Tiwai Pt deal done with Meridian

If leave for the appeal is granted, the smelter's argument will focus on the interpretation of the Holidays Act. Photo / Supplied

The short term future of the Tiwai Point aluminium smelter looks safe, with news of a power deal between its owners and Meridian Energy.

New Zealand Aluminium Smelters Limited (NZAS) has issued a statement saying the deal - for 572MW of electricity until 2030, will allow the smelter's three potlines to remain fully operational.

NZAS chief executive Gretta Stephens said this was good news for the NZAS workforce, Southland and New Zealand.

"We have crossed a hurdle today and now have more certainty about our immediate future," she said.

Had Meridian pulled out of any deal with the smelter, or its owners decided to close down, a glut of cheap electricity could have come onto the market, leading to a possible fall in wholesale prices.

Prospects of this happening anytime soon now appear unlikely.

"It has been a complex and demanding negotiation, but this is a good outcome for Meridian," Meridian chief executive Mark Binns said in a statement.

The variation commits Meridian to cover the full 572 megawatts currently used at the smelter from January 1, 2017 at "more competitive rates" for the smelter than would have applied if NZAS chose to rely on the previous arrangement for the full 572 MW.

The deal will give NZAS the flexibility to operate at current production levels for the full contract period should it want to and provide Meridian with an improved overall price for its electricity.

Meridian said it was committed to cover Tiwai Point's electricity usage at current production levels through to 2030, but NZAS retains all its termination rights from the 2013 round of negotiations, which includes a 12 month notice of termination that can be given any time from 1 January 2017.

Contact Energy has also put out a statement saying it has signed a deal with Meridian Energy to supply 80 MW of energy to the smelter.

Read this morning's Meridian announcement here