https://www.stuff.co.nz/business/116...-tiwai-smelter
Power generators will be hit hard - Genesis and Contact most exposed to the closure.
Rest of NZ - cheaper power on the way.
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https://www.stuff.co.nz/business/116...-tiwai-smelter
Power generators will be hit hard - Genesis and Contact most exposed to the closure.
Rest of NZ - cheaper power on the way.
Microsoft moved a datacentre here recently, wonder how much those consume.
Electric cars still will need some hydro-juice :)
https://www.interest.co.nz/business/...it-closing-its
Smelter to close..!
bad news for Power companies, but this is great news for the rest of New Zealand’s companies and consumers (outside of Southland), assuming power prices drop due to the big excess in supply this will create.
Thats not how supply and demand works. If power companies could simply raise there prices to increase revenue, then they would be doing that already. The only way that happens is if there is zero competition, or collusion with competitors to rise prices (which is illegal).
The cost to generate water going down a river isn’t going up . There will be an excess of supply so prices lower ...
That said , they do have to get it North where the population is . Until other sources of demand arise . Plenty of dairy factories converting from coal to electricity . If the power is cheaper it could stimulate demand .Govt will be able to cut the winter energy grant too ....
Although it should be noted they announced this in the middle of election season, so its possible they are hoping for a Hail Mary subsidy offer from one or more political parties to keep the smelter going.
Weren't tiwai being given very low cost energy? If this portion of the grid can be sold elsewhere at higher prices it could have no overall effect on revenue etc.
The plant is winding down slowly over a year though which can be planned for more than a sudden exit
Power prices will not drop nationwide. The lower South Island will see a drop in wholesale prices, but that will not be reflected across the whole country. There is a constraint in the lower south island that prevents that extra energy from being moved north. The issue is that the power lines north of Roxburgh just cannot carry this extra energy.
Transpower are proceeding with the Clutha Valley to Waitaki upgrade, but will take a number of years to complete, and even then will only allow an extra 400 MW or so north, not the full 600 MW lost demand at Tiwai.
The hope is that dairy factories in the lower South Island that currently burn coal will move to electricity to make up that additional demand. For the rest of New Zealand it will be business as usual.
For the country as a whole demand has been increasing at around 300 MW per year for the last 4 or 5 years. This is being driven by additional irrigation needs and the conversion of the car fleet (albeit slowly) to electric. So in 2 years the national demand will be right where it is today.
Interesting development. Could be the tipping point for a large scale roll-out of EV adoption and infrastructure. Chuck in some economic recovery $$s from the Government and I can see some public-private initiatives being announced between councils and gentailers for more kerb-side charge points, consumer incentives for EV adoption and attractive long-term electricity purchase contracts for electrified public transport and freight operators. The strategy will be there waiting to execute - not like they haven't had time to think about it.
https://www.scoop.co.nz/stories/HL19...er-closure.htm
Treasury was very relaxed about the economic impact of closure.
Government should buy tiwai for $1. Save Rio Tinto $46 mill next year.
If Rio Tinto can't make a dollar then what hope the NZ Government ? Wonder what the clean up costs will be ?
While I feel sorry for Southland and all the people affected, gotta give Labour points for not chasing the power price down, especially in an election year. Datacenters....I believe they use a lot of power...wonder if they might be viable in the South ? Or should we take this closure as long term gift to NZ as an additional supply of renewable energy ?
Another grubby filthy attempt by Rio T to extort a cheaper power price out of NZ. Three months out from an election with unemployment sky rocketting..another test for Jax and co...will she smile and cough up?. Probably I suspect but don't let Twyford out of his box. Let Shane do the talking.
Bye bye Rio and take your ouvea dross with you.
I'm personally not sure how anyone could be "relaxed" about thousands (I estimate indirect and direct impacts of about 4,000 jobs) gradually being lost over a few years seemingly with nothing down south to replace such a hit... The company tried to work with government several months back to put together a "business plan" and the Government were seemingly fairly unwilling to engage or even look into anything, so I doubt this incompetent bunch running the country will do anything now - can hardly say Rio didn't warn them! I also think this is alot deeper than just power prices. This thing has been around 50 years, and will be gone within 2... alot of high paying jobs have been created through it, alot more than immediate numbers (2,600) may suggest (almost too hard to come up with anything but an estimate). Jacinda said this is a "jobs jobs jobs" budget, but intention isn't reality... I look forward to the regional development minister commenting on this... there really is no positive way to spin this. Lets hope consumers get lower power prices, but I doubt this will actually happen.
