Labour pledges delay to Tiwai Point aluminium smelter closure

Business

Labour aims for three-to-five year extension to life of the Southland smelter, including 'supporting' Transpower to allow reduced power costs for the smelter owner NZAS

28th Sep 20, 11:45am by David Hargreaves

Tiwai Point

The Labour Party is now pledging to extend the life of the Tiwai Point aluminium smelter in Southland by three-to-five years, including allowing the smelter owner to negotiate a cheaper power price - something Labour had appeared to explicitly rule out earlier.

Both Labour's coalition partner in the current Government NZ First and the National Party have pledged ways of extending the life of the smelter.

Smelter owner NZ Aluminium Smelters, majority owned by the giant Rio Tinto, gave notice in July that it would close the smelter next August (2021), with the likely direct loss of 1000 jobs and 1600 indirect jobs. The impact on the Southland economy will therefore be huge.

At the time, Energy Minister Megan Woods, appeared to rule out cutting a deal for NZAS/Rio, saying the Government wouldn’t give the company a handout.

“Since the smelter opened, taxpayers have been subsidising Rio Tinto to keep it open, either directly or indirectly through cheaper power, and Emissions Trading Scheme allocations of over $48 million per year,” Woods said on the day the NZAS/Rio announcement was made.

However, on Monday, Woods, as Labour's Energy Spokesperson pledged to extend the life of the smelter for three-to-five years, including the Government "providing support to Transpower to enable reduced transmission charges over the closure period while avoiding a redistribution to other electricity users". Labour released this fact sheet on the proposal.

Woods didn't go into any greater detail on what the "support" would entail and said the final negotiation of transmission pricing is commercially sensitive "so details will be released as appropriate".

She said Labour wanted Southland to develop new industries "that are future focused and will integrate into the local community providing a source of well paid jobs for current Southlanders and future generations”.

“Extending the life of the aluminium smelter requires an agreement on electricity transmission costs. Normally, any reduction in transmission costs for a major customer like the smelter would result in higher prices for other consumers. Labour will negotiate a way forward to keep the smelter operating and prevent extra costs falling on other consumers. We’ll do this by supporting Transpower to form an agreement with the smelter that preserves jobs in the medium term and gives Southland time to build a new economic future."

She said if terms could be agreed in order to extend the smelter for 3 – 5 years, they would include conditions that ensure the Smelter would:

Continue operating for agreed period of time
Work on remediation of the site
Maintain employment at the site
Work with government on the future use of the site.

Woods said a period of about three to five years would give the workers, Iwi, local community, Government and other stakeholders more time to engage on plans for the future of Southland’s economy.

"We’re already hearing from a range of other energy users interested in setting up in Southland, such as for hydrogen production, data centres, or solar panel production. There are also opportunities to use that energy to reduce the amount of fossil fuel usage in the energy system such as replacing coal boilers with using electricity from the grid."

She said Labour was "clear" that any reduction in transmission charges must be fair, "not just for the Aluminium Smelter, but also for New Zealand".

"If our bottom lines are not met, or agreement cannot be reached on a fair transmission charge for the extended closure period, we will immediately pivot our focus to supporting the workforce and region should Rio Tinto decide to proceed with their original closure date next year."

Woods said Labour had been clear in Government that there will not be any further direct subsidies for Rio Tinto to continue operating the Aluminium Smelter.

"This is a position taken by successive governments since former Finance Minister Bill English told Rio Tinto in 2013 there would be no further taxpayer money offered up.

"But Labour also recognises the importance of an orderly closure over time, both to enable workers, Iwi and the local community to plan for what comes next and to avoid a sudden increase to transmission prices for other electricity users around New Zealand that would occur if the smelter closes.

"That’s why we are willing to negotiate with Rio Tinto on a more managed exit."

