The Tiwai Point aluminium smelter is "losing millions of dollars every month" and can ill-afford to give shift workers a 50 per cent increase in leave without increasing hours worked, the company says.
The smelter owner, New Zealand Aluminium Smelters, says it will appeal an Employment Relations Authority decision that overturns its 20-year practice of applying a "lieu days benefit", which the company says "complies with the law and our contracts."
"The ERA's decision imposes millions of dollars in additional costs on NZAS, both retrospectively and into the future, at a time when the smelter is already losing millions of dollars every month," acting general manager Stewart Hamilton said in a statement.
Owned ultimately by global metals giant Rio Tinto through its Pacific Aluminium subsidiary, the smelter's future is in doubt as it seeks to renegotiate contracts for electricity that it signed in 2007 and which only came into effect this year.
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If unsuccessful, the smelter would be expected to close in an orderly fashion as its contract obligations run down over the next three to five years. Tiwai Point uses around one-seventh of total electricity generated in New Zealand.
Finance Minister Bill English is expected to announce the government will partially privatise Meridian Energy later this year, following last week's successful float of state-controlled MightyRiverPower.
Meridian has made clear it would expect a shake-out in the electricity sector if the smelter closed, and its hydro assets would likely find higher value customers as they would be highly competitive with thermal generators, some of whom would be likely to close older plant to reduce the generation overhang that would occur if the smelter closed.