Smelter anticipates rise in profits as potline reopens
Tiwai Aluminium Smelter and Bluff Harbour.
The BusinessNZ Energy Council has welcomed the reopening of a potline at NZ Aluminium Smelters at Tiwai Point near Invercargill after a new deal with Meridian Energy for part of its electricity consumption .
It comes on the back of a 23 per cent rise in international prices for aluminium, and four years after a $30 million government subsidy was paid to NZAS.
The last published accounts for NZAS revealed a $25 million profit in 2016, down on the previous year, but the 2017 profit is expected to be considerably higher and will be published later this month.
David Caygill says the Tiwai smelter deal shows the energy market is working well.
BusinessNZ Energy Council chair David Caygill said the agreement indicated the strength and competitiveness of the energy market in New Zealand.
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It showed the the electricity market was working and the benefits to manufacturing in New Zealand given its high proportion of renewable electricity generation, Caygill said.
Soon-to-retire Gretta Stephens, general manager and chief executive of NZAS Tiwai Aluminium Smelter, has announced a forth pot line will be restarted.
Aluminium at NZAS produced 10 times less carbon than aluminium made in countries where coal generated a higher proportion of energy, he said.
NZAS closed the line 4 quarter potline at Tiwai Point in 2012 citing unprofitability and high electricity prices but now it will be reinstated after signing a fixed-term power agreement with Meridian.
The contract, underwritten by Meridian and supported by contracts with Contact, Genesis and Mercury, runs until December 2022.
The new contract, underwriting NZAS's price risk relating to an additional 50 Megawatts per hour, is separate to Meridian's main electricity agreement with NZAS that provides 572 MWh per hour of electricity to 2030, Meridian Energy chief executive, Neal Barclay said.
NZAS general manager Grett Stephens said it was quicker to close a potline, which could take six months to restart, with one of the delays being recruitment and training of 32 new staff.
She said the 23 per cent rise in aluminium wouldn't necessarily equate to the same increase in profits depending on the cost of other inputs.
However, a weaker New Zealand currency should help lift local profits.
In 2012 the owner of NZAS, Rio Tinto, announced a corporate repackaging of some of its smelters to facilitate a sale - "that hasn't been changed", Stephens said.
Stephens said the $30m government subsidy in 2013 came at a time the company was paying high spot prices for electricity.
The Finance Minister at the time, Bill English, said it would help help secure a revised contract with Meridian "because of the importance of the smelter to the stability of the New Zealand electricity market" and because it offered investors more certainty ahead of the Government's privatisation of Meridian.
- Stuff
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