Rio Tinto approaches Meridian to changes Bluff power supply contract

Thursday 9th August 2012

Meridian Energy, one of the state-owned power companies earmarked for partial sale, says Rio Tinto's Pacific Aluminium unit wants to vary the terms of its electricity supply contract for the aluminium smelter at Bluff.

"Discussions are ongoing and remain confidential," Meridian said in a statement to the NZX.

The Bluff smelter was built partly to create a market for the huge hydro-electric output of the Manapouri scheme, now owned and operated by Meridian. The terms of the power supply contract were renegotiated in 2007 with the new supply agreement set to begin in January next year.

The smelter, operated by New Zealand Aluminium Smelters (NZAS), is Meridian's biggest single customer and the contract due to kick in from Jan. 1 is for 18 years. The smelter consumes about one-seventh of New Zealand's electricity and the price has never been disclosed.

In its first-half accounts, Meridian described the contract as a "pricing agreement rather than a supply agreement."

"NZAS will be responsible for purchasing electricity from the national market itself, and Meridian will provide NZAS with price certainty for that electricity," Meridian said in February.

"The agreed base price under the new agreement is significantly higher than under the current electricity supply contract," it said.

The negotiations come as Rio Tinto looks to sell the Tiwai Point smelter along with 12 other aluminium producing assets in Australia. Japan's Sumitomo owns about 21 percent of the Bluff smelter.

BusinessDesk.co.nz

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