Meridian Energy makes future strategy

Meridian Energy is reviewing what it would do with massive amounts of electricity if Southland's aluminium smelter closes.

New Zealand Aluminium Smelters (NZAS), which runs the operation at Tiwai Point, near Invercargill, is now in discussions with the state- owned power company over what Meridian says are "potential changes" to their agreed wholesale contract.

Those discussions are despite the fact that a contract renegotiated five years ago does not even take effect until January next year and is expected to run until 2030.

There are concerns about the future of the smelter after NZAS said this month it was in a "really difficult financial situation" and was reviewing its costs.

The smelter is New Zealand's largest user of power. It uses about 580 megawatts (MW) of power, a staggering amount of electricity that is about 15 per cent of the country's entire output and 40 per cent of Meridian's annual average generation.

Meridian's Manapouri power station generates about 5000 gigawatt hours of electricity a year, most of which is used by the smelter. Two 220,000-volt power lines run directly from the power station to Tiwai Point, although one line has a side- branch that heads north close to Invercargill.

If the smelter closes, that huge amount of power will have to be accommodated somehow on the national grid.

Meridian markets and production general manager Neal Barclay said the company was "analysing a range of scenarios" that might eventuate as a result of the contract talks.

These were commercially sensitive. However, it was "far too early to discuss or draw conclusions" about the smelter's future.

Meridian was in regular talks with state-owned national grid company Transpower about planned grid upgrades in the south of the South Island, he said.

Transpower chief executive Patrick Strange said there were five projects on the books worth about $170 million that would help move any extra power north out of Southland, although it would take several years to complete them all.

The constraints that currently stopped that much extra electricity from being transferred north were not in Southland but in Central and North Otago.

A number of projects to strengthen electricity lines have been postponed because proposed new generation has not been built.