New Zealand’s Aluminium Smelter (NZAS), based in Tiwai, Southland, New Zealand, recently secured energy supply through a portfolio of contracts with Meridian Energy, Contact Energy, and Mercury Energy. This will ensure the smelter has the power it needs to continue operating until at least 2044 — providing certainty to employees and the local community and supporting New Zealand’s contribution to a low carbon future.
“With these agreements concluded, the uncertainty for our hard-working team members and Southland is now over, and we can get on with producing the aluminum New Zealand and the world needs for its energy transition,” said Chris Blenkiron, chief executive of NZAS.
Meridian Energy, Contact Energy, and Mercury have concluded 20-year deals with NZAS to provide price certainty for the smelter and supply the 572 MW it needs to continue producing high purity aluminum for global export and domestic supply. The agreements are also likely to underpin development of further renewable energy projects.
The agreements follow 18 months of complex negotiations. However, Blenkiron noted that these negotiations had been carried out in a spirit of openness, with all parties focused on the sustainable future of one of the country’s largest export earners, along with the smelter’s ability to act as a battery for the New Zealand energy system.
“It has been a long process to get to today’s announcement, but worth the effort to secure a long-term future for New Zealand’s smelter and the many benefits associated with this,” said Blenkiron. “We have been deliberate and taken our time, to ensure we see a new, long term and sustainable future for the smelter, and give that certainty to our employees, Southland, and New Zealand.”
In addition, to the power supply agreements, NZAS has signed two separate demand response contracts with Meridian and Contact will enable the Tiwai smelter to make up to 185 MW of electricity available to the national grid in times of severe shortage. This essentially makes the smelter the largest battery in New Zealand.
“When our demand response is called on, it effectively means New Zealand will have to burn less coal at Huntly, ultimately reducing New Zealand’s carbon emissions,” said Blenkiron. “We believe this is one of the largest single site, long duration demand response agreements, in terms of percentage of national grid, anywhere in the world. Implementation of the demand response will have an impact on the smelter’s production. The agreements announced today will see NZAS compensated for this loss in production volume.”
Blenkiron notes that the potential demand response of up to 185 MW was the approximate equivalent of the energy supply needed to power nearly a quarter of a million households. “As a very large user of electricity, NZAS recognizes the impact we have on the demand for electricity in New Zealand. Making up to a third of our supply available to help New Zealand is something we are happy to do to make sure that we play our part in the wider energy sector and help to keep the lights on,” he said. “Added demand response capacity will be invaluable as New Zealand’s energy demand, and climate change, increase demand on the national grid.”
In addition to providing energy supply and demand response, these agreements will also support the potential development of new renewable wind projects in the region. This provides a providing a further boost to the security of electricity supply for New Zealand.
“We are pleased the long-term future of the Tiwai Point smelter has been secured with these agreements, which were reached with a genuinely collaborative spirit between all parties,” said Jérôme Pécresse, chief executive of Rio Tinto Aluminium. “They give us confidence that our New Zealand workforce and assets can continue competitively producing the high purity, low-carbon aluminum needed for the global energy transition. This is an exciting new chapter, and we would like to thank everyone involved, including our new energy partners, our local Indigenous partners Ngāi Tahu, the Southland community, the New Zealand government and our NZAS workforce for their support in getting us here today.”
Shifting Ownership
NZAS is currently 79.36% owned by Rio Tinto. Recently, Rio Tinto announced that it has entered into an agreement to acquire Sumitomo Chemical Company Limited’s 20.64% interest in the for an undisclosed price. On completion of the transaction, NZAS will be 100% owned by Rio Tinto.
The transaction is subject to various conditions precedent, including regulatory approvals from New Zealand’s Overseas Investment Office and Australia’s Foreign Investment Review Board, as applicable.