Ann: GENERAL: MEL: Smelter Agreement Variation

• Release Date: 03/08/15 08:30
• Summary: GENERAL: MEL: Smelter Agreement Variation
• Price Sensitive: No
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					MEL
03/08/2015 08:30
GENERAL
PRICE SENSITIVE
REL: 0830 HRS Meridian Energy Limited

GENERAL: MEL: Smelter Agreement Variation

Meridian Energy has signed a variation to the existing Electricity Agreement
with New Zealand Aluminium Smelters Ltd (NZAS) following extended
negotiations.

"It has been a complex and demanding negotiation, but this is a good outcome
for Meridian," said Meridian Chief Executive Mark Binns.

NZAS did have the right to terminate the existing contract today with effect
from 1 January 2017, but by signing this variation, this right has been
waived. The variation commits Meridian to cover the full 572 MW currently
used at the smelter from 1 January 2017 at more competitive rates for the
smelter than would have applied if NZAS chose to rely on the previous
arrangement for the full 572 MW.

"This variation will give the smelter the flexibility to operate at current
production levels for the full contract period should it want to and provide
Meridian with an improved overall price for its electricity.

Although the smelter already had the option of a contractual volume of 572 MW
from 1 January 2017 prior to this amendment, pricing had meant NZAS was
incentivised to reduce to 400 MW from that date," said Mr Binns.

"Meridian has always been clear that the contract structure entered into in
2013 was intended to incentivise NZAS to obtain 172 MW from other generators
and allow Meridian to achieve market prices for this volume, which would be
released from the contract.

Meridian's view was that it was in the interest of other generators to
provide that cover to NZAS.  While Meridian is disappointed NZAS was unable
to reach an agreement with other parties, it believes the new arrangement
provides pricing for the 172 MW that is more in line with market
expectations," said Mark Binns.

Meridian and NZAS had agreed to an extension of the termination right from 1
July to 3 August, when it was clear that negotiations between NZAS and other
generators were not going to be completed by 1 July.

"While other generators have differing views as to the impact of a smelter
exit on their competitive position, Meridian has been able to gain sufficient
support from some parties to warrant it covering this extra volume from
2017," said Mr Binns.

Meridian is committed to cover Tiwai Point's electricity usage at current
production levels through to 2030, but NZAS retains all its termination
rights from the 2013 round of negotiations, which includes a 12 month notice
of termination that can be given any time from 1 January 2017.
End CA:00267812 For:MEL    Type:GENERAL    Time:2015-08-03 08:30:38