Agreement should keep Tiwai Point aluminium smelter open

The future of the Tiwai Point aluminium smelter looks assured after South Island power generator and retailer Meridian Energy signed a variation to its existing deal with the Rio Tinto-controlled with New Zealand Aluminium Smelters Ltd (NZAS).

NZAS had the right to terminate the existing contract today with effect from 1 January 2017. By signing this variation, the right has been waived.

"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.

NZAS said the deal would allow the smelter's three potlines to remain fully operational.

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," Stephens said in a statement. "The agreement provides short-term security for the smelter and allows time for market fundamentals to improve," she said.

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.