Rio Tinto in no position to dictate over Tiwai smelter.
Ominous sounds have been coming from the deep south since August when Meridian Energy announced it had been approached by Rio Tinto, majority owner of the Tiwai Pt aluminium smelter, seeking to renegotiate its electricity supply contract for the next 27 years. The world price of aluminium had fallen 30 per cent from a peak in April last year and Rio Tinto's returns from Tiwai Pt and several smelters it has in Australia had been further reduced by the strength of the currencies of both countries.
It would not have escaped the mineral giant's notice, either, that it was an opportune moment to put pressure on the New Zealand Government. The smelter is by far this country's largest electricity consumer, taking all the power from the Manapouri hydro station which was built purely for the smelter more than 40 years ago and produces 15 per cent of the nation's power. If the smelter were to close the electricity market would be flooded.
The mere possibility caused Contact Energy's share price to fall in August and put a cloud over the Government's plans to float shares in the other big generating companies.
Ominous noise was heard again this month when a union at the smelter went public with a rumour that Meridian had abandoned the talks. That rumour was denied by Meridian's chief executive, Mark Binns, last week but he also said Manapouri produced the cheapest power in the country and looked forward to national grid upgrades and changes to transmission pricing rules would allow the power to be distributed more widely.