Full steam ahead for smelter in next four years, boss says

Thursday, 14 January 2021

New Zealand Aluminium Smelter chief executive Stewart Hamilton wants Tiwai to scale back up to work at capacity for the next four years. [File video]

Planning will begin to get the Tiwai Point aluminium smelter operations back to “full capacity” following the announcement on Thursday that the plant would remain open for four more years.

Eight months ago majority owner Rio Tinto announced it would wind down the Tiwai plant – which employs 1000 people and creates a further 1600 indirect jobs – by August 2021 due to high energy and transmission costs.

However, a new power deal with Meridian Energy has resulted in Rio announcing on Thursday morning it would continue operating until the end of 2024.

The news was welcomed by employees, contractors to the plant and Southland leaders who have lobbied for it to remain open for longer so the region has time to transition to other industries.

* Southlanders need to get 'more vigorous' to save smelter

* Tiwai Point attracted controversy from the start

Smelter general manager Stew Hamilton said it was great news for Tiwai, Southland and the wider New Zealand economy.

New Zealand Aluminium Smelter general manager Stew Hamilton.

Staff were “generally pretty excited” after a challenging 2020.

The deal had centred on the smelter getting a “competitive price” for power with its provider, Meridian Energy, but he declined to say what it was.

“It has put us in a position where we believe we will be more commercially viable in the next four years.”

The plan was to now get the operation back to running at full capacity until near the end of the four-year contract.

No decision had yet been made on whether potline four, which was currently closed, would be restarted.

The time extension gave time to plan for the future by talking to the Government and stakeholders about “what we need to do to be prepared for time beyond 2024”, Hamilton said.

Rio was still in discussions with the Government around getting a fairer transmission price, which it needed to insulate the smelter from aluminium price reductions, he said.

There was potential in the contract to move the operation from three potlines to two potlines, “and ideally that won’t be the case”, but a fair price for transmission was needed to remain viable for four years.

The extension also provided time for detailed closure studies to be completed.

Rio would discuss remediation of the site in coming months, he said.

Deputy Prime Minister Grant Robertson confirmed the Government and Rio Tinto remained in discussions around transmission pricing and remediation of the site.

“Understanding the extent of the environmental impact of the smelter and removal of toxic waste from this site remain a bottom line for the Government.”

Robertson said the four year deal provided welcome certainty to the Southland community.

The Government would work with Southlanders to map out a clear transition plan for the region for the time when the smelter shut down.

A Meridian Energy spokesperson said it was delighted there was certainty regarding the departure date for the smelter.

The longer exit period provided a great opportunity for the Southland region to transition to a low carbon future.

The power deal was commercially sensitive and Meridian was now “working to a December 2024 exit”, the spokesperson said.

Ngai Tahu also welcomed the agreement to extend the smelter’s life to 2024.

Te Rūnaka o Awarua (Bluff) Upoko, Sir Tipene O’Regan, said it gave the region some short to near-term security.

But it was no time to sit back.

“We now have time for serious discussion on a strategic reset of our national energy arrangements.

“That reset must take place in the context of our move towards a low-carbon economy and climate change as well as our need for foreign exchange.”

Ngai Tahu was ready to work with Rio Tinto and others on a managed close out plan for the smelter that would ensure the site was properly remediated.