Contact says talks with aluminium smelter 'active' but Meridian is downbeat

Monday, 10 August 2020

Tiwai Point Aluminium Smelter chief executive Stewart Hamilton talks on the future of the smelter.

Meridian and Contact Energy have sent different signals on the status of negotiations to delay the closure of the Tiwai Point aluminium smelter.

Broker Forsyth Barr said in a report last week that it had been able to confirm that the smelter’s majority owner, Rio Tinto, had told New Zealand Aluminium (NZAS) staff that “a final decision” was four to six weeks away.

Releasing its annual result on Monday, Contact Energy chief executive Mike Fuge said the company was “actively engaged in negotiations for revised terms for electricity supply to the Tiwai smelter”.

“We believe the best interests of ‘NZ Inc’ are served by the smelter remaining operational for at least the next five years,” he said.

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There continue to be mixed signals on whether a deal will be hammered out with Rio Tinto to keep the Tiwai Point aluminium smelter open beyond August next year.

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

* Meridian and Rio Tinto still talking - but what does it mean?

“The inability for this to happen will be bad news not only for Southland, but also for global emissions and New Zealand’s renewable energy aspirations,” he said.

Meridian Energy appeared more downbeat in a statement that it simultaneously released to the NZX, indicating the negotiations had not so far resulted in progress.

Meridian said it had no knowledge of a pending announcement to smelter staff.

“Meridian has put a confidential proposal to NZAS with the objective of allowing NZAS to close down the smelter over a longer period of time – Meridian has proposed up to four years.

“To date that proposal has not been accepted and Meridian's current expectation is that the smelter will close on August 31, 2021 as previously announced by NZAS,” it said.

Rio Tinto last week declined to comment on the Forsyth Barr report.

Contact reported a drop in its net profit to $125 million in the year to the end of June.

That was down from a $345m profit the previous year, when its result was boosted by a $170m gain from the sale of its Rockgas business and its Ahuroa gas storage facility.

Its underlying profit from continuing operations was down 22 per cent at $129m.

Chairman Rob McDonald said Contact’s performance in the second half of the year had been in line with expectations despite the impact of Covid-19.

But the first half was “more challenging” because of the impact of gas shortages on the business.