Pacific Aluminium Blames High Power Prices And Low Aluminium Prices For Losses at Tiwai Point

Pacific Aluminium Blames High Power Prices And Low Aluminium Prices For Losses at Tiwai Point

Citing price instability and the rising cost of electrical power to the plant, the operators of New Zealand’s Tiwai Point reported a loss of NZ$46 million in 2019.

For the full year of 2019, Pacific Aluminium logged a loss of NZ$313 million, reversing a net profit in 2018 of NZ$207 million. Pacific notes the reversal in fortunes at Tiwai Point came after factoring in hedges the firm made to protect it against fluctuations in power costs.

Though a drop in aluminium prices of 15 percent made a significant impact, Chief executive Stew Hamilton said the rising cost of power and power transmission made the most harm last year.

“No matter how hard or efficiently the team here works, we can’t consistently off-set the high price of power and transmission charges we face,” he explained.

“This means we swing from delivering small profits to losses for our owners, making our financial viability uncertain.”

Last year’s dismal financial results underscored the reasoning behind the review of the smelter’s future, he continued, with production cuts at the site a strong possibility. Pacific has floated the idea of cutting NZ$20 million, but a decision has yet to be made.

At present, both Meridian and Contact Energy are engaging with Pacific in talks to sell the plant power at a discounted rate. Meridian is Tiwai Point’s current power provider. Some fear that a closure of the plant may lead to a dip in power prices, but local power firms have contested the notion.

“If we can secure an internationally competitive power arrangement that enables us to be consistently profitable and a transmission charge that more accurately reflects the service we receive, NZAS [the smelter] will be well placed to continue,” promised Hamilton.

Pacific Aluminium is a division of Anglo-Australian mining giant Rio Tinto Group. It operates Tiwai Point, which supplies high-quality aluminium to the automotive and aerospace industry.