Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

Meridian drops smelter bomb - new contract unlikely

Meridian drops smelter bomb - new contract unlikely

By Pattrick Smellie

March 28 (BusinessDesk) - Meridian Energy says it is "unlikely" to reach a new electricity supply agreement with its largest customer, the Tiwai Point aluminium smelter, which consumes around one-seventh of New Zealand's electricity.

The bombshell disclosure has the capacity to upset the government's plans to partially privatise state-owned electricity company MightyRiverPower. Offer documents are due for release in about a fortnight, with listing by mid-May.

This morning's announcement to the NZX comes ahead of a select committee appearance this morning by the chair and senior managers of Meridian at the commerce select committee, where it's expected chief executive Mark Binns will outline more fully the implications of the stalemate.

But news that there may be no new electricity price agreement with New Zealand Aluminium Smelters carries huge implications for the electricity sector, which has struggled to grow in the last five years and would face a massive supply over-hang which could last years, were the smelter to close.

However, that outcome is not yet certain.

The smelter's majority owners, Anglo-Australian minerals giant Rio Tinto, are locked into the first three years of an new 18 year contract, which took effect from Jan 1, took three years to negotiate, and had been agreed in 2007.

While the New Zealand smelter makes internationally recognised high grade metal, which sells at a premium, Rio has been hit hard by its exposure to the aluminium sector, where world prices have been hit hard since the global financial crisis.

Rio Tinto is seeking to sell the smelter, along with a clutch of other, older smelters in Australasia, which it has packaged as a new subsidiary, Pacific Aluminium.

Rio's over-exposure to aluminium has been cited as one reason Rio's global chief executive, Tom Alabenese, was replaced earlier this year.

Binns said since Rio had approached Meridian for a renegotiation, "various options have been discussed and Meridian has offered a number of changes and concessions to the existing contract."

"Despite significant effort by both parties there remains a major gap between us on a number of issues, such that we believe that it is unlikely a new agreement can be reached with Pacific Aluminium.

"In the event no agreement can be reached, Meridian will seek to engage with Rio Tinto and Sumitomo Chemical Company (which holds a 20.64 percent stake in the smelter) … who will ultimately decide on the future of the smelter."

The current contract remains "unaltered and binding on the parties."

(BusinessDesk)


© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Financial Markets Authority: Online Investing Platforms Transform Attitudes To Investing

Eight out of 10 New Zealand investors have a more favourable view of investing and financial markets after using online investing platforms, according to research released today by the Financial Markets Authority - Te Mana Tātai Hokohoko... More>>



Barfoot and Thompson: Auckland Housing Prices Shrug Off Winter Concerns

Auckland house prices shrugged off the normal winter downturn, concerns about increasing prices and warnings of possible future interest rate rises in July.
“Mounting concerns about the prices being paid and possible future interest rate increases did nothing to dampen July trading... More>>



Stats NZ: Sharp Falls In Unemployment And Underutilisation

The seasonally adjusted unemployment and underutilisation rates fell to 4.0 and 10.5 percent, respectively, in the June 2021 quarter, Stats NZ said today. The unemployment rate continued to fall from its recent peak of 5.3 percent in the September 2020 quarter... More>>


ASB: Labour Shortage Sting Set To Cause Issues For Years According To Latest Quarterly Economic Forecast

There are positives and negatives in the latest ASB Quarterly Economic Forecast as New Zealand continues to bounce back strongly from COVID-19. The closed border is putting additional strain on the country’s labour market... More>>

Transport: July 2021 New Vehicle Registrations Boosted By EV Rebate Scheme
Motor Industry Association Chief Executive David Crawford says that July 2021 sales of new vehicles were boosted by the recently introduced rebate scheme. July 2021 registrations were 15,053 units compared to 12,263 units for July 2020... More>>



ASB: New Support Finder Tool Helps Connect Customers With Thousands In Government Support

ASB research alongside benefit numbers from the Ministry of Social Development shows an increased number of Kiwis are struggling financially, and many may not be aware they’re eligible for government support... More>>