A 20-year deal with Southland's Tiwai Aluminium Smelter could be good news for everyday New Zealanders.
The agreement signed by Meridian, Mercury, Contact Energy and New Zealand Aluminium Smelters will guarantee supply until 2044.
Milford Asset Management's Jeremy Hutton says this is positive news for the electricity sector.
LISTEN ABOVE
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Jeremy Hutton, Milford Acid Managements with us.
Speaker 2 (00:01):
Hey, Jeremy, good evening, Heather.
Speaker 1 (00:04):
Were you surprised by the fact that there was a
twenty year deal with Typoint.
Speaker 2 (00:09):
Yeah, it was the news that everyone who follows the
New Zealand electricity sector had been waiting for eagerly, and
it was a positive, positive news. And yes, the deal
length was a surprise. So Meridian Energy, who is the
primary negotiator, had requested a longer deal than the normal
or the previous three yearly deal cycle, and Rio Tinto,
(00:30):
who's the owner of the smelter, liked to play hardball
around the shorter timing in the past, so effectively, Meridian
was seeking the longer term, a more meaningful deal and
something that it gives a sector more opportunity to invest
long term and of course give the local community done
in South lond and more certainly around jobs and opportunities
as well.
Speaker 1 (00:48):
What do you reckon this means for new renewable projects
in the country. Will more of them get built?
Speaker 2 (00:54):
Yeah? It should be a large positive for new renewable
builds in New Zealand and the ty smelter is a
really large user of electricity in the country around twelve
to thirteen percent of total electricity demand, and if the
smelter had exited, it would have left the electricity market
and a heavy oversupply, and this incentive to build for
developers would have been gone probably for the rest of
(01:15):
this decade.
Speaker 1 (01:17):
And a smell to exit would have impacted our country's
electrification plans.
Speaker 2 (01:20):
Do you think, yeah, my viewer would have. It would
have impacted our ability to decarbonize and electrify materially. I mean,
we do as a country need to produce a lot
more electricity to meet our total country carbon commitment goals.
And the gentailers and other developers have been building a
large amount of view generation already, mainly on the back
(01:42):
of growing demand from things like electric vehicles and data
centers that we know. But now the gentailers and other
developers will be you know, they have that certainty to
commit to more generation and they are long term projects,
so they need that certainty. And there are some great
wind projects that I think will kick off on the
back of this, particularly down in the Deep South were
(02:03):
there is some great resource. Unfortunately it's really close to
large users like the Tey smelter as well.
Speaker 1 (02:09):
That's good stuff and what happened to the share prices
of the gen Taylor's.
Speaker 2 (02:13):
Yeah, the size of the positive reaction was a surprise
to me. I mean, the market had been anticipating a
ty Stay deal as likely, so part of the good
news was factored in already. But there is always some
risk that the exit scenario could play out, and that
was in the price a little bit too, Albeit it
was small in this instance. So you saw a small
(02:33):
pop of between three and five percent for the big
three gent tailors, so Meridy and Mercury and Contact. But
there was always also a bit of other action. On
that day, there was a large passive index rebalancing event,
and that generally happens on the last trading month of
the last trading day of the month, and these passive
funds tend distort the market a little bit. When that
hit in the last hour, those share prices took another
(02:56):
leg up and Meridian finished up ten percent on the day,
which is really a few move for a steady gin
Taylor like Meridian.
Speaker 1 (03:02):
I tell you what. Jeremy, thank you, Jeremy Hutton, Milford
Asset Management. Hey have you with one of the mum
and dad in Vistas buying into these companies when the
country sold down, Chuch hang good move from you. For
more from Hither Duplessy Allen Drive, listen live to news
talks it'd be from four pm weekdays, or follow the
podcast on iHeartRadio
Jeremy Hutton, Milford Acid Managements with us.
Speaker 2 (00:01):
Hey, Jeremy, good evening, Heather.
Speaker 1 (00:04):
Were you surprised by the fact that there was a
twenty year deal with Typoint.
Speaker 2 (00:09):
Yeah, it was the news that everyone who follows the
New Zealand electricity sector had been waiting for eagerly, and
it was a positive, positive news. And yes, the deal
length was a surprise. So Meridian Energy, who is the
primary negotiator, had requested a longer deal than the normal
or the previous three yearly deal cycle, and Rio Tinto,
(00:30):
who's the owner of the smelter, liked to play hardball
around the shorter timing in the past, so effectively, Meridian
was seeking the longer term, a more meaningful deal and
something that it gives a sector more opportunity to invest
long term and of course give the local community done
in South lond and more certainly around jobs and opportunities
as well.
Speaker 1 (00:48):
What do you reckon this means for new renewable projects
in the country. Will more of them get built?
Speaker 2 (00:54):
Yeah? It should be a large positive for new renewable
builds in New Zealand and the ty smelter is a
really large user of electricity in the country around twelve
to thirteen percent of total electricity demand, and if the
smelter had exited, it would have left the electricity market
and a heavy oversupply, and this incentive to build for
developers would have been gone probably for the rest of
(01:15):
this decade.
Speaker 1 (01:17):
And a smell to exit would have impacted our country's
electrification plans.
Speaker 2 (01:20):
Do you think, yeah, my viewer would have. It would
have impacted our ability to decarbonize and electrify materially. I mean,
we do as a country need to produce a lot
more electricity to meet our total country carbon commitment goals.
And the gentailers and other developers have been building a
large amount of view generation already, mainly on the back
(01:42):
of growing demand from things like electric vehicles and data
centers that we know. But now the gentailers and other
developers will be you know, they have that certainty to
commit to more generation and they are long term projects,
so they need that certainty. And there are some great
wind projects that I think will kick off on the
back of this, particularly down in the Deep South were
(02:03):
there is some great resource. Unfortunately it's really close to
large users like the Tey smelter as well.
Speaker 1 (02:09):
That's good stuff and what happened to the share prices
of the gen Taylor's.
Speaker 2 (02:13):
Yeah, the size of the positive reaction was a surprise
to me. I mean, the market had been anticipating a
ty Stay deal as likely, so part of the good
news was factored in already. But there is always some
risk that the exit scenario could play out, and that
was in the price a little bit too, Albeit it
was small in this instance. So you saw a small
(02:33):
pop of between three and five percent for the big
three gent tailors, so Meridy and Mercury and Contact. But
there was always also a bit of other action. On
that day, there was a large passive index rebalancing event,
and that generally happens on the last trading month of
the last trading day of the month, and these passive
funds tend distort the market a little bit. When that
hit in the last hour, those share prices took another
(02:56):
leg up and Meridian finished up ten percent on the day,
which is really a few move for a steady gin
Taylor like Meridian.
Speaker 1 (03:02):
I tell you what. Jeremy, thank you, Jeremy Hutton, Milford
Asset Management. Hey have you with one of the mum
and dad in Vistas buying into these companies when the
country sold down, Chuch hang good move from you. For
more from Hither Duplessy Allen Drive, listen live to news
talks it'd be from four pm weekdays, or follow the
podcast on iHeartRadio
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
24/7 News: The Latest
The latest news in 4 minutes updated every hour, every day.