Meridian Energy unbolts door to negotiations with Tiwai Point aluminium smelter to keep it functional for another 12 years

The largest renewable energy of New Zealand, Meridian Energy’s Chief Executive Officer, Neal Barclay has unbolted the door to negotiations, which might drive Rio Tinto’s Tiwai Point aluminium smelter to remain functional for at least another 12 years considering 2034.

On 23^rd February 2022, while reporting the company’s interim results, Neal Barclay said, “Meridian was still working on the assumption it would stop supplying power to the aluminium smelter (NZAS) when its current contract came to an end in December 2024.”

He further added, “There were no current discussions with the smelter on a new electricity contract.”

However, speaking to an analyst during a conference call, he firmly unlatched the doors for discussions, saying “Meridian was certainly not averse to having discussions. When we do enter into negotiations with NZAS, we will advise the market.”

The global metal giant, Rio Tinto as a majority stake owner lead the way by stating “We saw a positive pathway to continue operating and contributing to the local and national economies beyond 2024.”

Barclay said, “I am setting out what Meridian would want from Rio Tinto before it would consider any form of a contract extension”.

“Rio Tinto would need to demonstrate proper environmental responsibility, they’ll need to pay a fair and enduring price for electricity and they’ll need to make a long-term commitment to New Zealand.”

“If Rio Tinto is serious about decarbonisation then 10 to 15 or even 20 years is not unreasonable.”

“Ongoing uncertainty over whether the smelter was going to close or not would become even more intolerable as the power industry moved towards zero carbon.”

Barclay said “Rio Tinto would also need to offer seasonal demand response, in other words, the ability to reduce the smelter’s electricity demand in times of short electricity supply”, Barclay added.

“At the moment, though, Meridian had no idea whether the smelter was willing to pay a fair price for energy is consumed.”

It has been understood that Rio Tinto have negotiated down the smelter’s power price from about 5.5 cents a kilowatt-hour to about 3.5c/KWh in January 2021, at a time when aluminium prices were shorter than two-thirds of their current level.

The power distribution company, Meridian Energy disclosed a 41% drop in its profits for the six months to the end of December. Although, the company booked a $133 million profit for the period, with revenues skidding 1% to $1.67b.

“Our operating performance was impacted by lower revenues from the smelter, but was otherwise on par with the same period the previous year”, Barclay said.