New Zealand's largest electricity company says it has gone as far as it can to save the Tiwai Point aluminium smelter from closure.
The Southland smelter company's majority owner has rejected the Government's offer of a short-term subsidy and is continuing negotiations with state-owned Meridian Energy for a deal on cheaper power prices. The parties have been in talks on electricity prices since August last year.
Meridian says keeping the Southland plant open will now require concessions from the company that operates it.
The New Zealand Aluminium Smelters (NZAS) plant is New Zealand's sole aluminium smelter. Rio Tinto subsidiary Pacific Aluminium owns most of the company and about 20% is owned by Japan's Sumitomo Chemical Company.
Pacific Aluminium says the smelter is losing money and it needs to get cheaper electricity to keep it running. It says it is confident an agreement can be reached.
But Meridian says it has made as many concessions as it can and the ball is now in Pacific Aluminium's court.
Meridian Energy chief executive Mark Binns told Radio New Zealand's Morning Report he would like to keep supplying the smelter but the electricity could easily be sold elsewhere.
The Government has ruled out long term subsidies to ensure the smelter's future.
Impact on asset sales not a factor - PM
Prime Minister John Key says the Government will not be held hostage by Rio Tinto because of the possible impact on the partial asset sales programme, should the Tiwai Point aluminium smelter close.
State-owned power companies are among the assets up for partial sale by the Government.
The Tiwai Point smelter uses 15% of New Zealand's electricity and if it closed power prices could fall because of the increase in supply. In turn, this could push down the price of some of the companies up for sale, including Mighty River Power, due to be partially sold this year.
Labour Party leader David Shearer says Rio Tinto knows the Government wants to get the best price for Mighty River Power, so it can play hardball, and the Government will just have to take it.
However, Mr Key says the Government will not be pressured into providing long term taxpayer funded subsidies.
"The argument the Labour Party are saying is that we should be held hostage to Rio (Tinto) so that they can force the best deal out of us because we are somehow worried about the mixed ownership model programme. Well that's not true."
Invercargill mayor Tim Shadbolt says there may be little the city council can do to help keep the smelter remain open, except to try to find another owner.
He says the council's sister city in China has expressed interest in helping to find a new owner, which he hopes might take a longer term view of the smelter's profitability than the current owner.