More than $ 2 billion has been wiped off the value of power companies following the announcement that the aluminum smelter in Bluff is being reviewed and could close down.
The smelter directly employs about 900 Southlanders, but its possible closure could have ramifications well beyond the region by flooding the market with cheap electricity.
The smelter, which is undergoing a "strategic review", has enjoyed cheap power from the Manapouri hydro plant since 1971, and consumes about 13 per cent of the country's electricity supply according to the Electricity Authority.
That could be unleashed on the market in the event of a closure, potentially putting the skids on power prices.
* We are all paying for Tiwai Point
* New Zealand aluminum industry is committed to a low carbon future
* Tiwai Smelter deal signed between Meridian Energy and NZAS
* Speculation that Rio Tinto's Tiwai Point smelters for sale
Independent electricity retailers contacted by Stuff were reluctant to discuss the possible implications for power prices, noting that threats to close the smelter had been made before.
But Meridian Energy shares were down almost 8 per cent in lunchtime trading on the NZX, slashing its value by just over $ 1b.
Contact, Mercury, Genesis and Trustpower were also hit hard, with their shares falling by between 3 per cent and 7 per cent, also knocking more than $ 1b off their combined values.
The smelter is owned by New Zealand Aluminum Smelters (NZAS), whose major shareholder is the giant resource of Rio Tinto.
"The review will consider all options for the future of the smelter, including the option of closure," the smelter's electricity supplier, Meridian Energy, said in a statement to the NZX.
It has been advised Rio Tinto would provide an update on the review by the end of March.
Energy Minister Megan Woods said the review was a commercial process by a commercial operator.
"We hope that these discussions and work by NZAS and Rio Tinto result in the smelter remaining open and continuing to back the Southland economy by trading on its position as producing the world's greenest, low-carbon aluminum," she said
"The New Zealand Government has had a clear position since 2013 under the Key / English government that there will be no more financial assistance from taxpayers for Rio Tinto, which is already supported by Meridian for the power it uses."
That hasn't changed, she said.
"We note Rio Tinto's own assessment is that the fundamentals for the aluminum market are still strong, and should see a return to higher prices over the medium term."
The price of aluminum is sitting at about US $ 1728 (NZ $ 2742) a ton, down from a peak of just over US $ 2500 a ton in April last year and back at levels last seen towards the end 2017.
Rio Tinto Aluminum chief executive Alf Barrios said in a statement that it was intended to hold discussions with the Government and energy providers to explore options and identify economically viable solutions.
"The aluminum industry is currently facing significant headwinds with historically low prices due to an over-supplied market. This means that many aluminum providers are reviewing their positions.
"Rio Tinto will work with all stakeholders including the government, suppliers, communities and employees in order to find a solution that will ensure a profitable future for this plant," he said.
NZAS chief executive Stew Hamilton warned in March about the potential financial impact that a change to electricity transmission pricing could have on the smelter.
But electricity industry sources have said repeated threats to close the smelter have made it hard for generators to weigh up how much to invest in new electricity generating capacity – given the volume of excess supply that the closure of the smelter would unleash on to the electricity market .
Lower power prices could be a silver-lining for consumers, if the smelter was to close.
NZAS reported a $ 220 million profit for the year to December 2018, turning around a $ 176m loss the previous year, with revenues climbing 16 per cent to $ 698m.
But it said the big profit reflected "the tolling nature of the company which its revenue is determined by and equates to the tax deductible costs that have been incurred, not revenue derived from the sale of aluminum".
Hamilton said NZAS had paid nearly $ 200m over the past 10 years for transmission infrastructure that does not use in the North Island.
"We have no choice but to absorb these costs which has placed undue pressure on the operation."
Hamilton said his focus was now on his team at Tiwai and making sure the local community was kept informed.
"We recognise this review creates uncertainty for our employees and the many people who depend on NZAS for their livelihood.
"Rio Tinto is mindful of the importance of our operations to the local community in Southland and we will be consulting with the New Zealand and local governments, the local community, suppliers, employees and customers during this process. This includes working to address very high energy costs. "
Invercargill National MP Sarah Dowie said the news was devastating.
"They wouldn't make this announcement unless they were seriously and critically looking at their operations."
The announcement comes on the back of the Southern Institute of Technology being centralized and uncertainty in the farming sector, she said.
"Now Rio Tinto; Southland will be destroyed," Dowie said.
"Why would New Zealand be in the business of exporting jobs and livelihoods at the expense of exporting the greenest aluminum in the world. It makes no sense, we should do everything we can to make it possible for the smelter to thrive."
Rio Tinto's statement said it spent about $ 450m in New Zealand annually and accounted for 6.5 per cent of Southland's GDP with export revenues of about $ 1b each year.
It said the strategic review would examine the economic and social impacts of the loss of NZAS to Southland and New Zealand.
Southland Chamber of Commerce president Neil McAra said the closure of the aluminum smelter in Bluff would be devastating for the Southland economy.
He conceded the Southland economy was reliant on the smelter, along with agriculture.
McAra said the Government had talked about supporting the New Zealand region but he didn't believe it had lived up to that.
Like Dowie, McAra pointed to the SIT situation and Tiwai as examples where he felt there could be more support from the Government.
He described the transmission situation as unfair, given Tiwai paid nearly $ 200m over the past 10 years which went to the transmission infrastructure in the North Island.
"It's a case of robbing Peter to pay Paul," he said.
McAra said leaders within the Southland community were gathering on Wednesday to talk through the situation.