New Zealand

‘It’s a very profitable smelter now’, Meridian boss says after price beat-down

www.stuff.co.nz

The Tiwai Point aluminium smelter will now be very profitable and it is “entirely possible” its owners will seek to keep it open beyond the end of 2024, Meridian Energy chief executive Neal Barclay says.

Meridian and the smelter’s majority owner, Rio Tinto, announced last week that they had agreed a new electricity contract that would mean the smelter will stay open for almost another four years.

Broker Forsyth Barr believes the smelter negotiated about a 36 per cent reduction on the power component of its electricity bill, cutting the price it pays for electricity to about 3.5 cents per kilowatt hour and shaving about $100 million off its annual costs.

Forsyth Barr forecast Rio Tinto would knock on Meridian’s door again next year, or the year after, seeking to renew the contract for longer.

READ MORE:
* Global aluminium prices bounce back, but ‘day of reckoning’ still looms
* Broker believes Tiwai smelter beat down Meridian on power price by 36%
* Aluminium smelter deal – who caved?

Barclay agreed it was “entirely possible” the smelter would approach Meridian “and want to extend”.

“They are more than likely to want to engage at some point, particularly if aluminium prices hold up the way they are – it is a very profitable smelter now,” he said.

“If we were to engage in, or entertain, such a thought it would be because that was our … best option,” he said.

Meridian Energy will be earning less from its generators at the Manapouri power station under a new deal with the Tiwai Point aluminium smelter.

SUPPLIED

Meridian Energy will be earning less from its generators at the Manapouri power station under a new deal with the Tiwai Point aluminium smelter.

But Barclay said the new price at which Meridian had agreed to supply the smelter was “not sustainable” and indicated he was optimist Meridian could find higher-paying customers for its power in the interim.

The smelter had no automatic right to buy electricity from Meridian beyond 2024, he made clear.

A spokeswoman for Rio Tinto declined to comment to Stuff on whether it was likely to seek to extend the power contract down the track and give the smelter a further reprieve.

More to come

www.stuff.co.nz

Show More

Related Articles

Back to top button