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No quick resolution of power supply deal for Tiwai Point aluminium smelter
Edited by : AL CIRCLE
3 min read
Meridian Energy and Rio Tinto will resume talks before Christmas about supplying power to the Tiwai Point aluminium smelter in Southland, but there is no sign that a deal is just around the corner.
Rio Tinto has said that the smelter, which employs about 600 people, could close if it cannot get even cheaper power prices. The smelter uses about 15 per cent of New Zealand's power.
Meridian has a binding contract with the smelter company NZAS, covering 18 years from January 1, 2013. The Government has indicated that Rio Tinto would be bound by existing contractual arrangements for three years, but Meridian chief executive Mark Binns would not comment on that. However, if Rio Tinto did walk away, the excess power from the Manapouri station would come on to the national electricity market and cause power prices to drop, Transpower said recently.
Despite the long-term contract coming into force on January 1, and talks resuming this month, Binns said nobody was expecting any resolution "in the near term".
Meridian has also said it will be better placed to handle another profit-sapping dry year like 2012 as it had recently been granted permission to take Lake Pukaki in the South Island down 5m.
Meridian's profit in the past year was hammered by the lowest levels of inflows into its South Island hydro power lakes in the 79 years since records began. As a result, underlying profits were down more than $100 million for the financial year.
Binns said the Lake Pukaki consent would be a big help in future dry years. As a "renewable" power company, Meridian is reliant on water and wind power, which makes its profits more volatile. Nevertheless, it is sticking with renewable power only, rather than thermal-fired stations, because it thinks there will be more value in that "green" brand over time. "We are not going to get a coal or gas-fired station," Binns said.
In the past year, Meridian made a disappointing net after-tax profit of $75m, down from $303m in the previous year. The previous year's result was boosted by the sale of two Tekapo hydro power stations.
Hydro power generation volumes were 16 per cent down on the 2011 financial year, after adjusting for the loss of the Tekapo stations.
The impact of low lake levels was partly offset by wind generation up 18 per cent.
"Without wind generation, the situation would have been far more severe," Binns said.
Rio Tinto has said that the smelter, which employs about 600 people, could close if it cannot get even cheaper power prices. The smelter uses about 15 per cent of New Zealand's power.
Meridian has a binding contract with the smelter company NZAS, covering 18 years from January 1, 2013. The Government has indicated that Rio Tinto would be bound by existing contractual arrangements for three years, but Meridian chief executive Mark Binns would not comment on that. However, if Rio Tinto did walk away, the excess power from the Manapouri station would come on to the national electricity market and cause power prices to drop, Transpower said recently.
Despite the long-term contract coming into force on January 1, and talks resuming this month, Binns said nobody was expecting any resolution "in the near term".
Meridian has also said it will be better placed to handle another profit-sapping dry year like 2012 as it had recently been granted permission to take Lake Pukaki in the South Island down 5m.
Meridian's profit in the past year was hammered by the lowest levels of inflows into its South Island hydro power lakes in the 79 years since records began. As a result, underlying profits were down more than $100 million for the financial year.
Binns said the Lake Pukaki consent would be a big help in future dry years. As a "renewable" power company, Meridian is reliant on water and wind power, which makes its profits more volatile. Nevertheless, it is sticking with renewable power only, rather than thermal-fired stations, because it thinks there will be more value in that "green" brand over time. "We are not going to get a coal or gas-fired station," Binns said.
In the past year, Meridian made a disappointing net after-tax profit of $75m, down from $303m in the previous year. The previous year's result was boosted by the sale of two Tekapo hydro power stations.
Hydro power generation volumes were 16 per cent down on the 2011 financial year, after adjusting for the loss of the Tekapo stations.
The impact of low lake levels was partly offset by wind generation up 18 per cent.
"Without wind generation, the situation would have been far more severe," Binns said.
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