A decision to keep the Tiwai Point aluminium smelter open appears increasingly likely, and shares in Meridian Energy and Mighty River Power gained yesterday before Monday's scheduled announcement on the future of the Bluff industrial plant that uses about 13 per cent of all the electricity generated in New Zealand.
Meridian and Mighty River Power shares both closed higher at $2.25 and $2.76 respectively.
Meridian is presumed to be a winner from whatever is announced because it could expect to sell the 572 megawatts of electricity it now provides to Tiwai Point at a price better than the discounted level it renegotiated in 2013 before its partial privatisation.
The smelter's majority owner, Rio Tinto Alcan, will make the decision on whether to keep the smelter open based on a complex mix of six-year lows in global aluminium prices, offset by a strongly falling New Zealand dollar, its ability to negotiate a new electricity contract for 172MW of the 572MW supplied by Meridian, and the cost of up to $400 million it would immediately face to clean up the Bluff site if it were to close the plant.
The remediation costs are widely regarded as one of the main reasons Rio Tinto is expected to try to keep the smelter running, even if it struggles to be cash-flow positive, let alone profitable.