The likelihood of New Zealand Aluminium Smelters (NZAS) closing the 44-year-old smelter appears to be diminishing.
NZAS, owned by Australian mining giant Rio Tinto, had to make a decision yesterday on whether it terminated its electricity supply agreement with Meridian, potentially then closing the smelter in 2017, or reduce its electricity take.
However, by mutual agreement, the date NZAS can give notice was changed from yesterday to August 3, with all other agreement terms unchanged.
It appears NZAS is in discussion with numerous electricity generators to cut a power deal which would share supply, costs and risks across numerous suppliers instead of taking its 13% share of the country's output from just Meridian, from its Manapouri hydro plant.
The issue is becoming a repeat political football of mid-2013, when the present agreement was struck in August that year and the Government gave Rio Tinto a controversial $30 million sweetener to remain open.
Now, NZAS, which receives a discounted electricity price, could possibly have some transmission charges of up to $50million waived, as a further incentive to keep operating - employing 800 people directly and almost 3000 indirectly in the wider, lower Southland area.
Analysts had predicted last week one option was for NZAS to make a drive for a ''consortium'' of electricity suppliers to come together to negotiate supply.
NZAS general manager Gretta Stephens said the extension allowed NZAS to ''continue pursuing commercially competitive electricity arrangements'', while a separate statement from Meridian's chief executive Mark Binns said NZAS had been in discussions ''with a number of parties, including Meridian'' for supplying Tiwai.
Ms Stephens said, ''We welcome the Electricity Authority's recent paper outlining options for transmission pricing reform which acknowledges that NZAS pays more than $50 million a year for transmission infrastructure it receives no benefit from.''
She said there remained ''significant pressure'' on the smelter's operation, from electricity costs, depressed global aluminium prices and high transmission costs, the latter as much as 10 times more than other smelters around the world.
Craigs Investment Partners broker Peter McIntyre said it appeared a consortium-type arrangement could now be on the table.
He did not believe NZAS would take the ''walk away'' option, with Tiwai to close in 2017, but would, as of existing right, negotiate its power take down from 572MW to 400MW.
''Meridian is in the box seat here, being a low-cost electricity producer and able to narrow its [profit] margin more than the other gen-tailers [generator-retailers],'' he said.
He believed NZAS was negotiating with other generator-retailers for supply of the 172MW and, again, Meridian was ''best placed'' to cope with losing some supply.
Forsyth Barr broker Andrew Rooney said the month-long delay was ''unexpected'', boosting the odds that the smelter would remain open, ''albeit marginally''.
''The delay allows NZAS to keep pressure on the generators it is negotiating with for supplying 172MW after January 1 2017,'' he said.
He said
Meridian was aligned with NZAS, in that it wanted other parties to supply the 172MW, which kept negotiating pressure on Contact Energy, Genesis Energy and ''probably'' Todd Energy, Mr Rooney said.
Labour leader Andrew Little said the National-led Government had used taxpayers' money; the $30 million sweetener, to bolster Meridian because it was about to be sold off as part of the Government's asset sales programme.
''It's not good enough that after two years of negotiation between Meridian Energy and Rio Tinto there is now another delay until August,'' Mr Little said in a statement yesterday.
He said the August 2013 deal gave Rio Tinto a much faster exit clause, guaranteeing just 15 months' notice, rather than the previous three years in the contract.
''That brazen exercise in corporate welfare saw Rio Tinto get $30 million, its notice period halved and cheaper electricity,'' Mr Little said.
''The 800 workers at Tiwai deserve better as this whole mess has been created by the Government's inept negotiations in 2013.''
He was critical the Government did not have a plan if jobs at Tiwai were lost. Southland had many other industries with potential including agriculture and high-value food production, forestry and wood manufacturing, a growing high tech industry, and other manufacturing, Mr Little said, but they had had little support.
