Govt move turns the screw on Rio Tinto

By bringing forward over $100 million of transmission line upgrades, thus lessening the impact of a closure of Tiwai Point smelter, the Government has reduced Rio Tinto's leverage over it.

The Government has turned the screw up another notch on Rio Tinto to keep Tiwai Point open by bringing forward over $100 million of transmission line upgrades by a year so Manapouri's electricity can be fed into the South Island's grid.

Transpower announced yesterday it had agreed with Contact and Meridian to begin work immediately on the remaining three projects in a five-project plan to better connect the power produced at Manapouri into the South Island grid.

Two of the five projects were done between 2010 and 2016, but were the other three were suspended in 2016 after the previous Government secured Tiwai Point with a $30 million payout. The early resumption means the work can start this summer and be completed by June 2022, rather than June 2023.

Contact CEO Dennis Barnes said Contact would provide $5 million in pre-funding to accelerate the work and he welcomed Transpower's "flexibility and pragmatism."

"Our view remains that a disorderly exit of the smelter would be a poor outcome for New Zealand. Sudden closure will affect multiple stakeholders, including all generator retailers. It would also be detrimental to the Southland economy and the pursuit of our decarbonisation goals," Barnes said.

Meridian CEO Neal Barclay said Meridian, which sells the majority of the power for the Bluff aluminium smelter, would also provide $5 million of pre-funding.

"Once the remaining works are complete, it will alleviate existing constraints and significantly reduce the risk of renewable electricity not being dispatched, should Rio Tinto choose to close its Tiwai Point aluminium smelter in the future," Barclay said.

The early transmission investment reduces the leverage Rio Tinto might have, given the risks that not all of Manapouri's power could be fed into the grid if the smelter closed, given the existing infrastructure in place.

However, more work would need to be done to feed the power to the North Island and Auckland in particular, as Transpower explains in this useful Q+A on the CUWLP project. That work would include another $500 million of work, including a fourth HVDC line across the Cook Strait.

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