South Port profit faces 22% hit when smelter closes

Rio Tinto plans to close the Tiwai Point aluminum smelter next year. Photo / Supplied

South Port New Zealand will look to aquaculture to fill a $2 million hole in its annual earnings that will be left when the Tiwai Point aluminum smelter closes next year.

The smelter makes up 33 per cent of the Bluff port's cargo volume. However, the port doesn't earn wharfage revenue for the raw material delivered to the smelter, which instead pays a licence fee for the wharf structure.

South Port estimates the smelter contributes about $2m, or roughly 22 per cent, of net profit after tax. That excludes the fixed term licence fee which will continue to be charged until 2043.

The company said profit for the year ended June 30 will be more than $8.7m, although it won't formally report its result until April. In the June 2019 year, the company posted a profit of $9.7m.

The shares, which are two-thirds owned by regional council Environment Southland, fell 6.5 per cent to $6.49 in late trading today.

While the full effect of the closure will not hit until the 2022 financial year, the current period may be affected as the smelter winds down its operations.

South Port chair Rex Chapman said the impact of the decision on the Southland economy will be significant.

"It is to be hoped that the small window between now and next August is used to ensure that the financial impact is mitigated both in the short term and in the longer term," he said.

"Aquaculture has been identified as Southland's best near-term economic opportunity and now is the time for that opportunity to be realised as soon as possible."

The aquaculture industry is worth approximately $600m a year but the government has set a target of lifting that to $3 billion annual turnover by 2035.