30 June 2015
A new policy in the proposed Invercargill City District Plan “encourages” New Zealand Aluminium Smelters (NZAS) to rehabilitate Tiwai Point if the smelter closes - but the smelter maintains it has strict internal requirements around any such eventuality.
After negotiation with Meridian Energy in 2013, the smelter got a price cut on 572MW of supply from 2013 to 2016. But to keep the lower price after that the smelter must cut the amount supplied through the contract to 400MW. It must make that decision by the end of 2015. It also has an option to decide on Wednesday whether to terminate the whole deal, triggering closure in 2017. Site rehabilitation costs could be a key issue as the cost has been estimated in the past at between $200m to $400m. Analysts have said closure seems unlikely as the smelter’s financial position has improved.
As part of the 10 year review of the Invercargill City Council District Plan, the Smelter Zone at Tiwai has been re-examined. In January the city council produced a report on proposals, including a new policy encouraging rehabilitation of the site in the event of closure. A hearing was not held as the smelter was generally happy with the report’s contents, but did submit on it.
NZAS chief executive Gretta Stephens said they were comfortable with the outcome and had no plans to appeal.
The report points out that the 1969 planning approval made no provision for the eventual closure of the smelter and rehabilitation of the site. “This possibility surfaced as a serious issue only comparatively recently, in the context of public statements made by NZAS in relation to negotiating longterm electricity pricing.” It says the major issue is the extent to which the district plan should address the possibility of the smelter ceasing operations, and the consequent issues of site rehabilitation and/or alternate land uses.
City council senior policy planner Liz Devery said the existing district plan for the smelter zone did not mention site rehabilitation, but the proposed policy addressed the issue to some degree.
“It’s better than it was. We now have a policy but it isn’t a rule,” she said.
The report says on the one hand there is a strong imperative to address the issue of rehabilitation, but on the other hand, the matter of eventual closure was, clearly, not considered at the time Comalco was granted planning approval to establish and operate the Smelter. In the report, planner William Watt says the new policy is a reasonable compromise.
NZAS opposed the original wording of the new policy saying it did not achieve its goal of encouraging appropriate adaption, reuse and remediation of the site. The council reworded the policy to say: “In the event that Smelter activities are discontinued, to encourage and where possible require the rehabilitation of the site, including removal, maintenance and/or adaptive re-use of buildings”.
Stephens said there were no plans for NZAS to close, but NZAS had a closure provision in its financial statements for restoration at the end of the life of the smelter.
“This restoration level is self-imposed by Rio Tinto.”
In April Pacific Aluminium reported underlying earnings of $56 million for 2014. The upturn, due to a brief increase in world prices for aluminium and market premiums; both of which had subsequently decreased in 2015, followed two years of consecutive underlying losses for the smelter.