Power shares

[Stranger_Danger]

It would be interesting if you had the time and could access financial statements for Tiwai Point to see if they are paying fair prices for their other inputs. Rio Tinto would be providing the Bauxite (I guess) I don't suppose they would be using transfer pricing to take profits offshore. What about debt, do they have any? is thin capitalisation an issue. I guess pointless now but if you had the time it would be interesting to know. I'm sure if that were the case someone would have brought it up by now while they debate the price of power.

The main thing that is completely of whack is the wage bill, and nobody ever wants to talk about it.

Those are highly paid jobs involving, arguably, not a whole bunch of skill or risk.

If you benchmark Tiwai Point internationally, it isn't the electricity that kills it - it is the wages. But it sounds better to blame evil power companies.

[Panda-NZ-]

I think long term tiwai will be considered a blight, taking all that low cost power and providing nothing in return, for anyone really. It should have closed in the good times so workers can find some more meaningful jobs during a good job market.

Now to advertise nz as the perfect place for people to meet their green energy commitments.. simply set up here

[Jantar]

The few issues may include the $50m million pa lost in transmission fees from Tiwai plus a multiple of this to build new transmission lines .
Power prices may actually go up in the North Island-I do not know .
Would appreciate Jantars opinion

The hint that this may happen was in Transpower's decision to proceed with the Roxburgh to Waitaki lines upgrade, then to cancel it, then to suddenly reinstate it. That upgrade will cost at least $100 M and possibly much more, but even then it will only increase the power flow north by about 1/2 to 2/3 of what Tiwai used.

However that additional flow will allow a delay in building new plant in the North Island, and may lead to the earlier shutdown of some thermal plant. Stratford CCGT and or Huntly Rankine units perhaps?

That in turn places more reliance on renewable forms of generation, and greater emphasis on high cost peaking plant. The upshot is higher lines charges to all of NZ once they are no longer being subsidized by Tiwai, and greater volatility in North Island wholesale prices.

The recent UTS decision by the EA adds another complication. If South Island generators can no longer use pricing to prevent line constraints, but must accept low prices for generation on their side of the constraint, then offer prices on the demand side must rise to equalise their income. The other long term alternative is to shut down South Island hydro plant and build new North Island thermal plant. Now that is a perverse outcome that no-one really wants to happen and would increase North Island prices.

[Rep]

Rio Tinto operates 4 aluminium smelters to produce their RenewAL brand of low carbon aluminium claiming a carbon footprint that is a third of the industry (noting many have electricity from coal powered thermal stations).
Tiwai is one of the smelters with the other three - one is located in Iceland with the other two in North America. My understanding that these three smelters are supplied by hydro plants that are owned by Rio Tinto - bearing in mind that I think originally Comalco had intended to build Manapouri along with the Tiwai Smelter but couldn't fund both so the Muldoon administration stepped in.

Manapouri is owned by Meridian and so Rio Tinto has to effectively pay a market competitive rate for their hydro power (less any subsidy) rather than the cost of generation at the other 3 smelters if my understanding around their ownership of the hydro schemes is correct.

Even if the Tiwai aluminium has a higher purity, the low carbon credentials are matched at the other plants and the North American production might be closer to the end user of the aluminium products (reducing shipping and inventory holdings for Rio Tinto and the end user). We also don't have a huge domestic use of the aluminium from the plant unlike the American smelters as I understand Rio Tinto has got a lot of assistance from the Canadian and Quebec Government around the smelter and producing a low carbon product that can be used in their domestic car assembly industry and exported to US plants. That makes hard to justify a premium for the production at Tiwai as a low carbon, high purity product compared to Rio Tinto's own hydro electric powered smelters.

Also I'm fairly sure we don't import bauxite - it should be alumina by the time it gets here having been processed using the Bayer Process. I think the byproduct of that process is something we'd want to avoid as it makes the ouvea dross at Mataura look like a pond compared to a lake of the byproduct of making alumina.

[RTM]

The main thing that is completely of whack is the wage bill, and nobody ever wants to talk about it.

Those are highly paid jobs involving, arguably, not a whole bunch of skill or risk.

If you benchmark Tiwai Point internationally, it isn't the electricity that kills it - it is the wages. But it sounds better to blame evil power companies.

Interesting. Where do you get the information from SD ? I'd like to read it.

[fish]

The main thing that is completely of whack is the wage bill, and nobody ever wants to talk about it.

Those are highly paid jobs involving, arguably, not a whole bunch of skill or risk.

If you benchmark Tiwai Point internationally, it isn't the electricity that kills it - it is the wages. But it sounds better to blame evil power companies.

It is beginning to sound to me that mediation with full disclosure of Tiwai costs,real transmission costs and costs of the hydro-electricity might produce an equable outcome-but is their willing on all sides for this?

[percy]

I am expecting broker downgrades right across the sector and have been expecting this announcement for some time. One wonders whether many (any ?), in this sector can maintain their dividends ?

I have retained my Genesis, as it appears they will maintain their dividend,and sold my MEL, as it appears they will not be able to.
Have replaced MEL with more SPK.

[sb9]

I have retained my Genesis, as it appears they will maintain their dividend,and sold my MEL, as it appears they will not be able to.
Have replaced MEL with more SPK.

I'm holding onto MEL for now as its from IPO times, however added CEN y'day as couldn't ignore yield at those prices.

[bottomfeeder]

Raw materials for Tiwai all come from Queensland. Rio Tinto mines bauxite in Weipa and makes it into Alumina, then sends it to NZ. ...wikipedia.

[Rep]

Raw materials for Tiwai all come from Queensland. Rio Tinto mines bauxite in Weipa and makes it into Alumina, then sends it to NZ. ...wikipedia.

There's certainly a bauxite mine in Weipa - I think it's the world's largest one by a big margin.

From memory, the bauxite is transported to the alumina refineries in Yarwun and Gladstone (which are about 20 minutes apart by road) and there's an aluminium smelter close by at Boyne Island. There's a co-gen plant feeding power for Yarwun and from memory (it's been a while since I drove around there for work) but the other refinery is fed from the Gladstone power plant which is coal powered and it's a third to half larger in capacity than Huntly.

Gladstone has a massive port facility mainly for export of commodities like coal, alumina, LNG and other ore. The local economy was severely affected by the end of the commodities boom in Australia.