Government welcomes Meridian agreement

Meridian Energy’s agreement with New Zealand Aluminium Smelters (NZAS) will provide greater certainty for Tiwai Point smelter workers, the wider Southland region and the New Zealand electricity industry, Finance Minister Bill English and SOE Minister Tony Ryall say.

Meridian this morning announced it had reached an agreement with NZAS on a new electricity contract for the smelter.

“While the contract remains until 2030, the revised agreement between Meridian and NZAS’s shareholders demonstrates a commitment by NZAS to continue operating the smelter until at least January 2017,” Mr English says.

To help secure the deal, the Government has agreed to a one-off payment of $30 million to NZAS.

“This is a one-off incentive payment to help secure agreement on the revised contract because of the importance of the smelter to the stability of the New Zealand electricity market,” Mr English says. “It provides medium term certainty for Southland and New Zealand.”

Mr Ryall says the Government was not directly involved in the negotiations between Meridian and NZAS, which took more than a year.

“Meridian negotiated a commercial agreement that included returning the price of power paid by NZAS to around pre-2013 levels, in exchange for guarantees on the contract from or on behalf of NZAS’s parent companies.

“NZAS shareholders approached the Government for further assistance to return the smelter to viability in current market conditions,” Mr Ryall says.

“The protracted negotiations caused a great amount of uncertainty in Southland and in the electricity market in general, prompting the Government to explore whether it could step in to support a positive outcome.”

The Government funding will come from operating contingences for 2013/14. Mr Ryall says the agreement will provide some relief for smelter workers and the Southland economy, and greater stability for the electricity market in New Zealand.