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129 Comments

by DoTheMath | 28th Sep 20, 11:49am 1601246992

At some stage we need to agree that some businesses are just not economically viable. Southland has a labour shortage, many of these jobs can be repurposed until Tiwai gets a new thing going.

by Hook | 28th Sep 20, 12:03pm 1601247792

The current owners of those jobs at Tiwai won't enjoy the 60 - 70% pay reduction they'll wear in that repurposing DTM. The maintenance guys and the contracting businesses will be big casualties

by DoTheMath | 28th Sep 20, 12:33pm 1601249639

Yeah but it wont take long to get something else on the go with a skilled workforce. Giving Rio Tinto free power is never going to be a long-term solution and the band aid has to come off eventually.

by Hook | 28th Sep 20, 12:50pm 1601250608

BS. To replace the earnings capacity will take years, certainly more than even the 5 yrs proposed. NZAS isn't getting free power and even if it was you need to accept Manapouri was built specifically to supply the smelter. That's why the grid was never designed to export power out of Southland. The issue is the Transmission Pricing and they have a fair point. How do you think Auckland fuel users would feel if their fuel levy was quadrupled so that the rest of the country paid 1/4 of what they do now?

by OreoContrarian | 28th Sep 20, 1:23pm 1601252597

If it is so easy to create a new long term industry why don't the Government just create one in Northland and employ everyone on a 100k a year. Most new businesses fail. Any new business that will employ a few thousand will only come if they get subsidies as New Zealand is not special and there are many other countries that pay the subsidies to attract a new business starting up that employs a few thousand people. If Tiwai shuts down it will be a waste land for a decade plus.

by GenerationXY | 29th Sep 20, 10:41am 1601329289

In Northlands case, I believe the government is holding a Reeferendum to do EXACTLY that...

by OreoContrarian | 29th Sep 20, 11:38am 1601332730

Your dreaming if you think it will pay everyone 100k a year. Have a cousin doing it in the States on a big scale. Relies on cheap Mexican labour to make the business work even there.

by GenerationXY | 29th Sep 20, 10:42am 1601329342

DP.....

by Basil brush | 28th Sep 20, 1:22pm 1601252531

Isn't that what has effectively happened with the introduction of the regional fuel tax in Auckland?

by Lanthanide | 28th Sep 20, 1:31pm 1601253104

No, Auckland had a cost imposed on it, but the rest of the country had no change. Hook was suggesting increasing the rates in Auckland so the rates everywhere else could be decreased.

Also the 10c regional fuel tax in Auckland is going to the Auckland council to build roads specifically for Auckland.

by Hook | 28th Sep 20, 4:35pm 1601264140

Thanks for clarifying what I said - sort of. What I was asking was not increasing the rate per se, but more along the lines of if that was the status quo i.e. Auckland being a significant fuel user paying more in a levy based on volume thereby subsidising what the rest of the country paid

by Casual Observer | 28th Sep 20, 6:12pm 1601269927

Auckland may have had a cost imposed on it, but around the same time fuel down here fuel also went up. It has been suggested that the fuel companies increased everywhere else to cover their margins so that they could remain competitive in Auckland.

by Theoracle | 28th Sep 20, 8:35pm 1601278547

Auckland fuel went up 10c then everywhere else thought bugger that we'll go up too and that's exactly what happened. So we all copped it in the end.

by Averageman | 28th Sep 20, 2:05pm 1601255107

Talked to a Design Engineer the other day. There is a project in the works to take the power to Benmore and then distribute from there. Will take a few years, interestingly about the same as the proposed extension in this article

by Hook | 28th Sep 20, 2:30pm 1601256602

An interesting idea. It certainly makes me wonder why they're faffing about with the Onslow idea - a complete waste of money

by powerdownkiwi | 28th Sep 20, 2:55pm 1601258138

You need to understand energy.

First lesson: Energy underwrites money.

So what you're really saying is that it is a complete waste of energy. That is not at all certain, but my bet is that it is worth finding out. And I'm not the only one: https://businessdesk.co.nz/article/opinion/keith-turner-time-for-new-na…

Let me guess, he wouldn't know anything either?

by Yankiwi | 28th Sep 20, 3:27pm 1601260028

Sadly, as we have seen elsewhere, adding dam infrastructure will be opposed by the Greens. Short sighted viewpoints in my opinion, better to increase dam infrastructure (and extent) to reduce dependence on carbon based fuels.

