The threatened Tiwai Point aluminium smelter will keep operating through to the end of December 2024, in a new deal just announced to the New Zealand stock exchange.
Mining conglomerate Rio Tinto announced last year it was closing Tiwai due to high energy and transmission costs.
Meridian Energy said that global mining giant Rio Tinto, Tiwai’s owner, has accepted a new contract.
Meridian Energy’s chief executive Neal Barclay said it should provide more certainty to the people of Southland.
He said it is still planning for the eventual exit of the smelter but will now accelerate other opportunities.
The extension of time for Tiwai smelter will help extend around 1000 jobs in Southland. Another 1600 owe their income to contracting and services required to keep the plant running.
Rio Tinto, which had proposed to close the smelter by August this year, said the extra three years operation will provide time for better planning for after the smelter closes in 2024.
In a statement it said it gives Rio Tinto, Meridian, the government and Southland time to plan and provides certainty for staff.
Rio Tinto said the new agreement with Meridian covers new power pricing making the smelter “economically viable and competitive over the next four years”.
NZ Aluminium chief executive and general manager Stu Hamilton told RNZ’s Summer Times programme that the workforce would in large remain intact.
“It means that we need to keep running the operation at full production through to 2024. That means we’re going to need most of our people for most of that time.”
The negotiation process has been going on for 14 months with numerous stakeholders, including Meridian and also local and national government, he said.
Asked what changed, he said it has been a discussion about how to get a competitive price for power that makes the smelter commercially viable.
“Through the discussions we have now come up with a deal which means that we are comfortable that the smelter is in a much better commercial space to commit to that four years of operation.”
He said they still needed to look at transmission pricing to ensure the smelter was insulated from the ups and downs of the market.
There are no subsidies involved, it was a commercial deal.
He said the announcement was great news for Southland and the wider New Zealand economy as it meant turning renewable hydro electricity into pure aluminium, generating significant earnings for the economy.
No certainty for workers at year’s end
The Labour Party campaigned on keeping the aluminium smelter open for another three to five years, during last year’s election campaign.
In December, government ministers flew into Invercargill, but they were unable to provide any certainty for workers.
Ngāi Tahu also entered the fray with Te Runaka o Awarua Upoku, Sir Tipene O’Regan, sending a letter to Rio Tinto last month calling on the mining giant to give local Māori a voice in the process.
Sir Tipene said when Rio Tinto eventually leaves, iwi do not want to see the surplus energy supplied by Manapōuri hydro station going to waste and had a vision for a green hydrogen production in the future.
But firstly the iwi was concerned with a managed exit so not to cripple the region’s economy and to ensure Tiwai Point was appropriately remediated once the smelter’s doors closed.
At the time Rio Tinto refused to comment, saying they did not want to conduct negotiations through the media.
Minister of Energy and Resources Megan Woods said last month that the government was doing all it could to ensure Rio Tinto kept operating the smelter for another three or more years beyond its anticipated closure in August 2021.
The government was also determined to avoid a toxic wasteland being left behind, she said.