Bluff smelter seeks power contract change

00:52, Aug 09 2012

The owners of the aluminium smelter at Bluff want to change their contract with state-owned electricity provider Meridian Energy.

Meridian Energy today said it had been approached by Pacific Aluminium, a business unit of Rio Tinto Ltd, to discuss potential changes to the electricity contract with the smelter.

Australian miner Rio Tinto is the majority shareholder in New Zealand Aluminium Smelters Ltd. Meridian said in 2007 it renegotiated the contract conditions with NZAS and signed a new electricity supply agreement, which takes effect in January 2013.

"Discussions are ongoing and remain confidential," Meridian said in a release through the NZX debt market.

The smelter was put up for sale by Rio Tinto last year, but with world aluminium prices having slumped 29 per cent in the last 12 months or so. Rio Tinto has said it is in no rush to sell.

The export-based smelter employs around 800 people.

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BusinessDay reported last month that NZAS said the company was facing tough market conditions as a result of low aluminium prices and pressures from the high New Zealand dollar exchange rate versus the United States dollar.

The company said it was leaving no stone unturned as it looked for opportunities to improve and sustain its business position. Meridian said NZAS was New Zealand's largest single user of electricity.

"As Meridian's biggest customer, NZAS uses approximately 40 per cent of Meridian's average total generation output," Meridian said.

"Meridian (and its predecessors) has supplied NZAX with electricity since the plant at Tiwai Point (near Bluff), Southland was commissioned over 40 years ago."

BusinessDay.co.nz