Meridian Head Expresses Hope for NZAS Smelter’s Future

Meridian Head Expresses Hope for NZAS Smelter’s Future
Tiwai Point Aluminium Smelter as seen from the top of Bluff Hill. Source: Wikimedia

Meridian Energy Limited Chief Executive Officer Mark Binns says he expects the embattled New Zealand Aluminium Smelter’s Tiwali Point plant will continue running. His hopeful musings come as Sumitomo Chemical Company and Rio Tinto mull the plant’s future.

“There will always be uncertainty, which is why we would prefer the smelter to stay — but not at any cost,” Binns remarked at Meridian’s annual meeting in Christchurch this week. “The only thing we can manage is the [smelter] energy price, which even with the January 1 increase will remain the cheapest electricity price to any New Zealand customer.”

Binns went on to say that, in the event the smelter did close its doors, surplus power would run from the southern portion of the South Island north, and supply- and demand-side adjustments would need to be made by the market to the “new normal.”

He said that, though short-term price movements aren’t easy to predict, the smelter may be in a better spot strategically over the medium term, or roughly five years into the future. However, he hedged by noting that such predictions inherently relied upon assumptions about uncertain variables.

Binns, who was just back from meeting with investors in the United States and Britain, said that the smelter and its future was a hot topic at meetings in both countries. He was not surprised, he said, as the smelter uses twelve percent of New Zealand’s electricity, and the future of the smelter has tremendous implications for the country and the industry as a whole. Power supplier Meridian’s pricing scheme changed at the beginning of the year for the smelter, increasing prices and giving NZAS the right to terminate with twelve months’ notice, he explained.

“Investors’ views on this vary,” he said. “Some are concerned — they tend to be those who have not invested in the sector but probably would if the smelter left and the uncertainty was removed.”

NZAS is a joint venture operation owned by Pacific Aluminium (New Zealand) Limited (79.36%), and Sumitomo Chemical Company (20.64%). Pacific Aluminium (New Zealand) Limited is the managing partner, and is a wholly owned subsidiary of Rio Tinto.