'Chance has passed' for deal to keep aluminium smelter open: Meridian

Friday, 10 July 2020

Rio Tinto owned Tiwai Point aluminium smelter, based near Invercargill, announced on Thursday the plant will close at the end of August 2021.

The Tiwai Point Aluminium Smelter’s major power supplier, Meridian Energy, says the chance of securing a deal to keep the smelter open has passed.

Smelter owner Rio Tinto said on Thursday it would start planning for the wind-down of operations, and the eventual closure of the smelter near Bluff in 14 months.

The decision was made following a strategic review which “showed the business is no longer viable given high energy costs and a challenging outlook for the aluminium industry”.

Rio Tinto announced on Thursday it had terminated its power contract with Meridian, but it is understood a new deal could still conceivably be struck between the pair.

* Tiwai Point attracted controversy from the start

23012018. News. Robyn Edie. Southland Times/Stuff. Aerial photo with Bluff township and Bluff Hill, back, and Tiwai Aluminium Smelter front. Bluff habour centre and the Tiwai wharf.

* Tiwai Point aluminium smelter to close, 1000 jobs to go

However, Meridian chief executive Neal Barclay indicated that was not going to happen.

‘’’Despite our efforts to negotiate the contract, it is clear from the termination notice we received yesterday that the chance of securing a deal to keep the smelter operational has passed,’’ Barclay said.

Rio Tinto declined to comment, with a spokeswoman saying its discussions with Meridian in regards to its contract were commercial and in confidence.

Barclay said Rio Tinto’s decision to close was hugely disappointing for the smelter workforce and the Southland community.

The outcome was not one that Meridian would have chosen, he said.

’’Meridian worked hard to provide solutions that we believe were of lasting value to the smelter.

Meridian Energy chief executive Neal Barclay.

‘’We had a substantial offer on the table as long as there was a stronger commitment from Rio Tinto to New Zealand, but ultimately they have decided to walk away.

‘’Unfortunately we are now in a position where we will wait to work with the smelter owners on an orderly exit.’’

Barclay said the company had put together a “pretty compelling offer” to Rio Tinto to persuade it to keep the smelter open, but it had been rejected.

“I think they have decided they want to close the smelter,” he said.

He said the four-year deal on power prices the smelter had been offered would have delivered a $50 million cost saving to the smelter in its first year, rising to between $60m to $70m after that.

It would have brought the smelter’s power costs “down to the mid-point” for smelters globally, he said.

Southland’s leaders this week vowed to fight to keep the smelter open, saying they would lobby the Government for the smelter to receive ‘’fair’’ power and transmission prices.

They have invited Prime Minister Jacinda Ardern and finance minister Grant Robertson to Southland to discuss the issues.

A spokeswoman for Ardern said she would visit Southland next week with a group of ministers, including Robertson.

Robertson indicated the talks from the Government's side would not be about saving the smelter.

“I heard a very definitive statement from Rio Tinto on Thursday about the closure, so the Government will now get alongside the people of Southland to grow jobs in the region,” he said.

Earlier on Friday, Southland Chamber of Commerce president Neil McAra said there was a short window to save the smelter and Southland leaders were hopeful of engaging with the Government and finding a solution.

He did not know the chances of success.

‘’We will know next week after talking to central Government.’’

With the Covid-19 pandemic it was a more important time than ever to protect jobs, he said.

‘’It’s easier to protect jobs than create them.’’

The Southland Mayoral Forum met on Thursday and Friday to discuss the situation.

Gore District Mayor Tracy Hicks, the forum’s chair, was urging the Government and Rio Tinto to continue dialogue and explore all avenues to keep the smelter open.

“We can’t let this high-quality plant, with its skilled and experienced workforce, slip away without exhausting all possible options for its retention.”

Southland had a diverse economy and the capacity to grow other sectors but those discussions needed to be put aside until all options for the continuation of the plant were explored, he said.