Energy crunch: smelter agrees to further cut as Mercury doubles profit

Tuesday, 20 August 2024

The Tiwai Point aluminium smelter will cut back its production further.

The country’s industrial output will be trimmed further in a bid to contain higher power prices caused by low lake levels and a gas shortage.

Rio Tinto, owner of the Tiwai Point aluminium smelter, has announced it will temporarily cut its power consumption by about 37% until late September, after earlier agreeing to reduce production by about a third.

Spokesperson Simon King said it had made the difficult decision to reduce aluminium production to provide additional support for the power grid “at this time of energy constraint”.

“As a large electricity user, we recognise the responsibility we have in contributing towards keeping the lights on across New Zealand when needed,” he said.

A number of other electricity and gas users, including methanol manufacturer Methanex, Oji Fibre, Winstone Pulp and Pan Pac Forest Products have turned off production or signalled changes because of the power shortage.

Mercury Energy has meanwhile become the first of the majority-state owned gentailers to report its financial results for the year to the end of June.

It reported its net profit had more than doubled to $290 million, with its operating profit rising 4% to $877m.

Energy Minister Simeon Brown says there’s “a lot more that needs to be done” bringing on new generation.

The company followed Contact Energy in upping its pay-out to shareholders, announcing a 7% increase in its total annual dividend for the year to 23.3 cents a share.

Asked whether he was surprised to see Contact and Mercury increase their dividends during an “energy crunch” Energy Minister Simeon Brown said that was a commercial decision for the companies.

“But we have been very clear we want to see greater investment. We want to see them investing in new generation.

“Contact did announce on Friday another 150 megawatt solar farm in Christchurch, so that's good to see. There's a lot more needs to be done,” he said.

Mercury chief executive Vince Hawksworth said when announcing its results that it had continued to deliver more renewable generation and would invest “up to $1b” in new generation over the coming year.