Energy Minister Megan Woods not denying fresh talks taking place with smelter owner

Thursday, 27 August 2020

Finance Minister Grant Robertson spoke to Southland business leaders about the future of the Tiwai aluminium smelter at a breakfast event in Invercargill in August 2020.

Energy Minister Megan Woods is not contradicting a suggestion by Meridian Energy that the Government is talking to Rio Tinto about a deal on the Tiwai Point aluminium smelter’s electricity transmission costs.

Meridian chief executive Neal Barclay told analysts on Wednesday that it believed Rio Tinto was having “further discussions with the Government” in relation to electricity transmission costs.

These are charged to the smelter by state-owned transmission company Transpower.

Woods responded by saying there was “a range of discussions taking place, but they are all commercial in nature so I won’t be going into any detail about them”.

The Government had already ruled out “a direct subsidy” to Rio Tinto, she added.

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Talks about cutting the Tiwai aluminium smelter’s electricity transmission costs to delay its closure may be back on.

Rio Tinto was approached for comment on Wednesday and was still framing a response on Thursday.

Woods’ comments may fuel speculation that a deal could still be struck to delay the closure of the smelter, which Rio Tinto has said it currently plans to shut down by August next year.

The smelter provides work for about 1000 staff and contractors.

It is understood that Rio Tinto has argued in the past that its annual bill from Transpower should be reduced from $64 million a year to just $28m a year.

Meridian has had separate talks with Rio Tinto about a fresh offer to lower the smelter’s power costs in return for the smelter staying open for a further three years beyond August next year, until 2024.

Chief financial officer Mike Roan said on Wednesday that the ‘gentailer’ might need to write down its assets by between $690m and $1.3b if the closure was not delayed.

Meridian’s latest offer does not appear to have been sufficient in itself to make Rio Tinto commit to an agreement.

Barclay said on Wednesday that it had engaged with Rio Tinto on the possibility of extending the closure period from one year to four years “but at this stage was not aware if that would be acceptable to them”.

That may have put the onus back on the Government and Transpower to attempt to break the apparent deadlock.

Woods indicated the Government believed it did have options other than reaching a deal to delay the smelter’s closure.

“We have been engaging with the Southland Regional Leadership Group about the economic opportunities that have been identified by the region itself, including options for a transition package that supports new high-wage jobs,” she said.

“We are encouraged by the Southland Regional Leadership Group’s commitment to looking ahead and identifying future economic opportunities for the region.”

The saga may be close to a conclusion.

Broker Forsyth Barr said this month that it had been able to confirm Rio Tinto would make a further decision on the future of the smelter in September.

The global price of aluminium has been rapidly recovering since coming close to hitting a five-year low of US$1460 (NZ$2212) a tonne in May, and is now trading at US$1777/tonne.