Carbon tax repeal raised energy prices: Alumina

Alcoa's Australian assets have faced higher energy costs since the carbon tax was repealed, in revelations that challenge one of the primary criticisms of the controversial scheme.

The higher energy costs were revealed on Thursday by Alcoa's local joint venture partner, Alumina Limited, which said its energy costs had risen in the six months since the carbon tax was repealed, once currency fluctuations were put aside.

"Excluding the currency impact, energy costs were higher than 2013 levels mainly due to increased prices and the loss of carbon tax credits in Australia," the company said.

The outcome demonstrates the extraordinary level of compensation granted to big industrial companies under the carbon tax, in a bid to shield them from rising power prices.

Alumina Limited owns 40 per cent of 20 Alcoa assets around the world, including three power-hungry alumina refineries in Western Australia and the power-hungry Portland Aluminium smelter in Victoria.

The partners also ran the Point Henry aluminium smelter in Victoria, which was shut down in early 2014.

After expressing deep concerns about the impact a carbon price would have on their Australian operations, Alcoa and Alumina Limited were granted the highest level of compensation available under the carbon tax introduced by the Gillard government on July 1, 2012.

The partners were given carbon permits that covered 94.5 per cent of carbon emissions from their smelters and refineries in the 2013 financial year, and permits that covered 93.27 per cent of carbon emissions in the 2014 financial year.

The Grattan Institute's energy director, Tony Wood, said the rise in energy prices described by Alumina Limited demonstrated the perverse nature of the compensation scheme put in place.

After several years of challenging economic conditions, the global aluminium industry is on the rise again, with companies like Alcoa and Rio Tinto witnessing improved profits from the aluminium businesses.

The global oversupply of aluminium is being gradually eroded, and prices for the main ingredient in the lightweight metal, bauxite, have soared due to dwindling reserves in China and an export ban in Indonesia.

That trend helped Alumina Limited break a three-year dividend drought on Thursday, after posting a slightly better than expected underlying profit of $US91.1 million ($117 million) for the 2014 year.

The company's chief executive, Peter Wasow, heralded the return to dividends.

"With a strong balance sheet, reduced capital requirements going forward and an improved business outlook, we are pleased to resume paying dividends," he said.