14 January 2021

Tiwai aluminium smelter to stay open until end of 2024

News article from Southland Times

The Tiwai Point aluminum smelter will continue operating until the end of 2024.

NZAS issued a press release on Thursday morning saying it had reached an agreement on a new electricity agreement with Meridian Energy that allowed New Zealand’s Aluminium Smelter (NZAS) to continue operating the Tiwai Point aluminium smelter until December 31, 2024.

The extension provides certainty to the plant’s employees, the Southland community and customers while providing more time for all stakeholders to plan for the future.

While discussions with the New Zealand government are progressing in relation to their commitment to address the smelter’s high transmission costs, a new agreement has been reached with Meridian Energy in relation to power prices, making the smelter economically viable and competitive over the next four years.

The extension also provides time for detailed closure studies to be completed and for NZAS to support the government and Southland community in planning for the future.

Plans for eventual closure of the Tiwai Point smelter will include extensive stakeholder consultation, including within the Southland community and reflect the company’s robust closure and remediation standards.

Rio Tinto Aluminium chief executive Alf Barrios said: “We are pleased to have reached an agreement with Meridian Energy that will enable the Tiwai Point smelter to continue producing some of the lowest carbon aluminium in the world.

“This agreement improves Tiwai Point’s competitive position and secures the extension of operation to December 2024. It also provides Rio Tinto, the New Zealand government, Meridian, and the Southland community more time to plan for the future and importantly gives our hard-working team at Tiwai and our customers the certainty they deserve.”

In July 2020, Rio Tinto announced the conclusion of a strategic review of the smelter and a decision to wind down operations by August 2021 due to high energy and transmission costs.

NZAS is a joint venture between Rio Tinto (79.36%) and Sumitomo Chemical Company Limited (20.64%).

It employs around 1000 people directly and creates a further 1600 indirect jobs in Southland.

Mayor’s ‘euphoria’ over Tiwai announcement

Southland mayoral forum chairman Tracy Hicks said it was a good way to start 2021.

The announcement gave certainty to Tiwai and all its employees and contractors who derived their income from the plant, and it gave the province time to develop other industries for the future.

“I am feeling really pleased we have got to this point … there’s breathing space to explore and develop other opportunities for Southland which is the most important thing,” Hicks said.

“We have been very dependent on Tiwai. If it’s not there the whole economy of Southland gets a bit out of whack and we need to build resilience.”

Hicks said he had no doubt the energy from Manapouri power station could be used for future projects when the smelter did eventually close.

“Euphoria”, is how Invercargill Mayor sir Tim Shadbolt described the news.

“What a great way to start the new year.”

However, he reiterated the region needed to continue developing other industries including aquaculture.

“This gives us a wider time frame to look at other options.”

Government says transition plan can now be mapped out

Deputy Prime Minister Grant Robertson and energy minister Megan Woods, who have been negotiating with Rio Tinto to keep the smelter open, said the deal provided welcome certainty to the Southland community by protecting jobs and incomes as the region planned for the future.

“The Government is committed to working on a managed transition with the local community,” Robertson said.

“The Government has been focussed on helping to ensure a deal is reached which kept the smelter open for longer than the year initially proposed by Rio.”

The four-year deal would help protect jobs and incomes in Southland and provided a timeline for the Southland community to work alongside the Government to map out a clear transition plan for the region for the time when the smelter shut down, Robertson said.

“The strong relationship between the Government, local authorities and the Southland business community means we are in a good position to map out a transition plan which allows for high wage jobs to remain in Southland as the region transitions, while providing new opportunities for economic growth in the region,” Woods said.

Meridian’s announcement that it was actively developing new growth opportunities for when Tiwai closed, including process heat, IT infrastructure and green hydrogen, highlighted the opportunities for high-paying jobs that the Southland region had as the transition was made.

“The strong relationship between the Government, local authorities and the Southland business community means we are in a good position to map out a transition plan which allows for high wage jobs to remain in Southland as the region transitions, while providing new opportunities for economic growth in the region,” Woods said.

“Today’s news is particularly welcome given the economic uncertainty created by the global Covid-19 pandemic. New Zealand’s strong economy compared to the rest of the world, and steady political system, means this country is a great place to do business, and we welcome this commitment from Rio to continue its operations in Southland for the next four years,” Robertson said.

The Government and Rio Tinto remain in discussion around transmission pricing and remediation of the smelter site.

“Understanding the extent of the environmental impact of the smelter and removal of toxic waste from this site remain a bottom line for the Government,” Robertson said.

Contact Energy chief executive Mike Fuge also welcomed the news that the life of the smelter would be extended until at least the end of 2024 while an economic transition for Southland was developed.

“Today’s announcement of the deal between Meridian and NZAS ensures sustainable smelter operations in the medium term and allows time to plan for an ultimate exit of New Zealand’s largest energy user. This is great news for Southland and New Zealand, global carbon emissions, and Contact’s shareholders.”

As part of the arrangement, Contact has agreed to supply Meridian Energy with a portion of the electricity required to power the NZAS smelter at Tiwai Point. Contact will provide an average of 100 megawatts of baseload electricity through until the end of 2024 (assuming the smelter requires 572 megawatts of electricity).

“We are pleased to have played our part in helping secure the financial sustainability of the unique low-carbon smelter at Tiwai and retain the 1,000 high-paying jobs in Southland and the 1,600 associated contractor and supplier roles too,” Mr Fuge said.

“Many other jobs around New Zealand would also have been lost if there was a disorderly exit.”

Labour List MP Dr Liz Craig said the Tiwai announcement was fantastic news for Southland and it would provide certainty for Tiwai workers and the businesses that relied on Tiwai for much of their income.

“Extending operations until December 2024 also benefits the wider region, by allowing time for the community to prepare and for other industries to emerge”.

“The transition is an incredible opportunity for Southland, with other initiatives like data centres and green hydrogen already being proposed. Today’s announcement now provides the timeframe for the Government to work alongside local Mayors, iwi, the Southland business community and others to map out a transition plan for our region”.

Invercargill MP Penny Simmonds said the deal between Tiwai Point and Meridian Energy to keep the smelter open until the end of 2024 was good news for the staff, contractors and wider Southland community.

“Tiwai Point is an important part of Southland’s economy and it is vital to have this certainty for the next four years. This extra time creates an ideal opportunity to work through a transition to new options for Southland and the energy industry.”

A number of new opportunities were being discussed around hydrogen and the Tiwai extension would create the space to do the business case and take the community along.

“National will be working proactively with interested parties to ensure this key industrial site continues to benefit the local and national economy for future years,” Simmonds said.

Southland Chamber of Commerce president Neil McAra said the smelter extension was very good news which would bring certainty to smelter staff and the wider business community for the next four years.

But it was important the Southland leaders now refined their plan for the longer term prospects for the region.

“That work should continue on.”

In the long term Southland wants to use the power generated from the Manapouri power station, currently used by the Tiwai plant, to create employment, he said.