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Announcement on 9 July that Rio Tinto has terminated its power supply contract with Meridian Energy in regard to the Tiwai Point aluminium smelter in NZ with the intent to completely close the smelter. Date of termination is effective 31 August 2021.


As background, the contract represents approximately 40% of Meridian's annual electricity output from its hydro stations and wind farms in NZ or about 13% of all electricity produced by all companies in NZ.


So it's a significant impact to the electricity market in NZ and in my opinion the likely outcome will be some volume reduction spread across a number of companies. That is, Meridian will manage to sell at least some of the former contract volume to other users either via contracts or the spot market, such that other electricity generating companies will also see some reductions in output. As with any market, supply and demand applies so downward pressure on price is also likely. :2twocents


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