I am not at all confident that NZ will ever approve a dam expansion or a new dam.

by powerdownkiwi | 28th Sep 20, 4:02pm 1601262125

Yankiwi - yes, and it goes with Nimbism too. There are a lot who virtue-signal greenness, but are quite happy to accept the facilities of a Benmore etc. I'm starting to have that conversation with the 'Save the' brigade. But I happen to think we can not need our cake by not going into the cake-shop, too.

We are already an overshot species; Earth Overshoot day was a month later, but still grossly in overshoot:
https://www.theweathernetwork.com/ca/news/article/earth-overshoot-day-2…

by Hook | 28th Sep 20, 3:49pm 1601261340

PDK you are so off the wall. If you want to conflate my comment with something completely unrelated, that's your prerogative I suppose. If you remotely understood what I was commenting about ( 4+bln to build the Onslow Project vs investment into other necessary grid upgrades @ ~1bln) you might actually get the picture. Note the Onslow Project probably won't get started (actual construction) for another 5yrs vs the grid upgrade that is already consented and happening in parts.

by powerdownkiwi | 28th Sep 20, 3:56pm 1601261802

Do you grow grass without sunlight? Ever asked what sunlight is?

How much 'money' would you 'make' without it?

by OreoContrarian | 28th Sep 20, 4:08pm 1601262503

I have spent time in a hell hole called Chengdu in Sichuan province in China. No sunlight at all. Day after day for weeks. Engine room of China. So many Factories you drive past them for days. One of the most miserable places I have been to. No stray animals as they were consumed. But they make cheap goods for the rest of the world. You wont change their behavior. After seeing this first hand the idea of putting all this regulation on NZ businesses is crazy. Reinforced again after visiting Mumbai and Nagpur in India.

by Hook | 28th Sep 20, 4:10pm 1601262651

Last time I looked the sun was still shining and I don't plan on being around in the roughly billion years or so it's predicted to go supernova.

by Hook | 28th Sep 20, 4:14pm 1601262848

Keith Turner is speaking from a point of "vested interest". He's on the Board of the ICCC for starters. His opinions fail to address the very real possibility of consent refusal, the technical difficulties of tunnelling 600+mtrs vertically, the no doubt fraught compensation arrangements required with existing land owners and lastly the not insignificant opportunity cost of an asset sitting unused until the 1- in -100 drought turns up. NZ has never had a power shortage due to lack of water - it has had power shortages due to lack of infrastructure capable of transmitting power and regulations governing lake levels and minimum river flows. Onslow will not solve that problem.

by waymad | 28th Sep 20, 5:05pm 1601265923

And add two of the schemes that didn't gain consent (or were yanked before entering that Vale of Tears):

Waitaha on the West Coast - a tiddler at 20MW but that's 2/3rds of the Coast usage, so would have added considerable resilience to their supply.
Meridian's North Bank (of the Waitaki) scheme - 524MW IIRC.

Hey ho - but both could be described as 'shovel ready'.....

by Chris Morris | 28th Sep 20, 5:32pm 1601267578

He is almost certainly talking about Clutha Upper Waitaki scheme which will only allow 1100GWh pa north even if Manapouri closes.
https://www.transpower.co.nz/sites/default/files/bulk-upload/documents/…

by FamilyGuy | 29th Sep 20, 11:46am 1601333183

Jacinda would promise anything before election. Spending/promising taxpayers' money for your re-election is easiest thing to do. she just wants to save her job.
It is sad that both the main parties are horrible and we don't have a good alternative.

by RCD | 28th Sep 20, 11:52am 1601247168

Either way, Rio Tinto wins and the taxpayer underwrites them yet again.

