Southland's Tiwai Point aluminium smelter is making a profit again, helped in part by taxpayers forking out a $30 million grant last year and a cheaper power deal with the Government's half-owned power company Meridian.
Rio Tinto, the majority owner of the smelter, reported yesterday a statutory profit of $67 million for 2013, a vast turnaround from a $548m loss in the previous year, which was hit by massive asset writedowns.
However, Rio Tinto said the latest year was disappointing again, highlighting an underlying loss of $18m. That reflected one-off "non-cash" adjustments of $85m, related to the value of financial instruments linked with its power contracts.
Rio Tinto Alcan (NZ) operating as Pacific Aluminium, owns 79 per cent of NZ Aluminium Smelters (NZAS). Rio reported revenues of $655m in the latest year.
Last year, the smelter renegotiated its power contract with Meridian Energy, to pre-2013 price levels, and also picked up a $30 payment from the Government to keep it running.
The annual report shows that if Rio Tinto publicly announces a review of the ongoing viability of the smelter before the end of June 2015, it needs to pay back the $30m.
The power deal and grant last year was aimed at saving 800 jobs after NZAS threatened to move its business overseas. But even so, the Government only has a commitment from the company to stay until January 2017.
The annual report just out shows Rio Tinto had positive operating cashflows of $30m in the 2013 year, including $23.8m in the taxpayer "incentive" payment.
But the positive cashflow was a sharp improvement on the $50m negative cashflow in the year before.
The grant was recognised in the accounts over two years.
NZAS chief executive and general manager Gretta Stephens said in 2013 alone, NZAS managed to save $28m through continuous improvement initiatives.
"While unfavourable economic conditions continue to put considerable pressure on the smelter, we are doing everything in our control to improve our ongoing commercial position."
During 2013 and to date in 2014, the smelter continued to face significant challenges from a combination of low international metal prices, the strong New Zealand dollar and the high cost of delivered power, she said.
"We have a proud tradition of employing generations of Southlanders and contributing hundreds of millions dollars to the New Zealand economy every year and we intend to work as hard as we can so that NZAS can keep making that contribution in the future," Stephens said.
The result does not include the 21 per cent of NZAS owned by Sumitomo Chemical Company.
Rio Tinto's financial report filed with the Companies Office shows a net profit of $66.7m for the 2013 December year.
The renegotiation of the power contract with Meridian and performance improvements at the smelter had been largely offset by a combination of low metal prices and a high New Zealand dollar exchange rate, which was reflected in the $44m fall in metal revenues.
During the year the cash price for aluminium on the London Metal Exchange was US$1845 a tonne, down 9 per cent on 2012.
Total aluminium production at Rio's 79.36 per cent-owned NZAS operation was 325,000 tonnes, down 1 per cent on the previous year.