Credit: Original article can be found here
Former Tiwai Point Aluminium Smelter general manager Tom Campbell says the closure of the plant could have been avoided if commercial common sense was used.
A former general manager of the Tiwai Point Aluminium Smelter believes its closure would not be on the horizon if the relationship between electricity generators and the smelter was seen as a partnership, rather than being ‘’almost hostile’’.
Rio Tinto said in an announcement on Thursday it would start planning for the wind-down of operations, and the eventual closure of the smelter following a strategic review which “showed the business is no longer viable given high energy costs and a challenging outlook for the aluminium industry”.
The planned closure, in August 2021, would result in the direct loss of 1000 jobs, with 1600 jobs indirectly connected to the smelter also under threat, the company said.
Tom Campbell, who started working at the smelter in 1981 and rose to general manager between 2000 and 2004, said he was angry at the closure announcement because it could have been avoided if ‘’commercial common sense’’ had been applied.
The Tiwai smelter was one of the more efficient plants in the world which produced the highest purity aluminium, had high labour productivity and was ‘’by no means’’ the oldest plant.
The only reason it was closing was because electricity was so expensive in New Zealand, he said.
He believed an electricity deal could have been done that would have served all parties.
‘’In my view a formula could have been arrived at that would have saved that plant.’’
The relationship between aluminium smelters and electricity generators in Europe, Canada and Australia were seen as a partnership, Campbell said.
‘’Whereas in New Zealand, for some reason, the relationship has been combative and almost hostile.’’
Electricity could be offered to smelters in those other countries at significantly lower prices than it was being offered to Tiwai, he said.
Rio Tinto owned Tiwai Point aluminium smelter, based near Invercargill, announced on Thursday the plant will close at the end of August 2021.
‘’All the smelters in Europe, Canada and Australia can somehow negotiate lower electricity costs than Tiwai can … why is it that Tiwai ends up with the highest electricity costs despite the fact Tiwai and Manapouri [power station] were actually built to service each other.
‘’That’s what makes me angry … in my view it’s a lack of willingness from the [electricity] generators to act with commercial common-sense. It’s infuriating because it did not have to be so.’’
Any business about to lose its biggest customer, with no new customers to take its place, would move heaven and earth to offer a deal that could not be refused, he said.
‘’Clearly this has not happened in this case.’’
There were no winners, he added.
‘’The electricity generators lose, Transpower loses, the workers at the smelter lose, the community of Southland loses.
‘’We have the crazy situation where the smelter will close, the electricity generators have no customers for the 600 megawatts of electricity that will be released, a lot of water will be spilled, and to get the electricity to the North Island will probably take 10 years and cost half a billion dollars which will have to be paid by the consumers.’’
A spokeswoman for Meridian Energy, the smelter’s largest electricity provider, did not respond directly to Cambell’s concerns.
But in a statement, she said Meridian had worked hard to provide solutions that it believed were of lasting value to the smelter ‘’but we were looking for a stronger commitment to New Zealand from them’’.
‘’The industry came together to offer the smelter what we believe was a good deal that not only included a reduction in electricity costs, but the industry was also prepared to add in a transmission underwrite.’’
The total value of the package was $50 million per year from day one, increasing to close to $60 -70 million per year over the next three years, she said.
‘’From Meridian’s perspective, we’ve been seriously negotiating with Rio Tinto for quite some time.
‘’We made a meaningful offer. But ultimately Rio Tinto has decided to walk away.
‘’Meridian is now in a position where we will wait to work with the smelter owners on an orderly exit.’’
Last week, Rio Tinto aluminium chief executive Alf Barrios said it was ‘’very unfortunate’’ it could not find a solution with its partners to secure a power price reduction aimed at making NZAS a financially viable business.