Tiwai Pt decision delayed for a month

D-day for the Tiwai Point aluminium smelter has been deferred for a month.

Under the contract renegotiated with Meridian Energy in 2013 the smelter's owners, Rio Tinto and Sumitomo, could give notice today of terminating the contract at the end of next year. That would almost certainly mean closure (and a seismic change to the electricity sector) unless they could cover its load - 13 per cent of the national total - from other generators.

But the contract also provides that if the smelter remains in operation the proportion of its power needs covered by Meridian drop by 172MW or 30 per cent at start of 2017, freeing that power up for Meridian to sell elsewhere for a higher price but leaving a hole in the smelter's power demand to cover from other sources.

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Meridian and New Zealand Aluminium Smelters agreed last night to extend the notice of termination deadline to August 3.

"NZAS has been in discussions with a number of parties, including Meridian, with respect to its electricity requirements at its Tiwai Point smelter. NZAS requires more time to fully analyse its options before making a decision," Meridian chief executive Mark Binns said.

"We think it is in all parties' interests to ensure that a decision is based on the most complete information."

NZAS chief executive Gretta Stephens said the extension allowed NZAS to continue pursuing commercially competitive electricity arrangements.

"NZAS is one of the most operationally efficient smelters in the world, but pays one of the highest prices for power," Stephens said.

Combined with high transmission costs, and historically depressed aluminium prices, that continued to place significant pressure on the smelter.

NZAS paid as much as 10 times more for transmission than other smelters internationally, Stephens said.

"We welcome the Electricity Authority's recent paper outlining options for transmission pricing reform which acknowledges that NZAS pays more than $50 million a year for transmission infrastructure it receives no benefit from," she said.

"We look forward to working with the Authority to achieve the right result for New Zealand; however, our immediate focus between now and 3 August 2015 is on securing our electricity arrangements."