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UPDATE: Citizens shuttering dinosaur coke plant

April 12, 2007

Hammered by foreign competition, declines in heavy industry and rising environmental costs, Citizens Gas & Coke Utility said today it plans to close its 98-year-old Indianapolis Coke plant, eliminating 300 jobs.

The utility said today it was unsuccessful in finding a buyer for the southeast-side plant despite interest from about 20 firms over the last 11 months. Talks with one prospective buyer went on for five months.

Among the most serious was DTE Energy, the Michigan parent of Detroit Power & Light, according to sources outside the company who were close to the talks.

“Unfortunately, the utility was unable to reach an agreement to sell the facility,” Citizens said in a statement.

Citizens executives cited “steep declines” in the U.S. steel and auto industries over the last decade for declining orders of coke, a fuel used by foundries and steel mills. The plant bakes coal into coke, a substance that resembles volcanic rock.

“This is a very sad day for all of us at Citizens Gas & Coke Utility,” CG&CU President Carey Lykins said in the statement.

“Unfortunately, the plant can no longer compete in a world coke market greatly impacted by foreign steel and coke producers, who pay very low wages while not having to meet the stringent environmental standards we face.”

Citizens began building the Coke plant in 1908, when Teddy Roosevelt was president and Henry Ford introduced the Model T. Generations of workers have tended the plant, which has an annual payroll that exceeds $20 million and pays an average of $18 an hour per worker.

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itizens’ coke manufacturing division lost $17.6 million in 2006 on revenue of $118 million. In December 2005, the unit lost a key contract to supply a blast furnace; the contract amounted to 40 percent of its sales.

Until the 1950s, the gas produced by baking coal into coke was the main source of gas delivered to Marion County homes by Citizens Gas. The company later began purchasing much of its gas from suppliers via pipelines.

Benzene and other chemical emissions linked to cancer have been a health worry among neighbors of the 2950 Prospect St. site for years. Last year, the company reached a settlement with the Indiana Department of Environmental Management to spend $2 million on pollution controls.

Citizens also agreed to a $280,000 civil penalty for enforcement violations since 2001.

Coke revenue has helped offset rates paid by Citizens’ 266,000 gas customers in Marion County. In 2005, the plant posted income of $6.9 million on $132 million in revenue.

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ut profitability has been wildly cyclical over the years. In 2003, the coke unit lost $51 million amid a wave of foundry bankruptcies.

Customers have included International Steel Group’s Burns Harbor operations and the Wisconsin-based Neenah Foundry, which has made many of Indianapolis’ manhole covers.

Lykins said Citizens would offer outplacement services to workers and provide severance pay and paid health insurance. The plant is represented by International Brotherhood of Electrical Workers Local 1400.

Union officials could not be reached for comment.

In recent months, Citizens offered early-retirement incentive packages to 41 coke employees age 50 and older.

Citizens said the plant will be shut down gradually over the next several months and that it hasn’t determined how to use 120-acre site.

Other Citizens businesses include Citizens Thermal, which provides steam and chilled water to downtown buildings, and an oil production business in Greene County that has generated more than $38 million in net income since oil was discovered there in 1960.

CG&CU last year generated net income of $3.8 million.

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