Meridian Energy Ltd. agreed to provide all the electricity requirements of New Zealand Aluminium Smelter Ltd. until 2030, ensuring the plant at Tiwai Point near Invercargill remains open.
Meridian will deliver 572 megawatts of power from Jan. 1, 2017, “at more competitive rates for the smelter,” the Wellington-based company said in a statement Monday. NZAS, which is 69 percent owned by Rio Tinto, said the arrangement secures the short-term security of the nation’s only aluminum smelter.
Meridian, New Zealand’s biggest power company, agreed in 2013 to supply power to the smelter while including incentives for NZAS to seek as much as 172 MW of power from other generators, which would allow Meridian to sell that power at market prices.
“While Meridian is disappointed NZAS was unable to reach an agreement with other parties, it believes the new arrangement provides pricing for the 172 MW that is more in line with market expectations,” Meridian Chief Executive Officer Mark Binns said in the statement.
Meridian has been able to gain support from other parties to warrant it covering the extra volume, he said. Contact Energy Ltd. has agreed to supply 80 MW and Genesis Energy will supply 50 MW, the companies said today.
NZAS said it has retained the flexibility to reduce load or terminate the contract based on market conditions.
“While we’ve taken a positive step today, our combined electricity and transmission prices are still not internationally competitive,” NZAS Chief Executive Officer Gretta Stephens said.
Worldwide demand for high-quality aluminum is increasing through automotive and electronics manufacturers, she said.
“If we can continue production at NZAS, we will be able to take advantage of this future market potential which is good news for Southland and good news for New Zealand,” Stephens said.