The Tiwai Point aluminium smelter is now being open about the fact Rio Tinto may want to stay open beyond 2024.
The company that runs the Tiwai Point aluminium smelter has signalled majority owner Rio Tinto is keen to keep the smelter open beyond the end of 2024, but Meridian Energy says it is not in discussions over a new power contract.
New Zealand Aluminium Smelter (NZAS) chief executive Chris Blenkiron said Rio Tinto saw “a positive pathway to continue operating and contributing to the local and national economies beyond 2024”, when the smelter had been scheduled to close with the loss of about 1000 jobs.
“We are working closely with Ngāi Tahu, Southland and key industry leaders to find the best way to achieve this,” Blenkiron said.
“NZAS also has the potential to play a significant role in helping New Zealand’s electricity system manage dry year security of supply and, with other emerging industries, to enable the development of more renewable generation,” he said.
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The comments prompted Meridian Energy, which is the smelter’s main power provider, to issue a statement to the NZX on Tuesday morning saying it was not in discussions with NZAS about a new electricity contract.
Rio Tinto negotiated down the price it pays Meridian for electricity from about 5 cents a kilowatt-hour to about 3.5c/KWh in a deal agreed early last year that saw the mining giant shelve plans to close the smelter by the end of August last year.
Roger Neilson reminisces about his time at Tiwai. He was one of the first five apprentices at the New Zealand Aluminium Smelter in 1972.
But the contract has no right of renewal and Meridian has described price the smelter now pays for power as unsustainable, meaning the smelter would need to reach a new power-supply deal – probably at a higher price – to stay open beyond the end of 2024.
Prior to the 2021 agreement with Meridian, Rio Tinto had also sought, but failed to secure, a separate reduction of tens of millions of dollars a year in the electricity transmission fees it pays to national grid operator Transpower.
That was after Rio Tinto rejected a one-off offer of $15m to $35m from the Government for clean-up costs that would have been tied to the smelter staying open until 2024.
There has been a growing assumption within and outside the electricity industry that Rio Tinto would seek to keep the smelter open beyond 2024, on the back of soaring aluminium prices which in October climbed to a record high of US$3178 (NZ$4793) a tonne.
Documents released under the Official Information Act to Stuff in October showed Rio Tinto and senior government ministers had discussed changing the 2024 closure date.
However, Meridian has talked up other potential uses of power from its nearby Manapouri hydro scheme, such as using electricity from the power station to produce ‘green hydrogen’ for the transport industry.