3 Aug 2015

Share boost after Tiwai Point smelter deal

2:31 pm on 3 August 2015

Shares in electricity stocks have jumped after a deal that ensures the Tiwai Point aluminium smelter will stay open for at least three years.

Tiwai Point smelter

The aluminium smelter at Tiwai Point, near Bluff in the South Island Photo: Wiki Commons

Under a revised deal with the Rio Tinto-owned smelter, Meridian will supply all 572 megawatts of power until 2030.

The smelter still has the right to close down in 2018, one year later than its previous opt-out date.

Meridian chief executive Mark Binns said Meridian had secured better prices out of the deal.

"The price that we have offered is an increase on the previous price."

Meridian's share price rose as high as 6 percent before easing back to a rise of 6 cents (2.5 percent) to $2.31 at 1.15pm.

Contact Energy's shares rose 10 cents, or 2 percent, to $5.05, and Genesis Energy rose 2.5 cents, or 1.5 percent, to $1.75 after agreeing to supply Meridian a combined 130 megawatts of electricity for Tiwai Point.

New Zealand Aluminium Smelters had considered offers from other providers to supply some of its power needs.

But its chief executive, Gretta Stephens, said the deal with Meridian was the best it could get.

"It provides short-term security for the smelter and allows market fundamentals to improve."

She said the company needed flexibility over its operations.

"This amended contract has ongoing flexibility to maintain or reduce the load or to terminate the contract from 2018," she said.

"It gives us time for market fundamentals to improve and for the transmission pricing review to play out."

The transmission pricing review - by the Electricity Authority - could reduce the amount of money the smelter has to pay for power from the national grid.

Get the new RNZ app

for ad-free news and current affairs