Meridian ready to bargain with Rio

COLLETTE DEVLIN AND JAMES WEIR
Last updated 05:00 08/12/2012

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Rio Tinto will resume talks with Meridian Energy before Christmas to negotiate its electricity contract at the Tiwai Point aluminium smelter, with Meridian bosses yesterday saying there was room for bargaining.

Meridian chief executive Mark Binns confirmed yesterday that it had plans to meet with Rio Tinto as part of its ongoing negotiations.

This year, Rio Tinto said the 40-year old smelter could close if it could not secure cheaper electricity prices from Meridian and asked Meridian to look at the contract and decide if it was prepared to change it "in a number of ways".

Meridian has a binding contract with New Zealand Aluminium Smelters, signed in 2007 and covering the 18 years from January 1, 2013. Mr Binns told The Southland Times yesterday Rio Tinto had approached the power company about further discussions a few days ago.

"We were expecting to hear back from them after the last talks in September but we didn't know when," he said.

Meridian then told Rio Tinto of the areas they were prepared to make amendments "in a number of ways" and the areas they were not, he said. However, the content of the talks remained "confidential".

The Meridian board had an obligation to act in the best interests of the company and what it was contractually entitled to, he said.

"We have looked at what our cash flows position would be and the various scenarios in the electricity market, if Rio Tinto left [negotiations]." There was room for bargaining because if Rio Tinto did leave it could destroy Meridian's value, he said.

Meridian was "starting from the position where we would like Rio Tinto to stay" and there were some aspects it was prepared to look at, he said.

"Undoubtedly there will be more on that later in the year, or early in the new year, as matters develop."

NZAS general manager Ryan Cavanagh said he hoped positive progress could be made because urgent action was needed to return NZAS to viability.

"NZAS is having further discussions with Meridian Energy before Christmas to try and negotiate a more competitive power contract from 2013 and beyond. Our focus remains on trying to do everything we can to return NZAS to viability."

Many of the smelter's suppliers had worked with them to help return NZAS to viability as it faced "extremely difficult market conditions," he said.

"We believe it's in everyone's interest to find a commercial solution with Meridian Energy at the earliest possible opportunity." collette.devlin@stl.co.nz

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