Electricity pricing deal will keep the Southland aluminium smelter open for another four years, but it still needs the Government to concede transmission pricing levels

Electricity pricing deal will keep the Southland aluminium smelter open for another four years, but it still needs the Government to concede transmission pricing levels

A deal has been agreed to extend the operations of the Tiwai Point aluminium smelter until 2024, at which time it will be closed.

Meridian Energy (MEL) said Rio Tinto had accepted new contract terms until the end of 2024.

“As a company we have planned for the eventual exit of the Tiwai Smelter. We’re excited about the opportunities that we have to accelerate decarbonisation, and we’re actively developing new growth opportunities,” a spokesperson for Meridian said.

As part of these arrangements, Contact Energy (CEN) has agreed to supply Meridian with a portion of the electricity required to power the smelter. Contact will provide an average of 100 megawatts of baseload electricity through until the end of 2024 (assuming the smelter requires 572 megawatts of electricity).

The Government and Rio Tinto remain in discussion around transmission pricing and remediation of the smelter site.

Meridian’s announcement that it is actively developing new growth opportunities for when Tiwai closes, including process heat, IT infrastructure and green hydrogen, highlights the opportunities for tech jobs that the Southland region has as the transition is made.

Today's announcements extends the transition from the one year Rio Tinto was proposing, to four years.

Rio is closing the smelter, despite the "Tiwai Point smelter ... producing some of the lowest carbon aluminium in the world."

Previous agreements to keep the facility open have also talked up the transition away from smelting operations, but this time it looks more realistic.

Aluminium prices have been rising recently, but not at to the same degree as for copper and other metals.

Semi-precious metals

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The stock exchange got its explanation at last for the recent share price increase. Will that continue ? The foreign funds had any inside knowledge ?

Very high probability

Haha.. always a conspiracy to explain the unexpected eh??


But the explanation for the recent price gains in the generators has nothing to do with Tiwai, but with US index funds.

MEL started rising well before it was included in the "Green Gen Index", it was a bit odd and arguably unjustified

Not quite
The introduction of Meridian and Contact into the MSCI index doesn't happen until the revision on 1 April 2021, if at all. Standard and Poors don't usually reveal revisions until days before the operation of the new indexes. Inclined to think somebody jumped the gun and got squeezed in the following days. Check out the moves in capitalisation of Meridian on the NZX. Ridiculous. Got up to $23 billion on assets of $8½ billion

Yeah you could be right.. someone or some fund managers have just taken a bath.. almost 20% down from MELs peak today. NTA's don't always make a very good metric for price discovery though

Anyway, it seems to be good for the country ane the company that this has been resolved now. Will come up again during next election, I guess.

If Meridian supply all the electricity without competition, is it not logic that they will abuse the monopoly?

What? At $0.05 cents kw/H

That should be kWh if you want look like you know what you're talking about.
What is up with the NZ education system. Don't they teach the SI system in schools these days?

Really?? That's the best you got??

One has no market power when selling to a monopsonist..

They can't/won't supply it below cost. They also have CEN contracted to supply 20% or so

This is fantastic news just as prompt payment discounts end for consumers.

Those same consumers could have bought shares in 2013 and they'd be laughing all the way to the bank. I bought 30K @ the IPO - free power ever since thanks to the divys

Great lets just keep kicking the can down the road....typical government ae.

There was no way alternative transmission lines could be setup in time to close the smelter.
Now , if they don't put those new lines in , thats kicking the can .

Watch for them to dither around saying" oh.. there's new industry mooted for Southland that'll use the excess power"
Transpower still has to find the replacement for the transmission price loss - up to about 15 mill I think

They won't. Next stop, resource consent delays.

There'll be Snails...

A win for Meridian - time to upgrade the lines North and when it does close they are in the Auckland market with the cheapest power in NZ.

Magically, both Rio Tinto & Meridian reached a 'price' that can sustain further the business until 2024, why just until 2024? why not now? - who's really add the buffer cost here.. indeed as per govt promise before the election. Really patchy proposals from business point of view.. keep it afloat until xyz period, then what? the invite CCP investment? they able produce the Al cheaply, why maintaining the costly no longer viable business, expect a sudden jolt of revival of Airbus 380 production again? - Why doing business with NZ, cost too much.

Pusheen go do some research on the subject so you can make an intelligent and informed contribution

Because there is no way of using Manapouri amounts of power until new transmission lines are built. 5c/kwh is better than 0 cents/ kwh.

I thought you could make gas with it?

You can. Unfortunately Hydrogen isn't very lucrative at the moment as an export, NZ doesn't have the demand for it in the foreseeable future, and a plant to produce it would probably need an offshore backer (like Methanex with Methanol).
NZ could produce Hydrogen and then turn that into green Methanol but even that's probably not very lucrative (although better than H2) and you'd still need a backer with deep pockets
Interestingly there is already all the plant and equipment required to produce H2 and turn it into HCL (Hydrochloric acid) mothballed in the Eastern Bay of Plenty. HCL is in big demand in the steel industry. A Japanese company currently owns it and would probably pay someone to remove it

for hydrogen, you can't produce it from electricity at a lower cost than producing it from natural gas. So all hydrogen power for the foreseeable future will be produced from fossil fuels with the associated CO2 emmissions.

Did you factor in the cost of the feedstock? No natural gas in Southland so it'd need to be imported.. plenty of free water though and very cheap surplus power. Your calcs are somewhat flawed in a NZ context

If southland were an isolated economy that might make sense. But we can use hydrogen produced elsewhere

Government will rubber stamp it, Rio has them between a rock and a hard place due to the unemployment and economic situation.

4 years. So in the 2023 election cycle they can again announce 'we are going to shutdown the smelter next year unless we get a better electricity deal'