Tiwai Point smelter decision could simmer till after election
New Zealanders may have to wait another month to find out if a deal will keep the Tiwai Point aluminium smelter open for a few more years beyond its slated closure date of August next year.
Broker Forsyth Barr said in early August it had been able to confirm a further decision on the smelter would be announced to staff in ‘‘four to six weeks’’.
That would have meant an announcement should have been made by now. The Government’s decision on August 17 to push back the election by four weeks could explain that.
A deal seems logical, and it is possible terms have been already agreed. But given the public mood on this issue, the Government may be in no rush to conclude matters until after the election.
It is hard to tell from majority owner Rio Tinto’s accounts whether the smelter is making or losing money overall.
In the long term, the age of the plant and a post-covid abundance
of cheap gas in the Middle East are among factors that point to the plant becoming uneconomic.
But it is in the interests of Rio Tinto, major power supplier Meridian Energy, consumers and the Government to reach a deal to keep the smelter open a while longer. If that was not true before the onset of Covid, it is now.
Any bravado there might have been about Southland’s ability to drum up 1000 jobs to replace those of smelter employees and contractors has evaporated.
It is true the smelter pays far less for its power than consumers – about 5 cents per kilowatt-hour for power generated from Meridian’s Manapo¯uri hydro scheme.
But it has been a profitable arrangement for Meridian. Even 3c/kwh would be better than next to nothing, which is about what Meridian could expect for much of its power from Manapo¯uri for a few years if the smelter closes.
Until Transpower can upgrade the national grid so power from Manapo¯uri can be diverted to other big energy users, the boot was always going to be on Rio Tinto’s foot.
Energy Minister Megan Woods has ruled out a ‘‘direct subsidy’’ for the smelter. But if the alternative really is closure, then it will make sense for the Government to support an arrangement that sees the smelter pay less in lines charges to Transpower to keep it open until 2024 or 2025.
Any reduction in the smelter’s $60 million annual Transpower bill would mean other power users, potentially including consumers, would need to make up the difference.
But if the smelter closed, they would need to shoulder that burden entirely, given the smelter’s exit would not appreciably cut Transpower’s costs.