Comalco, the metals company struggling with low aluminum prices, a reluctant partner and the politics of power supply, Monday announced a NZ$400 million (US$235 million) upgrade of its smelter on the South Island of New Zealand.
The upgrade will add smelting pots (to refine the metal) to existing lines at Tiwai Point. It is aimed at boosting output, to 313,000 metric tons by the end of 1996 from the current 270,000, and making efficiency gains to ensure the plant's future for the next decade.Kerry McDonald, Comalco's New Zealand managing director, said the upgrade would add more than NZ$500 million (US$295 million) to the New Zealand economy over the life of the project, to 2012, although it will not substantially increase employment.
The plant, built when New Zealand was boosting output by big projects - a program later dubbed "Think Big" - has been criticized as benefiting from cheap power while not providing many jobs.
The upgrade was announced along with a decision to take an option on a new electricity supply deal with Electricity Corp. of New Zealand, negotiated last year.
Mr. McDonald said further details of that deal would be released later.
He disputed claims the price of electricity would rise in New Zealand
because of Comalco.
Mr. McDonald said production would be flat for the next 18 months and then would rise quite strongly - in time, it is hoped, for a pickup in aluminum prices.
Having posted profits up to NZ$170 million in the 1980s, Comalco reported a NZ$18 million loss in fiscal 1993, from $18.7 million in 1992, mostly
because of low aluminum prices.
The plant had also slipped in efficiency compared with newer ones, and Mr. McDonald said the upgrade was crucial for the plant's future.
He said financing the upgrade was not an issue, as dividends had not been paid to Australian shareholders since 1988 in anticipation of the upgrade.
Comalco New Zealand Ltd. is a unit of Comalco Ltd. of Australia, which is 67 percent owned by CRA Ltd. Comalco New Zealand owns 79.36 percent of the Tiwai Point smelter, and Sumitomo Chemical owns the rest.
Mr. McDonald said the group was looking at the issue of future financing.
He said the company's Japanese partner had a number of concerns but is now enthusiastic about the deal.