Meridian Energy's Neal Barclay on losing biggest customer, Rio Tinto's Tiwai Point: 'We will adapt'

Meridian Energy chief executive Neal Barclay. Photo / Doug Sherring

Meridian Energy's chief executive Neal Barclay says the company will adapt to the loss of its biggest customer, the Rio Tinto-controlled aluminium smelter at Tiwai Point.

The company, one of New Zealand's biggest and a significant mainstay for the sharemarket, saw its share price plunge by just under $1, or $2.4 billion in market capitalisation, to a low of $4.32 after Rio said Tiwai would close in August next year.

The stock later staged a partial recovery to $4.85.

Barclay, in an interview with the Herald, said he was disappointed for the smelter's 1000-strong workforce and the wider Southland region.

After Rio announced a review of the asset in October last year, Barclay said he regarded it as a 50/50 possibility that the facility would close.

"Our company is a big, strong organisation," he said.

"We will adapt and we are sure that the industry will adapt, but today it's about the people of Southland who are being impacted by this decision," he said.

Meridian offered an improved contract to the Tiwai Point aluminium smelter late last year.

"We worked very hard to put together what was a pretty compelling proposition on the table but clearly from their perspective and in the context of the aluminium smelting industry globally, that was not sufficient."

Barclay said there were a number of actions the company could take to start mitigating the impact of Tiwai's closure.

"But there is a long way to go and we have been planning for this for quite some time, so we think that we are as well prepared as anyone to adapt to this new world without a smelter there," he said.

The state-owned power grid operator Transpower said last month it would continue with the remainder of the Clutha Upper Waitaki Lines Project (CUWLP) at an estimated cost of $97 million.

In terms of where electricity market goes from here, Barclay said much would depend on progress of CUWLP.

Once that is complete, power from the southern generators can readily serve the national power grid.

"We would like to see it accelerated to ensure that the Manapouri and Clutha hydro schemes are made available to the country," he said.

"It's the most high-value transmission project in the country, as of this morning," he said.

In terms of Tiwai's closure on future power prices, Barclay said "there are far too many moving parts to form a view on that, or to even hazard a guess".

In the meantime, Barclay said Meridian was talking to parties who could offer alternative demand to fill the void left by Rio.

He said the closure would be a loss for the global environment but could hasten New Zealand's own decarbonisation.

"Globally, I don't think that this is a good environmental outcome because this is a smelter that gets its energy from a largely renewable electricity grid, and aluminium will probably now be smelted in China off a coal-fired electricity grid," he said.

"It's a positive from a New Zealand environmental perspective, but possibly not for the world."