Meridian Continues To Seek Long-Term Electrical Contract With Tiwai Point Aluminium Smelter Despite New Regulation

Meridian Continues To Seek Long-Term Electrical Contract With Tiwai Point Aluminium Smelter Despite New Regulation

New Zealand’s aluminium smelter and the region’s main power provider continue to speak in favor of striking a new deal that would keep the smelter going beyond its planned shut-down in two years despite a new administrative rule change that would allow the power company to scuttle any power agreement that it found to be unfair to its other electrical buyers.

In a conference call earlier this week, Meridian Energy head Neal Barclay said it expects to have a power contract that would fuel New Zealand Aluminium Smelter’s Tiwai Point plant through at least the next several years.

“We would need to see a long term commitment to New Zealand so we are talking, obviously, 15 to 20 years. I think it needs to be at least that.”

Barclay went on to give no indication that the two parties were any closer to such an agreement, however. However he noted that the gap of about NZ$0.35/kwh between what the Tiwai Point smelter sought and the “sustainable price” was “massive.”

He went on to say that Tiwai Point’s ultimate fate is not terribly material to Meridian at this point.

The latest wrinkle in Tiwai Point’s journey to a lifesaving power contract came last week when New Zealand’s Electric Authority promulgated a regulation that would allow it to nix major electricity contracts over 150 MW, as it estimated that the plant’s current electrical contract could be costing the country’s residential power customers up to NZ$200 per year in higher rates.

Although Barclay said Meridian’s current contract with Tiwai Point likely wouldn’t come under scrutiny because of the new rule, the Electricity Authority’s general manager of market policy Andrew Doube did not echo his sentiments.

Doube indicated that his organization was troubled by “the presence in the current Tiwai contracts of use-it-or-lose-it clauses that prevent on-selling of electricity.”

“The amendment is not retrospective, but one of its conditions is an ability for the buyer to on-sell any unused electricity, which would have precluded the current contract ‘passing the test’ unless one of the other two conditions were met.”

Doube indicated that the Authority has yet to assess Meridian’s power contract with Tiwai Point under the new rule.