Meridian And NZAS Sign Long Term Contracts

Meridian Energy and New Zealand’s Aluminium Smelter (NZAS)1 have signed a package of conditional 20-year contracts for part of the NZAS Tiwai Point aluminium smelter’s electricity needs. The package includes a long-term fixed price contract for wholesale electricity price cover and a significant demand response agreement.

Meridian Energy Chief Executive Neal Barclay says the agreement is an excellent result after many years of hard work.

“This is a fantastic outcome for New Zealand and the Southland region. It’s further proof that large industrial businesses can utilise New Zealand’s renewable energy advantage and create low carbon sustainable products, high value jobs and export dollars for our country.”

“We are very pleased that the NZAS team have adopted a more flexible approach toward their

operations. The demand response element of this new agreement is groundbreaking, not only for this country but globally. The level of flexible demand offered by NZAS will support the electricity system to become even more renewable, while relying less on coal and gas when the hydro lakes are low.”

Mr Barclay says the contracts are also a good result for Meridian.

“This new package of contracts is commercially sustainable and delivers value for our shareholders, so we are talking a real win-win here. The NZAS decision to extend the smelter life removes significant

uncertainty for the electricity sector, which also helps pave the way for new renewable energy to be built.”

Meridian will now consider implications on future pipeline investment and dividend policy. An update on the dividend policy can be expected at Meridian’s full year results briefing in late August.

Key terms of the long-term contracts include:

• 377 MW base load volume from 2025
• pricing that begins 1 July 2024 with a 20-year term, up to and including 31 December 2044
• four demand response options, ranging from 25 MW to 185 MW – an upper limit that roughly equates to one of Huntly’s Rankine units. Three quarters of a called option will come off Meridian’s contracted volume

The new arrangements will replace all the current arrangements between Meridian and NZAS, with the current arrangements terminating when the new arrangements take effect.

The contracts are conditional on satisfaction of conditions precedent, which include regulatory approval from the Electricity Authority. If approval is given, the contracts will take effect from the later of 1 July 2024 and the date Meridian confirms to NZAS that all conditions precedent are satisfied or waived. If conditions precedent are not all satisfied or waived before 31 December 2024, the contracts will not come into effect.

NZAS has provided Meridian with a letter setting out their commitment to environmental remediation of the smelter site, including details of their work to date with key stakeholders. A copy of the environmental remediation letter accompanies this release.

A copy of the long-term electricity contract, the demand response agreement and the other related conditional contracts signed by Meridian and NZAS are available here. A summary of the key terms of the long-term electricity contract and the demand response agreement accompanies this release.

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