News | 25th Mar, 2012

Alcoa SOS: we want cheaper power

Monday 25 March 2012
Ben Schneiders, The Age

Victoria's biggest electricity user, Alcoa, is pushing for a cheaper power deal as part of a bid to avoid closure of its Geelong aluminium smelter and the shedding of 600 jobs.

Environmentalists attacked the push by Alcoa, which uses up to a fifth of the state's electricity and is a major emitter of greenhouse gases.

The ageing Point Henry smelter in Geelong needs tens of millions of dollars of new investment, and a politically influential union is working on a plan that would see Alcoa provide most of that investment.

The rest would come from state and federal governments. Australian Workers Union state secretary Cesar Melhem said he reckoned the Point Henry smelter needed up to $100 million in new money to reach a similar standard to Alcoa's other Victorian smelter, at Portland.

''We can make the case for smelting to continue at Point Henry,'' he said. ''We've got a classic example of Portland doing very similar things in very similar circumstances, the only difference is it's a much younger plant.''

In February, Alcoa, Victoria's biggest exporter, announced that the 49-year-old Point Henry smelter was under review, as it was losing money due to the high Australian dollar, rising input prices and low metal prices.
Well-placed sources said Alcoa executives had been talking to electricity suppliers about changes to contracts in a bid to cut costs. It was expected any deal with electricity suppliers would require subsidies or assistance from the state government.

Alcoa said yesterday it was ''looking at all major input costs'', but would not comment on discussions with suppliers, as they were confidential. Alcoa has also been meeting senior government ministers over the future of the smelter, while workplace delegates have been recently briefed on the major challenges in keeping Point Henry open, which include electricity, raw material costs and labour.

Any government assistance for Alcoa would be controversial, with federal and state governments unveiling a $275 million package for Holden last week, which attracted criticism.

Shadow treasurer Joe Hockey said he had ''deep, deep reservations'' about it. But a spate of job losses in manufacturing at firms such as Toyota and BlueScope Steel have made jobs an important political issue.

Mr Melhem said aluminium was a ''strategic'' industry that justified government assistance. The AWU estimates that about 2000 jobs in total would be lost if Point Henry was shut, because of the flow-on effect to other businesses.

Environment Victoria campaigns director Mark Wakeham said any support for Alcoa should be linked to a shift from brown coal.

''They appear to have no appetite to shift towards cleaner energy sources,'' he said. ''Every decision they've made has left them more exposed to rising fossil fuel prices.''

Alcoa signed new electricity supply contracts in 2010, which were due to take effect from 2014 for Point Henry and 2016 for Portland. Mr Wakeham said a cheaper power deal would conflict with the introduction of the carbon tax, which was meant to discourage the use of coal.

Alcoa's review of Point Henry is expected to be completed by midyear. When it was announced in February, the federal Coalition claimed that the federal government's carbon tax was an important reason for Alcoa's decision.

At the time, Alcoa chief executive Alan Cransberg said Point Henry was losing money now, without a carbon tax, but added that carbon pricing would be an ''additional cost burden that we will have to overcome''.