The govt isn't responsible for every closure. Maybe the original subsidy shouldn't have been given, we are a market economy after all.
This is simply another synical power play (literally) by Rio Tinto. They wont be going anywhere. Rio Tinto will get their cheaper power price because Meridian will lose more money if Rio Tinto walks away. Government will chip in some "assistance" under the guise of the coronavirus, and Transpower will bring their new transmission pricing mechanism forward. At each of these steps, the NZ consumer / tax payer / gentailer shareholder will be nett losers. And Rio Tinto will repeat the same process next time the country is in a less than perfect economic and/or political position. Rio Tinto are a true parasite on our economy
They are leaving... there is no 'power play' this time... I am quite sure of it.
Bit like how many in NZ use to complain that we had too many tourists... now we have very few (if any) and suddenly many are hurting.
One may not realize what one has lost, until they have lost it.
Worth reading the Contact annoucement.
https://www.nzx.com/announcements/356004
Rio have smelt the covid honey pot and I have no doubt the hapless tax payer will be sodomized once again to prop up this parasitic global bully boy
Contact clearly confirming the reality that power prices will drop with the language about turning to minimizing the financial impact in a “lower demand” market and pausing construction of new generation assets.
Anyone hoping that the impact of this will not be felt nationwide on all generators is deluding themselves.
Long term gain for them I imagine. No need to be locked in to selling high amounts of power for very low prices.
Might pick up some we'll see.. exciting day for traders.
No. Long term loss for them. Tiwai Pt soaked up low cost energy, meaning Max Bradford's distorted pricing mechanism allowed higher price thermal generation to set the spot price for the remaining 87% of NZ power. Meridian used this exact same pricing mechanism to increase their return by spilling water. It will be a long term loss for the generators, hence why I think they will going with government and transpower to come up with a deal to keep the parasite in NZ
it is laughable how much the share prices have gone down... Mr Market no where near close to pricing in the long term impacts of this shock to the system... maybe when the power sector is down 25% or so on average (not 9% ish on average currently) from yesterdays price things will be back to something a bit more understandable... these are no longer bond proxies... and therefore shouldn't be priced like one.
No discussion about the remediation costs RIO have to do.Whats was it $150 mill plus remediation?
$250m+ in remediation costs. Grunty…..
The other share that will be affected (not a power company) is South Port.
Excuse the ignorant question but would the govt buying the smelter be an option?
Might as well buy it, they are printing free money so much, they can then reemploy lots of people, and negotiate with themselves for a good price on power. Losses? Who cares, if we can give 10 mill to bungy jumping we can give 50 mill to cover losses on this business. Win Win as far as I see it. Cant wait till 5.00 so I can open a Tui.
CBD to shift into tiwai to set up grow operations? Haha
turn it into a tourist attraction, an abandoned aliminium smelter in a scenic location. probably wouldn't be safe without maintenance after a certain time period though.
I would be interested to buy CEN in the 4.68 - 4.95 range.
Half of that was a loan, and tourism industry will bounce back eventually.
However the smelter is a different story, they already got a big handout from the government previously and a sweetheart deal on their main cost (electricity) and still are losing almost $50 million a year (that is a loss of $50,000 per employee). It’s a broken business with no hope of being profitable. Would be far better to give whatever subsidy would be needed to make it break even directly to the impacted workers ($50k per worker annually) and provide no-interest loans/grants to a broad swathe of new business proposals in Southland, rather than propping up a loss making smelter operation that will simply keep asking for more taxpayer support every few years.
What is more, it sounds like Rio Tinto is cutting its losses for good as there is no hope of profitability even with generous new government subsidies.
Went hard at opening Mel bought on ave at 4.53, Cen 5.75. Sold now out now at Mel 4.695, Cen 5.92. I'm trading on the emotion not the volume.
Thats interesting, I had no idea that happens, do they have their own mini furnaces?
Guess $250m of remediation work suggests a bunch of short-medium term jobs to buy a bit more time for the region. No idea precisely what remediation work entails but surely a chunk of it involves skills that can be picked up pretty quickly for some of the workers. And one imagines it's bound to go on longer than planned.
Looks like Govt have given Rio the two finger farewell. Great. The trick will be getting these b...stds to clean the site up when they leave. I expect if their 'bluff' has truly been called they'll 'mothball' the site, dump the dross and skip the country. We've had quakes shootings covid..this is small-fri now. Wonder if Hamilton etc al are still smiling ?.
