Image for Bell Bay aluminium smelter announces long-term energy contract

Rio Tinto Alcan Bell Bay aluminium smelter today announced the signing of a long-term, base load electricity supply contract with Hydro Tasmania that will help secure the future of the smelter until 2025.

The agreement with Hydro Tasmania, the state’s largest renewable energy supply company, will take effect in 2015, when the current supply arrangements expire.

Rio Tinto Alcan Primary Metal – Pacific president, Xiaoling Liu, described the agreement as an important step in ensuring the smelter’s future in the state.

“We are pleased to have reached a successfully negotiated commercial outcome with Hydro Tasmania,” she said.

Bell Bay smelter general manager operations, John Lemberg, said the new contract would ensure continued employment for the smelter’s 550 employees after 2014.

“This agreement is for 322MW of electricity and we are very pleased that we now have a sound platform to enable us to move forward.”

Mr Lemberg said the agreement also ensures the Bell Bay smelter will continue to make significant contributions to local and regional communities.

“The Bell Bay smelter has invested significantly in the local community through support programmes, donations, grants and sponsorships such as the Launceston Aquatic Centre, as well as considerable in-kind support through our partnerships,” Mr Lemberg said.

“We have been proud members of the Tasmanian community since the smelter began production more than 55 years ago, paying more than $176 million annually to local suppliers in goods and services purchased by the smelter and more than $50 million annually in salaries to employees.

“Today’s agreement means our future is here for our employees and contractors and their families, and we will continue our commitment to our community,” Mr Lemberg said.

The Bell Bay aluminium smelter began production in 1955 and today produces around 180,000 tonnes of aluminium per annum, supplying customers in key markets.

About Rio Tinto Alcan at Bell Bay

Rio Tinto Alcan Bell Bay aluminium smelter currently employs 550 men and women and approximately 60 FTE contractors. It also creates employment for a further 1,000 Tasmanians who depend directly on the economic benefits generated by the operation.

In 2009 the Bell Bay aluminium smelter spent $176 million purchasing goods and services from Tasmanian suppliers.

Aluminium production in 2009 was 178,000 tonnes. A majority of the smelter’s product is exported to customers in Asia.

About Rio Tinto

Rio Tinto is a leading international mining group headquartered in the UK, combining Rio Tinto plc, a London and NYSE listed company and Rio Tinto Limited, which is listed on the Australian Securities Exchange.

Rio Tinto’s business is finding, mining and processing mineral resources. Major products are aluminium, copper, diamonds, energy (coal and uranium), gold, industrial minerals (borax, titanium dioxide, salt, talc) and iron ore. Activities span the world but are strongly represented in Australia and North America with significant businesses in South America, Asia Europe and southern Africa.

• What Hydro says

Contract to provide increased returns and certainty to State

The new electricity hedge contract between Hydro Tasmania and Rio Tinto Alcan (RTA) for its Bell Bay aluminium smelter will provide improved returns to the State.

The 11‐year contract will take effect from 1 January 2015 when the current arrangements expire. Under the contract, Hydro Tasmania will provide hedging arrangements for 322MW of base load electricity.

Hydro Tasmania CEO Roy Adair said the prices and terms negotiated were consistent with those commercially obtainable by similar large customers in the National Electricity Market.

Mr Adair said Hydro Tasmania welcomed the conclusion to intensive commercial negotiations that began earlier this year. The agreement is welcome news to the smelter’s employees and the local community and provides a boost for the State’s economy.

“While the details of the new contract remain confidential, I can advise that they reflect current market conditions,” he said.

“This is a commercial agreement that reflects the dynamics of being part of a national market as well as the current and future costs of electricity generation.

“The long‐term contract with RTA has enabled both parties to plan for the future and supports Hydro Tasmania’s key corporate objective of financial sustainability.”

Mr Adair said this was a wholesale contract to provide a significant volume of electricity at a commercial rate 24 hours a day, 365 days a year. The smelter also provides important support services to the State’s power system.

He said any comparison with standard “delivered” retail power pricing was misleading as these retail prices include “network charges” to cover the use of the transmission and distribution system. The contract negotiated between Hydro Tasmania and Rio Tinto Alcan was an electricity hedge contract that will not cover the smelter’s delivery charges.

“The new energy contracts are aimed at securing long‐term investment and providing certainty of income for Hydro Tasmania at a fair commercial price and with an appropriate sharing of risk,” Mr Adair said. “This has been achieved with the new contract with RTA.”

Mr Adair said that the excellent working relationship with RTA has led to a genuinely sustainable outcome for both parties.

“We look forward to working together over the duration of the new contract,” he said.

Earlier on Tasmanian Times, Bob Burton:
As power prices spike, Rio Tinto Alcan launches a charm offensive
Rio Tinto Alcan’s new lobbyist ... Jody Fassina