Soft headed Governments are easy to manipulate when you are as big as RT

by youngdumbandbroke | 28th Sep 20, 12:11pm 1601248287

Imagine the uproar if Fonterra held the government to ransom like this

by ShoreThing | 28th Sep 20, 1:07pm 1601251659

Can't tell if that is sarcasm - you've heard of Federated Farmers, right?

by OreoContrarian | 28th Sep 20, 2:03pm 1601254997

Or when it was NZ Dairy Board. NZDB was at pastoral house 500 meters from Parliament so they could go an lobby / push the politicians for what ever they needed.

by youngdumbandbroke | 28th Sep 20, 1:58pm 1601254729

That's my point. Both Rio Tinto and Fonterra are in the same boat. But where is the climate change/environmental scrutiny on Rio Tinto? They've plundered and trashed countless ecosystems worldwide. But it's far less palatable politically

by Casual Observer | 28th Sep 20, 6:23pm 1601270621

Interestingly Fonterra has had some initial talks in taking power if Tiwai closes. Guess the Labour doesn't really want Fonterra/NZ emissions to drop ... https://www.rnz.co.nz/news/business/422440/how-meridian-fonterra-and-ti…

by OreoContrarian | 28th Sep 20, 6:27pm 1601270877

It is just jaw jaw. The Government could fund hundreds of million to get the power to Fonterra and Fonterra will pay the same or less for power. But Fonterra's emissions will drop. Sounds like a BS plan to me.....but we could then say our emissions had dropped

by Chris Morris | 28th Sep 20, 6:35pm 1601271314

The numbers talked about were disregarding capital costs of the change, going from coal powered steam to electricity would treble the energy costs. And energy costs is a major input on the viability of the business.

by powerdownkiwi | 28th Sep 20, 6:52pm 1601272365

Of any business.

And of any economy. You might enjoy this fellow, Chris:
https://surplusenergyeconomics.wordpress.com/

by Hook | 28th Sep 20, 11:56am 1601247393

So the "no more Govt subsidies" was another inspirational goal just like the 10,000 houses?? Telling people it's support not a subsidy is going to be an interesting sell. She's gonna get flayed by the media.
I wonder if the "no CGT on my watch" is another inspirational goal??

by Advisor | 28th Sep 20, 12:19pm 1601248741

The flipflopping is definitely annoying but for a smoother transition of the industrial site into its next gig, the government will have to keep the smelter running.
Some of the alternatives sound fantastic towards building a more modern, carbon-neutral industrial base down south; however, even if expedite public decision and implementation around the future of the site from its usual glacially slow pace, we won't break ground in the next 18-24 months.
Makes sense to keep the smelter running for the time being.

by Hook | 28th Sep 20, 1:14pm 1601252071

The flipflop is comedic theatre at its best, soon to be surpassed only by the explanational sideshow we'll see shortly on MSM. I agree with what she's doing but she should have been upfront about it after the release of the TPR several months ago. As for breaking ground - I doubt we'll see anything happening down there for at least 5yrs - Noone even knows what the best use of the power is going to entail, it'll take 2-3 yrs to work that out. Personally I'd go with H2 production and export - possibly the quickest to get up and running, couple it with green MEOH production and export.

by OreoContrarian | 28th Sep 20, 12:27pm 1601249236

Not ideal but I think the likelihood of finding jobs paying the same for all those people who would be laid off as well as contractors who supply services is nil. Cindy told Mike Hosking there were ideas in the EV space for Tiwai....she has no idea. Now her advisors have told Cindy that wont happen she has come out with this new policy.
NZ just could not afford for the unemployment that was going to result. Those who say there will be all these new businesses that could be created for the workers are dreaming. If it was so easy why doesn't the Government just create new industry's. Because they are not capable. The goal was 10000 houses a year and in end to 389 were created in 18 months and most were being built anyway.....After it failed Cindy called it a reset

by Advisor | 28th Sep 20, 12:31pm 1601249509

True - those arguing against the 'support' shouldn't forget that nothing worth noticing can be built down there without the government having to shell out subsidies to the future investors, so why not keep the smelter going for the time being.

3-5 years should be enough to prepare a transition plan ready for execution over the use of the cheap power to create jobs and economic opportunities without leaving a hole of $500 million the smelter contributes to NZ's economy.

by powerdownkiwi | 28th Sep 20, 12:31pm 1601249492

Firstly, cut the derogatory shyte, eh?

And the ideological mantra, for that matter.

Labour are trying to look ahead, which is better than John Key's can kick. There will be a discussion about use of the Manapouri power, by New Zealanders for New Zealanders is my hope. We have to displace the 60% of our energy which is currently fossil energy derived; not just because of Climate forcing, but because fossil energy is leaving humankind. That implies massive changes in just about everything - debt-issued money included.

