New Zealand's largest electricity producer,Meridian Energy has resumed talks with Rio Tinto Alcan,the majority owner of the Tiwai Point aluminium smelter over Rio's request for changes to 18 year contracts for power supply that kick in on January 1.
Mr Mark Binns CEO of Meridian said that Rio had recently come back to resume discussions after Meridian set out what it was and was not prepared to renegotiate in the contracts which were signed in 2007 and account for about one seventh of total electricity consumption in New Zealand.
Since then,aluminium prices have fallen steeply on global markets,while on the domestic front Meridian and other electricity generators are heading into their sixth year of flat demand as the economy undergoes a sluggish recovery and industrial users contract invest in efficiencies and seek alternative fuel sources.
Mr Binns said that"We have reviewed the contracts some time ago and have advised Rio Tinto of areas in which we are prepared to look at some amendments,and areas where are we not prepared to look at amendments.I can't elaborate on where we have drawn the line."
Rio Tinto Alcan,the Canada based aluminium arm of the Anglo Australian metals giant is seeking to sell its interest in the smelter at Tiwai Pt along with a clutch of other relatively ageing smelters in Australia and has packaged the assets as a new subsidiary,Pacific Aluminium.Rio has indicated it does not expect a quick sale.
Mr Binns would not confirm comments by Prime Minister Mr John Key that the first 3 years of the contract arrangements were set in stone,except to say that the prime minister's not a silly man and that there was no question that the new contracts would come into force from January 1.
On criticism by competitors of the company's decision earlier this year to build the Mill Creek wind farm behind Wellington,Mr Binns conceded the project was on the cusp of commercial viability in a negative scenario but that the board and senior management were confident it would earn its cost of capital.On balance,we thought it would be overall positive.
He took a poke at Dennis Barnes the chief executive of NZX listed rival Contact Energy saying that Meridian could have questioned its decisions to build gas storage facilities in Taranaki and the new Te Mihi geothermal plant at Wairakei.We could be critical but I won't be because Meridian was no closer to the detail of Contact's business than Contact is to Meridian's.
Mr Binns said that"I suppose the last guy who built the last power station will always criticize the next guy.Meridian green lit the USD 169 million,26 turbine project in June.As the largest and most valuable government owned electricity company.Meridian is ready for partial privatisation in the event the government decides to proceed with a sale and that it has established a permanent due diligence room"allowing all relevant company records to be kept up to date."
