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Tiwai Point smelter's earnings plunge

NZ NewswireNZ Newswire 30/05/2016 Pattrick Smellie

The Tiwai Point aluminium smelter made an underlying profit after tax of $54 million in the year to Dec. 31, just $2m less than the previous year's profit, although only $4m of that was made in the second half of the financial year.

Rio Tinto-controlled New Zealand Aluminium Smelters will decide by the end of July whether to sign a new electricity contract for 172 Megawatts of its total 572MW load at a new, higher price and warned in Monday's statement that the smelter is "facing even tougher conditions in 2016" than it did last year.

The international benchmark price of aluminium averaged $US1,661 ($NZ2,478.55) a tonne in 2015, down 12 percent on 2014, and was quoted on the London Metals Exchange on Monday at $US1,550 ($NZ2,312.92) a tonne.

Still, the reduced metal price was "offset by higher premiums and a weaker New Zealand dollar" which contributed to a $34 million improvement in metal revenues.

Total production of 335,291 tonnes was 2.1 percent higher than the previous year.

NZAS was to have decided before now whether to take up its 172MW tranche of electricity at a higher price than was negotiated in 2013, when the smelter played hardball with Meridian Energy for a cut to its power prices just ahead of Meridian's partial privatisation, securing a $30m government one-off payment in the process.

Meridian is the main supplier to the smelter, which uses around one-seventh of the electricity produced in New Zealand.

However, delays to the Electricity Authority's final recommendations on grid charging saw the decision pushed out to July.

The electricity regulator had originally proposed grid reforms that could have saved NZAS as much as $60m a year, but those were toned down.

South Island major industrial electricity users and generators, including Meridian, are the primary beneficiaries of the proposed changes, which would not take effect until 2019.

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