New Zealand Aluminium Smelters on Saturday denied reports that talks with Meridian Energy have broken down.
The Engineering, Printing Manufacturing Union says employees at the smelter at Tiwai Point have been told that Meridian has walked away from talks to reach a new power price deal.
In a statement, New Zealand Aluminium Smelter general manager Ryan Cavanagh said talks are continuing with all stakeholders.
He said the company won't comment on specifics or internal briefings, but employees are being informed about the business.
And State Owned Enterprises Minister Tony Ryall said he had been advised that Meridian has not walked away from the discussions.
EPMU organiser Trevor Hobbs, who was at the smelter on Thursday, said management were being advised then that Meridian had walked out of the power price negotiations.
The workforce at Tiwai Point is already facing 100 redundancies. Rio Tinto has said it will close non profitable operations.
Labour MP David Cunliffe, who visited the site on Friday, says the Government has an obligation to Southland to ensure Meridian negotiates in good faith.
Mr Cunliffe he had been told by reliable sources that Meridian walked out of talks on Thursday.
He said the combination of Meridian playing hardball and the high exchange rate for the New Zealand, could drive the smelter to the brink.
Mr Cunliffe said he does not believe the Government should write a cheque to the smelter's owners, but it should make sure Meridian has more meaningful talks with the company that it has been able to so far.
One hundred jobs are already going from the plant and Mr Cunliffe said more than 650 more employees would lose their jobs if it closes.
Contract change wanted
On 9 August this year, Meridian Energy said the owner of the smelter wanted to change the terms of a new power contract, due to start in January 2013.
New Zealand Aluminium Smelters said on 5 September that renegotiating its contract with Meridian Energy was now crucial.
The Tiwai Point smelter began operating in 1971 and employs about 700 people. According to the company's website, New Zealand Aluminium Smelters is 79.36% owned by Pacific Aluminium and 20.64% owned by the Sumitomo Chemical Company of Japan.
Falling aluminium prices worldwide and high energy costs forced the company to reduce output by 15% earlier this year. In the last financial year, the Tiwai smelter lost $20 million.
Prime Minister John Key has said Meridian has a cast iron three -year supply contract with the smelter.
Venture Southland says closure of the smelter would have a severe impact on the region and the country.
Strategic projects group manager Steve Canny says the smelter creates more than 3000 jobs and brings in $1.2 billion in export receipts, and must be kept open.