Woods and Robertson have said bye Rio..
i dont get how CEN are saying that transmission costs have been subsidized by NZAS
Well maybe but power costs are being subsidized by all of NZ and thats heaps more than the transmission costs
we subsidize them more than they subsidize us ?
This explains their side of the costs ...
https://www.stuff.co.nz/business/118...-point-smelter
Wonder how the Bluff Oysters will respond.
Also the seafood in general will improve massively.... less aluminium.
The power consumption by Tiwai is enormous.
Be good to start some giant glass houses... build a large airport. Fly the quality food produce directly to Aus and Asia...
Giant aqua culture farms...
Get some aquaponic set up.
My thoughts went. Less demand for power.
Manapouri supply is majorly consumed by Tiwai (from memory)
Close down less profitable power stations. And Or the ones using non renewable resources.
Ullrich Aluminium ... where do they get their material from?
Apologies won't/ haven't read all posts on thread. I am probably repeating information.
Big call if they go. Big Movie set 🤣. It would be pretty big. Mad max style.
Oh, the places you'll go ...
Lol - smelter management now saying there is a chance they remain open “if they get the right electricity price”
https://www.interest.co.nz/business/...its-doors-open
Will they really close. Have you gone to mico wakefield and tried to buy some extruded aluminium. Need a wheelbarrow full of money. Must be a profitable industry.
If i was selling electricity I wouldnt undercut the market, just let the water go over the spill way and wait untill demand/population increases.
"NZAS has estimated it would cost about $256m to meet its obligations to clean up the site after decommissioning the smelter.
Woods said the Government expected Rio Tinto would meet its obligations for clean-up of the site and do the right thing on the dross."
"expected" .I am very doubtful RIO will honour the remediation. Is there no funds locked in to cover this as in many mining companies have to do for remediation when mining is finished. They renneged on the dross disposal, they will get away with minimal remediation too imo.
Tiwai Point to close, 1000 jobs to go
I don't think the mining companies have to have funds on the books either for remediation. Its just listed as a liability but sometimes funds not there to cover for it. It is an important issue that future govts will have to grapple with and possibly change laws to make sure money is tied up for such an occurrence.
Maybe sometimes deep analysis can be too confusing. I remember working for a landlord whose tenant (pet food manufacturer) moaning about high rent when they werent profitable. Delving into their accounts, they were buying ingredients from associated companies at some standard costing, thats where their profit went. Completed aluminium products arent cheap. Maybe their raw materials purchased from Mummy and Daddy are way overpriced. Tiwai never meant to make a profit. I have heard Tiwai moaning about their loss making business since they first started. Seems to get their power cheaper though. More you moan the more you get.
Tiwai closing is the best thing for all the electricity companies and NZ You cannot sell a product below cost and that is what was happening with Tiwai if their was further reductions.
I remember hearing that the funds for site remediation were put into some sort of escrow when they built the place, and that remediation was a condition of the plant closing. It's actually quite a picturesque place with the exception of the plant itself and the access road to Tiwai is a nature reserve. Maybe there is some potential for a tourism operation there
If I'm not mistaken - is the Tiwai Smelter not structured as tolling Processor ?
The raw product belongs to Rio Tinto - does it not ?
If this is the case - why isn't a processor profitable - assuming it gets to process economically viable volumes ?
Correction to my last, there are no funds put aside, but the remediation costs are backed by site assets as attached:
"NZAS’s financial statements include a provision for rehabilitation and closure of $226.8
million as at 31 December 2011. Meridian has tested this figure with external parties
and it is seen to be a reasonable estimate of what likely closure and remediation costs
would be. However, this provision is not backed by a cash reserve and only the assets
of NZAS (mostly plant) support it." - from a Treasury release dated September 2013
RIO
Please clean up before you go
https://www.scoop.co.nz/stories/BU18...rs-actions.htm
https://www.tvnz.co.nz/one-news/new-...minium-smelter
The changing face of the mayor of our Southernmost city
Morning of 8th July: Tim Shadbolt
:t_up:
Morning of 9th July: Tim Sadbolt
:t_down:
I have to admit I am surprised that Rio have pulled the plug on Tiwai. I really though that the 'purest aluminium in the world' would ensure the premium price needed to keep the smelter viable. I guess the global outlook for aerospace just isn't so rosy at the moment...…
Still at least my 'value buying approach' has seen that I have not kept chasing up buying those power shares to ridiculous prices. I will have to look at the value equation again now. But my gut feeling is 'we aren't quite there yet'.
