14 Jan 2021

Tiwai Point aluminium smelter to keep operating until end of 2024

3:49 pm on 14 January 2021

The threatened Tiwai Point aluminium smelter will keep operating through to the end of December 2024, in a new deal just announced to the New Zealand stock exchange.

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Photo: Graham Dainty 2012

Mining conglomerate Rio Tinto announced last year it was closing Tiwai due to high energy and transmission costs.

Meridian Energy said that global mining giant Rio Tinto, Tiwai's owner, has accepted a new contract.

Its chief executive Neal Barclay said the company offered a significant deal to Rio Tinto keep the smelter open for another four years.

Last year, Meridian revealed that Rio Tinto rejected a deal which would have saved it close to a quarter of a billion dollars over a four year period.

Barclay said there was a strong commerical imperative to give a Rio Tinto a good deal.

"The deal is a pretty sharp deal to be fair, it's more or less the same deal we put to them last July after we received the termination notice of their existing contract.

"If the smelter had exited in 2021 as originally notified then a large amount of generation wouldn't be able to be produced from the hydro-catchments in the lower South Island and that energy would largely be spilt for a few years until the transmission lines could be enhanced."

Meridian is mulling the development of a green hydrogen plant, a data centre or using the surplus power to replace coal burners in the South Island.

Barclay said the new deal should provide more certainty to the people of Southland.

He said it was still planning for the eventual exit of the smelter but would now accelerate other opportunities.

The extension of time for Tiwai smelter will help extend around 1000 jobs in Southland. Another 1600 owe their income to contracting and services required to keep the plant running.

Rio Tinto, which had proposed to close the smelter by August this year, said the extra three years operation will provide time for better planning for after the smelter closes in 2024.

In a statement it said it gives Rio Tinto, Meridian, the government and Southland time to plan and provides certainty for staff.

Rio Tinto said the new agreement with Meridian covers new power pricing making the smelter "economically viable and competitive over the next four years".

NZ Aluminium chief executive and general manager Stu Hamilton told RNZ's Summer Times programme that the workforce would in large remain intact.

"It means that we need to keep running the operation at full production through to 2024. That means we're going to need most of our people for most of that time."

NZ First leader Winston Peters visits Tiwai Point while campaigning on 9 September 2020.

Winston Peters addresses Tiwai Point workers, during last year's election campaign. Photo: RNZ / Nate McKinnon

The negotiation process has been going on for 14 months with numerous stakeholders, including Meridian and also local and national government, he said.

Asked what changed, he said it has been a discussion about how to get a competitive price for power that makes the smelter commercially viable.

"Through the discussions we have now come up with a deal which means that we are comfortable that the smelter is in a much better commercial space to commit to that four years of operation."

He said they still needed to look at transmission pricing to ensure the smelter was insulated from the ups and downs of the market.

There are no subsidies involved, it was a commercial deal.

He said the announcement was great news for Southland and the wider New Zealand economy as it meant turning renewable hydro electricity into pure aluminium, generating significant earnings for the economy.

Union welcomes agreement

E Tū Union said there was now three years for staff, the company and the government to sit down and come up with a long-term solution.

Spokesperson Joe Gallagher said if the smelter was to close it would affect the whole community - not just those directly employed there.

"It's all the doctors, the nurses, the teachers, the shop owners, the farmers. It's all those places that are essentially impacted. It's all the people who come to Tiwai to do the contracting, the maintenance, and fix things and supply things. It has an impact on the whole of Southland."

The Invercargill MP Penny Simmonds is also celebrating the announcement and has congratulated all those involved in reaching the agreement.

Simmonds, who's a National MP, said the four-year-deal will allow the smelter time to become more sustainable while the region explores other opportunities.

No certainty for workers at year's end

The Labour Party campaigned on keeping the aluminium smelter open for another three to five years, during last year's election campaign.

In December, government ministers flew into Invercargill, but they were unable to provide any certainty for workers.

Ngāi Tahu also entered the fray with Te Runaka o Awarua Upoku, Sir Tipene O'Regan, sending a letter to Rio Tinto last month calling on the mining giant to give local Māori a voice in the process.

Sir Tipene said when Rio Tinto eventually leaves, iwi do not want to see the surplus energy supplied by Manapōuri hydro station going to waste and had a vision for a green hydrogen production in the future.

But firstly the iwi was concerned with a managed exit so not to cripple the region's economy and to ensure Tiwai Point was appropriately remediated once the smelter's doors closed.

At the time Rio Tinto refused to comment, saying they did not want to conduct negotiations through the media.

Minister of Energy and Resources Megan Woods said last month that the government was doing all it could to ensure Rio Tinto kept operating the smelter for another three or more years beyond its anticipated closure in August 2021.

The government was also determined to avoid a toxic wasteland being left behind, she said.

Tiwai Point

Photo: RNZ / Nate McKinnon

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