N.Z. And Comalco NEW AGREEMENT BRINGS SAVINGS

Press, Volume CVI, Issue 31327, 25 March 1967, Page 3

N.Z. And Comalco NEW AGREEMENT BRINGS SAVINGS

(New Zealand Press Association) WELLINGTON, March 24. The Government and Comalco have reached fresh agreement on the cost of producing electricity at the Manapouri power project which will result in savings for both New Zealand and the aluminum combine. Details of the new agreement were gazetted yesterday.

Comalco has an option on the use of “cheap” Manapouri power at its proposed aluminium smelter at Bluff. The option is open until next year. Announcing details of the new agreement, the Minister of Electricity (Mr Shand) said that the actual prices to be paid for electricity could not be calculated until the works were completed to the various stages detailed in the agreement. But, he said, the gazette notice schedule set out precisely in legal language the manner in which the cost was to be shared equitably between the Government and Comalco. Mr Shand said the cost of the Manapouri power project was now estimated to be substantially above the original estimates. “But the cost of power, taking into account the revised construction costs, is still considered to be substantially below the cost of power which might be available to the aluminium industry elsewhere,” he said. Confidence Felt “It is this knowledge which gives continued ground for confidence that Comalco will, when the time comes, take up their option and build their smelter.” Referring to the new agreement, Mr Shand said it clarified a number of issues which were in doubt. “It enables the Electricity Department to plan its construction programme on a

more satisfactory basis and gives the company a firm basis on which to cost and plan its development,” he said.

“The right of the Electricity Department to use part of the power which is eventually intended for use by Comalco will extend to October, 1976,” he said. Mr Shand said the new agreement retained the principle that the company must pay its full share of the cost of producing electricity at Manapouri. “But in the early stages it will only have to pay for the power which it actually uses and certain minor elements of cost will be taken up by the department and come to Comalco’s account only at the second stage when they are taking the major part of the Manapouri output,” he said. Capital Cost The Minister said: “It may seem strange that it is possible to amend an agreement in a manner which results in savings to both parties. “This comes about because the capital cost is not greatly affected by the number of generators installed,” he said. “If the initial load taken had been less than the full output, as now planned, the company would have had to meet the annual charges on a greater part of this capital cost during their development period. “But now, during the time it enjoys the use of the extra

capacity, these will be met by the Electricity Department,” said Mr Shand. Adequate Supply He said the new agreement had enabled the department to replan its development operation over the next few years, and to postpone for several years construction which would otherwise have been necessary to ensure a continuous and adequate supply to the New Zealand consumer. Mr Shand said that all seven lOOkw. generators would now be installed at Manapouri as part of the initial construction, and the construction of the Manapouri and Te Anau control dams would follow immediately. He said that until October 1, 1976, Comalco would have to limit its demand to 300,000 kw. of continuous supply. Four Years “This will give the Electricity Department approximately 1550 million units a year more than would have been available under the 1963 agreement,” he said. The’ Minister added that the capital expenditure which could be postponed as a result of the new agreement was of the order of £55 million. “Assuming that Comalco takes up its option, the period of postponement would be four years, but the greatest advantage would be that should Comalco not take up its option, a further postponement would be possible until such time as the surplus available from Manapouri could be absorbed into the system,” he said.