There were reassuring words today for anyone considering buying shares in Mighty River Power. There's been speculation the possible closure of the Tiwai smelter would cut power and share prices. But Transpower boss Patrick Strange says if the smelter closed, any drop in power prices would be only short-term.
Tiwai's smelter uses 15 percent of New Zealand's electricity, but if it closes, the head of Transpower says we'd still cope.
Rio Tinto abandoned talks with the Government over a possible subsidy for the smelter last week. Then, the Opposition was full of doom.
"Essentially there is a big question mark hanging over all of the electricity generators in New Zealand," says Green Party co-leader Russel Norman.
But Mr Strange says the industry was already preparing for that eventuality by 2022. It's just that now it may come sooner.
"If something happened at Tiwai and it disappeared tomorrow – we had a huge fire – we'd spill a little bit of water for a couple of years," he says. "But in reality it's not going to shut quickly."
Manapouri Power Station currently supplies Tiwai, but Mr Strange says it would take only three summers to tweak its lines into the national grid at the relatively low cost of $110 million.
"It'll have a downward effect on wholesale prices, which will be a relief to some struggling businesses," says Mr Strange.
But if that's good news for consumers, it isn't for investors in companies like Mighty River Power, which will make less profit and lower returns to shareholders when power prices tumble.
But any tumble would be short-term. Mr Strange says the market would ensure coal-fired power stations like Huntly closed sooner rather than later, and new plants just wouldn't get built for four or five years.
"We don't need it and people are more rational in the end," says Mr Strange. "There's no point in growing more carrots when there's a glut."
Power industry consultant Brian Leyland says instead of ensuring demand always exceeds supply, the industry could invest to prevent future crises, like droughts, having any impact on supply.
"I'm quite sure that the electricity industry, which controls the market and controls the power price, will arrange to keep this on the edge of a shortage and keep the prices as high as they need to make a good profit," says Mr Leyland.
source: newshub archive