Rio Tinto to keep NZ aluminium plant open until 2044
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The news: Rio Tinto-owned New Zealand Aluminium Smelters (NZAS) has signed 20-year electricity arrangements that will keep its Tiwai Point aluminium smelter operating until at least 2044.
The numbers: NZAS, which owns and operates New Zealand's only aluminium smelter, has signed contracts with electricity generators Meridian Energy, Contact Energy and Mercury NZ to set pricing for an aggregate of 572 megawatts (MW) of electricity to meet the smelter’s full electricity needs.
The agreements, which are subject to regulatory approvals and other conditions, are expected to commence in July 2024 and run until at least 2044.
The new electricity arrangements include 20-year demand response agreements with Meridian Energy and Contact Energy, under which NZAS may be requested to reduce electricity consumption by up to a total of 185MW.
In a separate transaction, Rio Tinto has secured 100% ownership of NZAS after agreeing to buy the 20.64% interest held by joint venture partner Sumitomo for an undisclosed price.
Rio Tinto has also entered into an agreement, for an undisclosed price, to acquire Tokyo-based Sumitomo's 2.46% interest in Boyne Smelters, which owns and operates the Boyne Island aluminium smelter in Gladstone, Australia. On completion of the deal, Rio Tinto’s interest in Boyne Smelters will be 61.85%.
The context: Rio Tinto said the sale and purchase transactions are part of Sumitomo's business portfolio transformation. Each transaction is subject to various conditions precedent, including regulatory approvals from New Zealand’s Overseas Investment Office and Australia’s Foreign Investment Review Board.
The Tiwai Point smelter accounts for around 13% of New Zealand's national electricity demand, but questions over the viability of the business due to high energy costs and a softening aluminium industry saw Rio consider its closure in 2021.
What they said: Rio Tinto's aluminium chief executive Jérôme Pécresse said: "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".
"They give us confidence that our New Zealand workforce and assets can continue competitively producing the high purity, low-carbon aluminium needed for the global energy transition," he said.
The sources: Rio Tinto media release, ASX announcement, ASX announcement
