Aluminium smelter issues assurance over clean-up after Government shelves talks

Tuesday, 9 March 2021

Roger Neilson reminisces about his time at Tiwai. He was one of the first five apprentices at the New Zealand Aluminium Smelter in 1972.

The chief executive of the Tiwai Point aluminium smelter has given an assurance it will close the smelter safely and responsibly after the Government suspended negotiations over its future clean-up.

New Zealand Aluminium Smelter chief executive Stew Hamilton said the smelter recognised its impact and responsibilities wouldn’t end when its operations ceased.

“We respect our local community and will share further information on closure studies as soon as possible,” he said.

The smelter's majority owner, mining giant Rio Tinto, decided in January to keep the smelter open until at least the end of 2024 after Meridian agreed to slash the price it charged the smelter for power until then to what Meridian described as an 'unsustainable' price, believed to be about 3.5 cents a kilowatt-hour.

* 'It's a very profitable smelter now', Meridian boss says after price beat-down

The Government appears to have made it clear that it doesn’t intend to be involved in a three-way discussion with the smelter and Transpower over the smelter’s transmission charges.

* Aluminium smelter deal - who caved?

* Rio Tinto confirms it is continuing to seek help for smelter from Government

There is speculation Rio Tinto assessed at the time it committed to keep the smelter open until 2024 that it also had good reason to believe the smelter would receive additional assistance from the Government, most probably in the form of a reduction in its Transpower electricity transmission charges.

However, Rio Tinto’s decision to keep the smelter open until 2024 has appeared to reduce the Government’s incentive to help cut the smelter’s costs, and it has maintained no deal would be finalised before satisfactory progress is made on arrangements for remediating the smelter site once it closes.

Finance Minister Grant Robertson wrote to Rio Tinto chief executive Alf Barrios last week saying ministers were “encouraged to learn that the smelter would continue to operate until the end of 2024, with the acceptance of Meridian’s electricity offer”.

The letter confirmed the smelter had been in separate talks with a government negotiating team up until at least January 25.

But he said ministers were disappointed a proposal the company put forward then “did not address the remediation activities and outcomes which we have repeatedly outlined as a non-negotiable bottom line for the Crown”.

“In particular, we are concerned about how the hazardous Spent Cathode Linings (SCL) will be dealt with, your plans for adequately addressing the existing unlined landfill, and what contamination may be present in land and water under the smelter itself,” he said.

“They are serious environmental issues, potentially exacerbated by rising sea levels. Any future agreement with the New Zealand Government must adequately address these pressing environmental concerns,” he said.

Robertson noted planned changes that seem intended to make it easier for the smelter to claim “prudent discounts” from Transpower, but gave no indication that the Government had agreed or intended to intervene in Transpower's decision-making over whether or not to grant a discount.

Transpower’s Prudent Discount Policy was “the appropriate avenue to address the smelter’s transmission charges”, he said.

“Once we have clarity about the environmental remediation required, and certainty about how you will achieve this, including treatment of the SCL and the unlined landfill, we may then be able to make real progress towards an agreement,” he told Barrios.

“I have instructed my officials to defer negotiations until you are able to make firm environmental commitments regarding the SCL and landfill.”

Hamilton’s statement indicated at least some of the information the Government was seeking could not be provided instantly.

“As part of our closure study we are in the process of undertaking detailed studies and gathering data about the site at Tiwai Point which has been in continuous operation since 1971 – 50 years,” he said.

“We are in the first phase of that process and have employed a range of external independent experts to assist us. For example in the past two months 238 bores have been drilled and samples taken which are now being analysed,” he said.

The price of aluminium is currently trading at a price comfortably above average levels over the past 10 years, at about US$2160 (NZ$3045) a tonne.

Meridian has estimated the smelter is now “very profitable” based on that price, and its new electricity price.

Chief executive Neal Barclay said in January that it was 'entirely possible” the smelter might want to keep the smelter open by renegotiating its power contract beyond 2024, while noting it would have no automatic right to Meridian’s power.