Meridian, Rio Tinto In Dispute Over Outage Costs

Wednesday, 6 May 2009, 12:43 pm
Press Release: NZ Energy and Environment Business Week

NEW ZEALAND ENERGY & ENVIRONMENT BUSINESS WEEK

For Immediate Release:

6 May, 2009.

Meridian And Rio Tinto In Dispute Over Potline Outage Costs

New Zealand Energy & Environment Business Week reports Meridian Energy and Bluff smelter owner Rio Tinto have reached for their lawyers over who should pay the very substantial costs of the transformer failure which has reduced electricity demand and aluminium output by one-third from Rio's Tiwai Point aluminium smelter.

Tiwai Point consumes around 15% of all electricity produced in NZ and is supplied on a "take or pay" basis by Meridian Energy, which manages the Manapouri catchment and generation assets, built largely to service the smelter. Neither company will comment on the dispute, which involves Rio Tinto invoking "force majeure" clauses in their contract for power from Meridian, following the failure of the decades-old transformer.

In a statement to NZ Energy & Environment Business Week, smelter owner Rio Tinto Alcan said it has “an extremely good relationship with Meridian Energy and works closely with them on all matters in relation to the energy supply contract. That contract and discussions relating to it remain confidential to Meridian and Rio Tinto.”

The transformer failed last November, removing on average 194MW of demand from the national grid. Rio may be in no hurry to resume production despite the reduction in output of aluminium from the smelter, which produces some of the world’s purest supplies of the metal.

Last month, Rio’s bauxite and alumina president Steve Hodgson announced the company would slow the expansion of its Yarwuna refinery and reduce bauxite production at its Weipa mine in response to “a sharp fall in alumina and aluminium prices.” Hodgson says there’s been little improvement in prices even after the industry cut capacity by 21m tonnes a year. He says “at current prices around 70% of the industry is currently operating at a financial loss.”

ENDS

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