Alumina chair Pizzey begs for energy policy rethink

Wednesday, May 31, 2017

Alumina chairman John Pizzey, who also sits on the board of packaging company Orora, says Australia’s energy-intensive industry will go under and small manufacturers will struggle to survive if the nation’s politicians can not compromise on energy policy.

Speaking in Melbourne yesterday, Mr Pizzey attacked what he said was a decade of ineffective ?national energy policy that had left Victoria’s Portland aluminium smelter paying up to double the power price paid in the rest of the Western world.

“Unless real policy about energy security and development is developed, you can kiss intensive energy companies goodbye and even small manufacturing companies will need to think twice,” he told The Australian yesterday.

“I might be hoping for the impossible, for people of different political persuasions to come to a compromise, but I hope they can.”

Mr Pizzey, a former Alcoa executive, made the comments after the company’s annual general meeting in Melbourne. At the meeting he joined a growing number of business leaders calling ?desperately for an overarching ?national energy policy to deal with gas and power prices that are rapidly rising as gas exports increase and the power system moves to lower carbon sources.

“There have been many years of energy policymaking in Australia that have reduced energy security and substantially increased energy costs for industry,” Mr ?Pizzey told shareholders.

“Power prices paid by the Portland smelter are approximately 50-100 per cent higher than prices paid by similar operations in the Western world. This situation should never have occurred, given the energy endowment of eastern Australia.”

Alumina is a junior partner in the Alcoa-led AWAC joint venture that owns a majority stake in Portland.

Last year, the Victorian government agreed to a $200 million subsidy over four years to prevent Portland’s closure in the face of higher power costs. But the subsidy, rising power prices and continued industrial power demand from the smelter — Victoria’s biggest power user — were unable to stop the closure of the ageing ?Hazelwood brown coal power station in the Latrobe Valley this year.

“In Australia, we paid high wages because we had abundant energy,” Mr Pizzey said. “But gas and power prices are going up significantly and directors of manufacturers are saying, how do we invest under these circumstances, because we are globally exposed.”

At the AGM, Mr Pizzey paid tribute to departing chief executive Peter Wasow, who the company this week announced would retire after three years in the job and be replaced by non-executive director Mike Ferraro.

“Peter leaves the company in a much stronger position than when he joined,” he said, noting last year’s stressful negotiations around Alcoa’s demerger that saw Alumina head to court to secure greater influence on the AWAC venture.

“The outcome has been a stronger company better placed to face the future challenges and ?opportunities.”

Mr Pizzey agreed that the new agreement made Alumina a more attractive takeover target.

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