SNOOPY
It would be interesting if you had the time and could access financial statements for Tiwai Point to see if they are paying fair prices for their other inputs. Rio Tinto would be providing the Bauxite (I guess) I don't suppose they would be using transfer pricing to take profits offshore. What about debt, do they have any? is thin capitalisation an issue. I guess pointless now but if you had the time it would be interesting to know. I'm sure if that were the case someone would have brought it up by now while they debate the price of power.
The main thing that is completely of whack is the wage bill, and nobody ever wants to talk about it.
Those are highly paid jobs involving, arguably, not a whole bunch of skill or risk.
If you benchmark Tiwai Point internationally, it isn't the electricity that kills it - it is the wages. But it sounds better to blame evil power companies.
I think long term tiwai will be considered a blight, taking all that low cost power and providing nothing in return, for anyone really. It should have closed in the good times so workers can find some more meaningful jobs during a good job market.
Now to advertise nz as the perfect place for people to meet their green energy commitments.. simply set up here :)
The hint that this may happen was in Transpower's decision to proceed with the Roxburgh to Waitaki lines upgrade, then to cancel it, then to suddenly reinstate it. That upgrade will cost at least $100 M and possibly much more, but even then it will only increase the power flow north by about 1/2 to 2/3 of what Tiwai used.
However that additional flow will allow a delay in building new plant in the North Island, and may lead to the earlier shutdown of some thermal plant. Stratford CCGT and or Huntly Rankine units perhaps?
That in turn places more reliance on renewable forms of generation, and greater emphasis on high cost peaking plant. The upshot is higher lines charges to all of NZ once they are no longer being subsidized by Tiwai, and greater volatility in North Island wholesale prices.
The recent UTS decision by the EA adds another complication. If South Island generators can no longer use pricing to prevent line constraints, but must accept low prices for generation on their side of the constraint, then offer prices on the demand side must rise to equalise their income. The other long term alternative is to shut down South Island hydro plant and build new North Island thermal plant. Now that is a perverse outcome that no-one really wants to happen and would increase North Island prices.
Rio Tinto operates 4 aluminium smelters to produce their RenewAL brand of low carbon aluminium claiming a carbon footprint that is a third of the industry (noting many have electricity from coal powered thermal stations).
Tiwai is one of the smelters with the other three - one is located in Iceland with the other two in North America. My understanding that these three smelters are supplied by hydro plants that are owned by Rio Tinto - bearing in mind that I think originally Comalco had intended to build Manapouri along with the Tiwai Smelter but couldn't fund both so the Muldoon administration stepped in.
Manapouri is owned by Meridian and so Rio Tinto has to effectively pay a market competitive rate for their hydro power (less any subsidy) rather than the cost of generation at the other 3 smelters if my understanding around their ownership of the hydro schemes is correct.
Even if the Tiwai aluminium has a higher purity, the low carbon credentials are matched at the other plants and the North American production might be closer to the end user of the aluminium products (reducing shipping and inventory holdings for Rio Tinto and the end user). We also don't have a huge domestic use of the aluminium from the plant unlike the American smelters as I understand Rio Tinto has got a lot of assistance from the Canadian and Quebec Government around the smelter and producing a low carbon product that can be used in their domestic car assembly industry and exported to US plants. That makes hard to justify a premium for the production at Tiwai as a low carbon, high purity product compared to Rio Tinto's own hydro electric powered smelters.
Also I'm fairly sure we don't import bauxite - it should be alumina by the time it gets here having been processed using the Bayer Process. I think the byproduct of that process is something we'd want to avoid as it makes the ouvea dross at Mataura look like a pond compared to a lake of the byproduct of making alumina.
Raw materials for Tiwai all come from Queensland. Rio Tinto mines bauxite in Weipa and makes it into Alumina, then sends it to NZ. ...wikipedia.
There's certainly a bauxite mine in Weipa - I think it's the world's largest one by a big margin.
From memory, the bauxite is transported to the alumina refineries in Yarwun and Gladstone (which are about 20 minutes apart by road) and there's an aluminium smelter close by at Boyne Island. There's a co-gen plant feeding power for Yarwun and from memory (it's been a while since I drove around there for work) but the other refinery is fed from the Gladstone power plant which is coal powered and it's a third to half larger in capacity than Huntly.
Gladstone has a massive port facility mainly for export of commodities like coal, alumina, LNG and other ore. The local economy was severely affected by the end of the commodities boom in Australia.