Alcoa's Australian smelter needs cheaper power to stay open past 2021 - partner

MELBOURNE, Dec 5 (Reuters) - Alcoa Corp will need cheaper, more reliable power to keep its Portland smelter in Australia open beyond 2021 when its current supply deal ends, the aluminium major’s partner said on Thursday.

Alumina Ltd, Alcoa’s partner in the Alcoa World Alumina and Chemical joint venture, would have a veto over any decision to shut the plant, its Chief Executive Mike Ferraro said, adding it was too early to predict the smelter’s future.

“We would ideally like to find a solution,” Ferraro told reporters on the sidelines of a mining event in Melbourne.

“It’s well run, it’s a relatively new smelter,” he said.

The power contract for the Portland smelter, which consumes about 10% of the state of Victoria’s electricity, ends in mid-2021.

“Ideally, we would like to renegotiate a new power contract at a lower price,” Ferraro said.

The Portland smelter was rescued in 2017 with Australian federal and state government subsidies of around A$230 million ($156 million) and a cheap power deal, after being crippled by a blackout that caused molten aluminium to solidify.

The plant has been plagued by power issues over the past few years, and now gets paid to curtail power use to help prevent blackouts during heatwaves. Two weeks ago it had to cope with eight hours of shaky supply.

Speculation the plant may be shut in 2021 grew after Alcoa said in October that it planned to curtail, close, sell or improve 1.5 million tonnes of smelting capacity over the next five years to help it become the world’s lowest per ton carbon emitter among aluminium producers.

The Portland plant, co-owned by AWAC, CITIC and Marubeni Corp, is powered by coal-fired electricity, making it a big carbon emitter compared to Alcoa’s plants elsewhere that are fuelled by hydropower.

Rival Rio Tinto is also weighing up the future of three aluminium smelters in Australia and a smelter in New Zealand, pressing for cheaper and more reliable power, as the Australian grid becomes more dependent on intermittent wind and solar power.

AGL Energy, Australia’s top power producer, said last month it is in talks with the Portland plant and Rio Tinto’s Tomago smelter, it’s two biggest customers.

“All things being equal, whether we make a dime out of it or not, we will work as a good corporate citizen to do everything we can to keep those smelters going,” AGL Chief Executive Brett Redman told analysts. ($1 = 1.4736 Australian dollars) (Reporting by Sonali Paul, Editing by Sriraj Kalluvila)