possible sale of our interests in Kaiser Center (in Oakland, California), an office complex where we hold the master lease but have not occupied significant space for many years, The Court will hold a hearing on the Key Employee Retention Program on September 3. The next regularly scheduled monthly hearing is on September 23. Financial Notes As most of you know, on August 13, Kaiser released its financial results for the second quarter of 2002. Also on August 13, the company filed the required certifications of quarterly financial results with the Securities and Exchange Commission -- signed by the chief financial officer, John La Duc, and me. No need to rehash the numbers here. I believe we are all too well acquainted with the difficult market conditions characterized by low prices, reduced shipments of primary aluminum, and weak demand in the aerospace market. Having said that, I will repeat my kudos for the Engineered Products business, which turned in a strong quarter due in part to cost reduction and improved demand in certain market segments, particularly ground transportation and electrical markets. In addition, the Gramercy alumina refinery reached a generally sustained operating rate of 100% of its rebuilt capacity and the Valco smelter continued to operate at record levels of efficiency. I want to emphasize that the company continues to have excellent liquidity. As of July 31, 2002, Kaiser had $115.9 million of cash and cash equivalents and more than $200 million of availability under our Debtor-in-Possession financing facility. As we noted in our discussion of second-quarter financial results, the cash balance declined from the June number of $147.3 primarily due to $30 million in payments to Kaiser’s 20%-owned affiliate, Queensland Alumina Limited (QAL) in July to fund the company’s share of QAL’s scheduled debt maturities. Trentwood Operations Not Affected by Move to Reject BPA Power Contract I want to repeat earlier assurances that the company’s Trentwood, Washington, rolling mill will not be affected by our decision to seek rejection of the 2001-2006 Subscription Contract with the Bonneville Power Administration (BPA). We are in the process of executing new power contracts for Trentwood and expect the transition to be seamless. As we announced on August 22, we have filed a motion with the Court to reject the contract in conjunction with a shift to market-based power purchases for our operations in the Pacific Northwest. Rejection of the contract would also enable the company to avoid “take or pay” penalties that could amount to as much as $1 million to $2 million per month beginning October 1. The Court is scheduled to hear our motion on September 23. Process Check We continue to have our normal scheduled monthly Court hearings, and we continue to communicate regularly with the Unsecured Creditors Committee (UCC) and the Asbestos Claimants Committee (ACC) – along with the advisors and legal counsel for each committee. In September, we expect to meet with the committee advisors to discuss long-term strategy. Such discussions represent the first required step before starting the very methodical development of a formalized Plan of Reorganization that will eventually be submitted to the Court. Clearly, we still have much work to do. In the meantime, Chapter 11 – as a legal and procedural process -- is not affecting the way we run our manufacturing operations. Should you have any comments, questions or suggestions, please visit the corporate website at www.kaiseral.com. Jack A. Hockema Monthly Operating Reports: Update Archive:
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