By David Winning and Stephen Nakrosis

SYDNEY--The hungriest energy consumer in New Zealand just got a new lease on life.

Rio Tinto on Friday announced new 20-year power supply deals that will keep the Tiwai Point aluminum smelter operational into the long term. Rio Tinto, which plans to take full control of the New Zealand Aluminium Smelters venture that runs the smelter, has in previous years been uncommitted about its future given swings in power costs and metals prices.

Tiwai Point, which employs about 1,000 people full time and has been in operation for around half a century, accounts for some 13% of energy demand in New Zealand.

New Zealand Aluminium Smelters, majority owned by Rio Tinto, has signed contracts with a trio of local generators to set pricing for 572 megawatts of electricity. Those deals are expected to begin in July, and run until at least 2044.

Rio Tinto's decision to keep the smelter open illustrates how aluminum has become a favored commodity again as global miners seek to become key suppliers of materials used in the energy transition. Aluminum is used in large quantities to manufacture electric vehicles and renewable-power infrastructure, as well as in consumers products such as laptop computers.

The agreements also help Rio Tinto in its effort to make itself more green. Tiwai Point consumes large amounts of renewable energy, representing an opportunity when some large investors argue the company hasn't done enough to improve its environmental record in other areas. Some buyers of aluminum also require low-carbon supply, seeing a marketing advantage in ensuring their products are cleaner and greener than before.

"It's further proof that large industrial businesses can utilize New Zealand's renewable energy advantage and create low carbon sustainable products, high value jobs and export dollars for our country," said Neal Barclay, chief executive of Meridian Energy, one of the generators that will supply the smelter under the new deal.

Meridian's share price rose 4.1% when the New Zealand market opened on Friday. The smelter's other suppliers, Contact Energy and Mercury NZ, also outperformed the benchmark NZX-50 index.

For New Zealand's government, Rio Tinto's decision eases concerns over job security in the Southland region of the country. Rio Tinto estimates the smelter contributes about 400 million New Zealand dollars ($244.6 million) to the area's economy.

The deal came with safeguards that aim to ensure enough electricity heads to the national grid when demand spikes, partly reflecting ongoing concerns about the reliability of supply as renewable energy accounts for a higher share of New Zealand's generation as coal-fired generation is phased out.

The Tiwai Point smelter has agreed to make up to 185 megawatts of electricity available to the grid in times of severe shortage. New Zealand Aluminium Smelters, or NZAS, said this is equivalent to the energy supply needed to power nearly a quarter of a million households.

Chris Blenkiron, chief executive of NZAS, said this makes Tiwai Point the country's largest battery. He added the agreements involve NZAS receiving compensation if it has to reduce production to make electricity available to the grid.

"As our electricity system becomes more based upon renewables, intermittency of generation becomes a larger problem," said Simeon Brown, New Zealand's energy minister. "This commitment from NZAS will help ensure the grid can continue to deliver electricity to Kiwis during times of peak demand."

Rio Tinto said Friday that it has agreed to acquire Sumitomo Chemical's 20.64% interest in NZAS for an undisclosed price. After the close of the deal, NZAS will be wholly owned by Rio Tinto.

Rio Tinto said it also agreed to acquire Sumitomo Chemical's 2.46% interest in Boyne Smelters.

Write to David Winning at

(END) Dow Jones Newswires

05-30-24 1943ET