Meridian would consider new wind farm if Genesis closes Huntly

Thursday 12th November 2015

Meridian Energy chief executive Mark Binns says a new wind farm is one of the options on the table if the country's biggest electricity generator can't convince Genesis Energy to keep open two ageing gas and coal-fired electricity plants at the Huntly power station.

The Wellington based company is urging Genesis to keep open two 250 megawatt Rankine units at the Huntly plant to protect the country's security of electricity supply, but Binns told Parliament's commerce select committee he has other options available if Genesis persists with its planned closure.

"We are talking to a couple of parties about putting in gas peakers - I can't name those parties, but I don't think you'd have to be Einstein to figure out who they are," Binns said. "In addition to that, we are looking at the flexibility around our lakes in the South Island and also reviewing where we are with our next generation option, which would obviously be wind."

When asked when a decision would be made on a potential wind farm investment, Binns said he would wait until at least mid to late next year.

"It would take some time for us to be able to conclude any deal with Genesis if one can be achieved. They're quite complex arrangements."

Last week, Binns told shareholders at Meridian's annual meeting that the closure of the Huntly units risked leaving New Zealand exposed to possible power shortages in the event of a drought sapping hydro storage. Genesis decided to scale back its coal and gas fired generation due to tepid demand, rising availability of generation from geothermal stations, and the added capacity between the islands after the Cook Strait Cable upgrade.

Binns said the scaling back of generation did address some of the supply issues that could be caused if the Rio Tinto controlled Tiwai Point smelter closed down. The smelter's future continued to hang over the industry, given that it uses 12 percent of the country's generated electricity, "because nobody wants to build a lot of new plant if Tiwai Point can go on 12 months notice."

The aluminium smelter has forced reductions in the price it pays for electricity in response to low global metal prices, and continues to operate on electricity contracts that could be abandoned as early as January 2018.

"That right to leave on 12 months notice is something they keep right through the balance of the contract to 2030," Binns said. "It's an issue that everybody has to factor into their decisions, and what I think it will mean is that when we do need new plant, it will probably be a sequence of smaller investments."

If the smelter does shut down, Meridian would probably compete more aggressively for retail customers, though the impact won't be as severe given the scaling back of electricity supply.

The company's shares slipped 0.2 percent to $2.19, and have gained 28 percent this year.

BusinessDesk.co.nz

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