New Zealand: Rio Tinto subsidiary hopes to re-negotiate power contract
Pacific Aluminium, a subsidiary of Rio Tinto Alcan, wants to renegotiate a power contract with Meridian Energy for its Bluff aluminium smelter on the Tiwai Peninsular.
The contract, which was finalised in 2007, requires Pacific Aluminium to pay for 544mW annually, rising to 572mW and takes into account exchange rates and global aluminium prices. However, as Pacific Aluminium has cut production at Bluff by 15% it's power requirements there have been reduced, hence the need for renegotiation.
Pacific Aluminium is the majority shareholder in New Zealand Aluminium Smelters (NZAS) owner of the Bluff smelter.
NZAS reported a $46M after-tax profit, thanks to a $65M insurance claim settlement, but would have made a loss without it.
While aluminium is only a small segment of Rio Tinto's overall business, it is having a negative effect on profits with underlying earnings down by 93% (excluding Pacific Aluminium).
Long-term demand for aluminium is good as Rio Tinto expects the Chinese economy to grow by 8% in 2012.