Cheaper power key to future of Portland aluminium smelter
The future of the Portland aluminium smelter depends on a long-term power contract at lower prices.
The future of the Portland aluminium smelter in Victoria’s southwest depends on a long-term power contract at lower prices, Alumina boss Mike Ferraro has said.
Speaking at the Melbourne Mining Club on Thursday, Mr Ferraro said Alumina wanted to keep the “modern, well-run” smelting operation going, but it needed to get off the “subsidy cycle” and win a new power contract on favourable terms to be viable in the long term.
Alumina owns 40 per cent of the Alcoa World Alumina and Chemical (AWAC) joint venture, which operates Portland.
Alcoa, its US parent that operates the asset, in October put the plant on notice it could face closure, launching a review of its global assets targeting high-cost and high-carbon-emission plants for potential closure.
Speaking on the sidelines of the Melbourne Mining Club event on Thursday, Mr Ferraro confirmed ASX-listed Alumina would have a say in the eventual decision on Portland, but said it was too early to tell whether the refinery would survive the review – although he would like to see it remain open if a solution for high power costs and grid reliability could be found.
“We would ideally like to find a solution. It’s well-run, it’s a relatively new smelter, it’s really important to the economy down there, but we need a power solution,” he said.
“We’re energy takers, and we’ve got an arrangement that expires in mid-2021, so ideally we’d like to renegotiate a new power contract at a lower price.”
In 2017, the Victorian government of Premier Daniel Andrews agreed to provide $200m in subsidies — eventually paid for by other Victorian power users — to ensure Portland would continue to operate until at least 2021, retaining its 500 regional jobs.
Mr Ferraro said he did not believe a renewal of subsidies was in the best interest of the plant and its workers, saying only a long-term fix for rising power prices would solve the issues affecting Australian manufacturers.
“Subsidies, top-ups, those sort of things don’t work long-term. It really is coming up with a competitively priced energy solution on the eastern seaboard that is globally competitive, because aluminium is sold on a global market,” he said.
“The subsidy cycle is … not a viable option for our joint venture, and it’s not a viable option for the staff and the people down there who live on a bit of a knife edge.”
Mr Ferraro confirmed Portland’s management had been involved in lengthy discussions with the state government, but would not comment on the details of the discussions.
A spokeswoman for Victorian Energy Minister Lily D’Ambrosio said the government was continuing to talk with Alcoa “about options for a sustainable long-term footing for the smelter”.
State opposition energy spokesman Ryan Smith blamed the Andrews government for Victoria having “some of the highest energy prices in the country”.
“Under Daniel Andrews’s failed energy policies, not only do businesses have to compete with other states on power prices but Victorian businesses can no longer rely on the certainty of supply,” Mr Smith said.