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                        [DEPARTMENT OF ENERGY LETTERHEAD]


October 24, 2000

In reply refer to: PS-6

                                                                 Amendment No. 3
                                                         Contract No. 95MS-94862


Mr. Brett Wilcox
President and CEO
Northwest Aluminum Company
3313 West 2nd Street
The Dalles, OR  97058

Dear Mr. Wilcox:

Northwest Aluminum Company (Company) has informed the Bonneville Power
Administration (BPA) that high power market prices will make it impractical for
the Company to continue to operate at full capacity. As part of a plan to
maintain plant operations for an extended period, the Company has requested that
BPA allow it to (1) revise Exhibit D of Contract No. 95MS-94862 (Block Sale
Contract) to reshape the power available to the Company in Fiscal Year 2001, and
(2) remarket power under section 18(b) of the Block Sale Contract. This will
enable the Company to make optimum use of BPA power as it makes changes in
smelter operating levels that are more sustainable in the current energy market.
The Company has indicated that this strategy of production curtailment,
reshaping, and remarketing are important elements of a plan to sustain
operations at the 80-85 megawatts (MW) level until some other source of power is
available.

BPA agrees to allow the Company to revise its Exhibit D, subject to the Company
agreeing to this letter agreement (Amendment No. 3), which expressly obligates
the Company to use all remarketing revenues to support its plan to maintain
plant operations at its facility in the 80-85 MW range, and to mitigate the
impact on Company employees adversely affected by reduced smelter operations.

Accordingly, BPA proposes the following:

        1. EFFECTIVE DATE. This Amendment No. 3, when executed by the Parties,
        shall become effective on September 28, 2000.

        2. AMENDMENT OF BLOCK SALE CONTRACT. A new section 18(b)(5) is added as
        follows:



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                "(5) USE OF REMARKETING REVENUES. The Company will use revenues
                from remarketing power under this section 18(b) for the
                following purposes only:

                        (A) To purchase power in the October 1, 2000 through
                        September 30, 2006 period to help maintain smelter
                        operations at the Northwest plant at the planned 80-85
                        MW level;

                        (B) To mitigate the impact on employees affected by the
                        reduced smelter operating levels;

                        (C) To offset cancellation penalties and other costs of
                        reducing obligations for alumina and other materials;
                        and

                        (D) To cover fixed costs the Company demonstrates cannot
                        be reduced as operating levels are reduced.

                The Company's obligations under this section 18(b)(5) will
                survive the termination of this Agreement.

                The Company hereby agrees that if it uses revenues from
                remarketing for any purpose other than those listed above in
                this section 18(b)(5), BPA may reduce the amount of power sold
                to the Company under the Company's power sales contract for the
                period October 1, 2001 through September 30, 2006. The amount of
                such reduction shall be commensurate in value with the amount of
                revenues used for purposes other than those listed above. All
                remarketing by the Company will continue to be subject to all
                other provisions in section 18 of the body of this Agreement, as
                amended by this section 18(b)(5)."

        3. REVISION TO EXHIBIT D. A revised Exhibit for the October 2000 through
        September 2001 period is attached to this Amendment No. 3.



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If you agree to the terms of this Amendment No. 3 and the attached Exhibit D,
please date and sign both copies of each, return one original copy of each to
me, and keep the other originals for your files.

                                       Sincerely,



                                       Senior Account Executive

                                       Name     Sydney D. Berwager
                                           -------------------------------------
                                       (Print/Type)


ACCEPTED:

NORTHWEST ALUMINUM COMPANY


By /s/ ALLEN BARKLEY
   ----------------------------------
Name   Allen Barkley
     --------------------------------
(Print/Type)

Title  General Manager
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Date   10/25/00
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