Tiwai Point aluminium smelter to keep buying 572 megawatts electricity

Southland's Tiwai Point aluminium smelter is going to stick to its electricity purchases at 572 megawatts from Meridian Energy. The smelter's majority owner, Pacific Aluminium, has declined an option to reduce the quantity it buys from electricity generator from 572 megawatts to 400. The deadline to opt that option expired today.

Tiwai Point aluminium smelter uses about one seventh of New Zealand’s power.

The decision to continue buying 572 megawatts of electricity means the aluminium smelter will have to cough up a higher amount for its total quantum of electricity, since the 172 megawatts will be pitched at a slightly higher price than the remaining 400 megawatts, for which the old concessionary price remains as is.

The price of the electricity purchased by Tiwai Point smelter was estimated by an analyst at $48 a megawatt hour, closer to the wholesale price for other companies.

If the smelter had exercised its right to scale down its electricity requirement, it would have reduced its purchases by 30 per cent. There had been some speculation that the decision would have indicated at Pacific Aluminium's long-term plans to close the facility in a phased manner.

However, industry watchers opine, “Cutting back electricity purchases would have required the smelter to cut back on aluminium production, which would have made the economics of the plant even more difficult than they were already.”

Pacific Aluminium declined to comment on the decision but said the need to maintain the quantity of its production was an important part of its decision.

"We remain committed to running a three potline, 572MW operation, as running a smaller smelter under the same conditions does not improve the smelter's international competitiveness," it said in a statement.

The future of Tiwai Point aluminium smelter is vital to Southland’s economy, where it contributes $525m annually and employs 800 workers directly.