New Zealand Aluminium Smelters Ltd Climate Change Approach

New Zealand Aluminium Smelters Ltd Climate Change Approach Stewart Hamilton Business Improvement Manager *

Introduction • Business Improvement Manager • Support Business Improvement by developing operational expertise to deliver sustainable value • Move business towards strategic performance targets in Key Result Areas: • Health and Safety • People Commitment • Environment and Communities • Market Position • Operational Excellence • Financial Strength 2

NZAS Climate Change Approach • World Aluminium Industry • NZAS Performance in the Industry • NZAS Approach – Sustainable and Technical • Role of Aluminium as part of the solution • NZAS Approach - Communities and Policy 3

NZAS Climate Change Approach • World Aluminium Industry • NZAS Performance in the Industry • NZAS Approach – Sustainable and Technical • Role of Aluminium as part of the solution • NZAS Approach - Communities and Policy 4

How Aluminium Is Produced 2 tonnes Alumina 5 1 tonne Aluminium

World Aluminium Production • ~45 Million Tonne of Aluminium (Primary and Recycled) • ~350 Million Tonne of CO 2 -e • ~5 x New Zealand Emissions Aluminium Smelter 6 Alumina Refinery Bauxite Mine

NZAS Climate Change Approach • World Aluminium Industry • NZAS Performance in the Industry • NZAS Approach – Sustainable and Technical • Role of Aluminium as part of the solution • NZAS Approach - Communities and Policy 7

NZAS Rio Tinto Aluminium (79. 36%) Sumitomo Chemical Company (20. 64%) 8

NZAS Operations Summary • ~20 th largest Aluminium Smelter (out of 200+) • Producing 350, 000 tonnes aluminium/year • Producing the highest purity aluminium in the world • Export revenue NZ$1. 4 bn • Using 13% of all NZ Electricity 9

NZAS Greenhouse Gas Emissions • NZAS CO 2 -e Direct Site Emissions 680, 000 tonne/yr 10

NZAS Performance • Reduced absolute site CO 2 -e by 41% since 1990 • Top 10% Carbon Intensity of World Smelters • Top 20% Energy Efficiency of World Smelters 11

NZAS Competitive Challenges • Reducing Emissions (technical risk) – Technical Limit to the Process – NZAS at World’s Best Practice for Cohort Group • Cost of Emissions (business risk) – Electricity represents 40% of NZAS costs – Selling on a International Commodity Market – Competitiveness at Risk • Carbon Leakage Risk – NZ Power Generation – high proportion of renewables – Net Emissions Lower from NZ Aluminium Production 12

NZAS Climate Change Approach • World Aluminium Industry • NZAS Performance in the Industry • NZAS Approach – Sustainable and Technical • Role of Aluminium as part of the solution • NZAS Approach - Communities and Policy 13

NZAS Sustainable Approach License to Operate 14 Cost & Revenue

NZAS Sustainable Approach • Sustainable Business comes from Governance in both: – License to Operate – Cost and Revenue • Systems Developed to Support a Culture of: – Attention to Detail – Procedures and Data Management – Continuous Improvement – Rewarding behaviour Aligned with our Goals and Values 15

Approach to Technical Challenge • • Business Improvement Projects – Six Sigma Rigor “Adapt and Adopt” $5 -15 Million per year ~ 15 Full Time Project Leaders • • • DC Power efficiency - Project 200 Process Carbon Efficiency – Froth Flotation PFC reduction (Anode Effects) – Process Control Fuel Combustion Efficiency Recycling of Extrusion Scrap 16

NZAS Climate Change Approach • World Aluminium Industry • NZAS Performance in the Industry • NZAS Approach – Sustainable and Technical • Role of Aluminium as part of the solution • NZAS Approach - Communities and Policy 17

Aluminium as Part of the Solution 18

Aluminium Life Cycle 19 • 706 million tonnes produced (since 1888) • Approx ¾ of this still used • Recycling aluminium requires 95% less energy than primary aluminium smelting • Recycling of aluminium today saves an estimated 84 million tonnes of CO 2 -e per year • Recycling the metal still in use = 15 years’ primary aluminium output

NZAS Aluminium Recycling • A cornerstone of Sustainable Practices • RTA Partnership developed with End-User Customer in NZ • 3600 tonnes of Aluminium recycled in 2006 20

Aluminium Offset • 60 -75% of vehicle fuel use is weight related • Typical aluminum parts 40 -50% lighter than a comparable steel part • 1 kg of aluminium used as replacement = 20 kg of CO 2 over lifetime 21

NZAS Aluminium Offset • For other vehicles, such as trains, ferries and aircraft the potential savings are even greater • 18, 000 tonnes per annum of NZAS high purity aluminium is supplied to European aerospace industry 22

NZAS Climate Change Approach • World Aluminium Industry • NZAS Performance in the Industry • NZAS Approach – Sustainable and Technical • Role of Aluminium as part of the solution • NZAS Approach - Communities and Policy 23

NZAS Community Approach • Energy Efficiency Extends beyond the gate… • Retrofit all Bluff homes with high quality insulation products • NZAS provide financial backing and support contractors in project safety and project management • 200 homes complete to date 24

NZAS Policy Approach • Business as Usual is NOT an option • Short term – simple options that do not compromise long term policy – Voluntary agreement leveraging off NGA framework – Options to promote renewables and offsets • Medium to Long term – Emissions Trading Scheme – Enable lowest cost abatement - deploy low emissions technology – Design complex - Allocation principles & impact on Electricity pricing – Market mechanism to aid technology development. . ? • Emissions Permit Allocation – Recognition of prior action Credit for Early Action – Competitiveness at Risk 25

Climate Change - A Business Driver • NZAS will continue to target and work on Climate Change Impacts irrespective of current policy uncertainty – Expectation that there will be a price on carbon – Set meaningful targets to reduce Energy and GHG – Incorporate in employee incentive payment scheme – Deploy strategic improvement projects – Invest in R&D to reduce the GHG intensity of our processes – Work with industry groups and governments in policy formulation – Investigate offset projects – on and off site – Promote recycling and the life cycle benefits of Aluminium usage – These approaches are almost always cost effective 26

New Zealand Aluminium Smelters Ltd Climate Change Approach Stewart Hamilton Business Improvement Manager *