The Tiwai Point aluminium smelter (NZAS) has begun talks with power companies to continue operating beyond 2024.
Tiwai Point aluminium smelter. Photo: Getty Images
The smelter previously indicated that it wanted to [https://www.rnz.co.nz/news/business/461084/rio-tinto-wants-to-keep-operating-tiwai-point-smelter-past-2024-closure-date
stay open] beyond the end of its current cut-price power deal but confirmed in a statement this morning its intention to secure a new contract.
"There is lots of work to do, but we believe there is a positive pathway to securing a long-term presence for the smelter," NZAS chief executive Chris Blenkiron said.
The smelter is the largest employer in the region, employing about 1000 people directly and a further 1600 people indirectly.
"We understand the importance of providing certainty to our staff and the people of Southland."
NZAS declined RNZ's request for an interview.
Power company Meridian said in a brief statement on the stock exchange that would enter into contract negotiations with the smelter.
Chief executive Neal Barclay said previously that it would no longer give the smelter any more rock bottom prices once the current contract expired, even if it wanted to stay open.
The future of the Bluff-based smelter had been a hot-button issue for several years.
Owner Rio Tinto threatened to close the plant in 2020, citing expensive electricity costs.
However, it later secured a cut price deal in early 2021 with Meridian and Contact Energy to keep it open for another four years.
A report by the Electricity Authority found that households may be paying an extra $200 per year for power, as they subsidised the cheap energy the smelter consumes.
"Probably zero chance" of another cut price deal
Forsyth Barr equities analyst Andrew Harvey-Green said he would be "very, very surprised" if the smelter got a deal anywhere near the one it was currently on.
"I think Meridian has been fairly open to say that that was a one-off situation and we're looking at quite a different situation [now].
"I would say there is a very, very low to probably zero chance that Rio [Tinto] would get a similar price."
Harvey-Green said even though aluminium prices had softened in recent months, they were still much higher than where they were when Rio Tinto signed its previous power deal.
"Their ability to pay higher electricity prices [is] quite a lot higher than it was."
He said it would be reasonable to assume that if a deal were reached, there would be clauses that would allow Meridian to restrict supply to the smelter during periods of low generation.
The broader electricity market was assuming that Rio Tinto would reach another long-term agreement, Harvey-Green said.
He said the market would have a negative reaction if the smelter were to close post-2024, as the loss of demand could stymie power companies' plans to invest in new generation.
Site clean-up
Blenkiron said that irrespective of any agreement, the company would still clean up more than 200,000 tonnes of spent cell lining waste that contains cyanide and toxic fluoride on the coastal site.
"Work is already underway to remove waste, improve our environmental performance, and continue building enduring relationships with our community."
The company recently doubled its clean-up budget to $687m.
