New 'final decision' on aluminium smelter in four to six weeks, says Forsyth Barr

Friday, 7 August 2020

NZ First Leader Winston Peters says talk that Tiwai has been subsidised is a 'lie'.

A further decision on the future of the Tiwai Point aluminium smelter will be announced to staff in four to six weeks, broker Forsyth Barr says.

The smelter’s majority owner, Rio Tinto, announced in June that it planned to close the smelter by August next year after failing to reach an agreement over a desired reduction in its power bills.

But doubt remains over how that will play out.

Forsyth Barr said electricity industry investors should assume the smelter would close by the end of August next year and that anything else would be “upside”.

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

Rio Tinto has denied it is currently planning to reopen its mothballed potline 4, but intrigue remains.

* Meridian boss: 'We offered smelter compelling deal'

The Government appeared “adamant” there would be no additional government funds going into the smelter and that it would instead support Southland in developing new opportunities for the 1000 staff and contractors it employs, it said.

But Forsyth Barr said talks had been continuing between Rio Tinto and the smelter’s major power supplier, Meridian Energy, which could see the smelter’s closure delayed.

Meridian chief executive Neal Barclay said last month that Rio Tinto had rejected a “pretty compelling” four-year deal put together by power companies.

That would have delivered a $50 million cost saving to the smelter in its first year, rising to between $60m to $70m annually after that, he said.

But there is speculation a deal new could be reached that would buy Meridian Energy more time to find other customers for the power that will be freed-up from its Manapouri hydro scheme when the smelter closes.

Genesis Energy chief executive Marc England has cast doubt on the smelter closing as planned next year, telling an audience at the Downstream electricity conference in Wellington on Monday that he thought that was only “possible”.

Forsyth Barr said it had been able to “confirm” Rio Tinto had told New Zealand Aluminium staff that a final decision was “four to six weeks away”.

A Rio Tinto spokeswoman would not comment.

But she addressed speculation in a newspaper report that the smelter had told contractors to prepare for the September reopening of the smelter’s fourth and smallest potline, which it closed in April because of operating requirements during the Covid crisis.

The smelter had “no current plans” to reopen the potline, she said.

Forsyth Barr said it was ironic that aluminium had one of its best months on world markets in the wake of Rio Tinto’s June closure statement.

Aluminium is currently trading at US$1777 (NZ$2650) a tonne which is higher than when Rio Tinto announced its review of the smelter in November last year.