The only knowns are that the future will not resemble the past and that the change will be rapid and now. So this can-kick is a wrong call. A buying of time we don't have.

by OreoContrarian | 28th Sep 20, 12:35pm 1601249750

Watch this doco. It has some good ideas to replace fossil energy https://www.youtube.com/watch?v=Zk11vI-7czE with green energy that use fossil fuels.

by powerdownkiwi | 28th Sep 20, 1:32pm 1601253122

Where have you been? That was debated to death here a long time ago.

I suspect you have the same problem the Hook commentator has; the ability to wish stuff away because it fails to meet some wished-for goal (usually associated with the status quo, so presumably indulged-in by those who think they are advantaged by the current system. Presumably those disadvanted by the current system are more amenable to change...).

Renewable energy is what we will end up with by default - all else being draw-down of finite resources. And in drawing-down at exponentially-increasing rates, we have to realise the cessation-point approaches rapidly. Some of us - early adopters - tried out options. I've done 20 years off-grid, one way and another. Of course some alleys were blind ones, of course some things changed (solar got cheaper than wind, for example, LED's superseded cold-cathode fluorescents, etc) but saying something is not to be pursued because it it inconvenient, misses the point. On that basis nobody would get into a lifeboat, more to the point nobody would build one - because the ship is so much more comfortable.......

Fossil energy leaving us, is akin to a ship sinking. All this infrastructure built of, with and for, fossil energy. Yet get into the lifeboat we must, and the earlier the better.

by OreoContrarian | 28th Sep 20, 1:40pm 1601253645

Without oil and gas for fertilizers and pesticides we will all starve. I think it will go on for a lot longer than you think. So convinced I invest in Occidental Petroleum Corporation and Exxon Mobil. Have been great dividend payers for a long time. If you buy Exxon Mobil today its paying 10.05% yield on its dividend. A lot better than keeping it in the bank in NZ so Orr can create a zero rate for your money. Reviewing going into even bigger position in both at the moment.

by powerdownkiwi | 28th Sep 20, 2:18pm 1601255887

You make the same mistake as the Hook fellow.

Listen to it: "....we will all starve......reviewing going into even bigger position"

Can you not see it? Firstly, you're betting on the Titanic staying afloat because some folk might drown if it goes down (the ship doesn't give a shyte; it's been holed). Secondly, what's your bet going to be worth, post FF energy? About the same as a Titanic Purser-issued pound. We are embarking on the biggest energy-descent ever. Can never be emulated. And even as we do so, the results of the burn are cooking our habitat - a mere incidental side-effect. And you still think the amassing of tokens is a worthwhile pursuance, at this late stage?

Or just a schill for the O/G industry?

by OreoContrarian | 28th Sep 20, 3:40pm 1601260859

No I dont pass moral judgements on who I invest in. Another hero stock of mine is Altria (formerly Philip Morris). Has paid 15% compounding for years beating the index. Currently 9% dividend yield.
I have been trying to be a bit more green. I like AMG Mercedes cars and in the last 10 years I have gone from the 6.3 litre V8 to 5.5 litre turbo V8 and then the 4.0 litre twin turbo V8 (all E63s models). It hasn't worked though the smallest motor is by far the fastest 3.2 to 100kmh but when you push the loud pedal its stuck on 20 litres per 100km. Its costing $250 a week to run in 98 fuel from BP. So I have tried and it cost me a lot each change but each one ends up using more fuel despite being rated greener!

by powerdownkiwi | 28th Sep 20, 2:28pm 1601256497

Good luck getting to a urinal.

by OreoContrarian | 28th Sep 20, 2:30pm 1601256649

Don't be like that. Be glad I have not bought 20 houses and paid no tax instead. If I am every struggling to get to a urinal I will hire a hot young nurse to assist me.

by Yankiwi | 28th Sep 20, 4:42pm 1601264523

okay, you get a thumbs up for that humor!

by Hook | 28th Sep 20, 2:42pm 1601257333

MAATE!! you are so setting yourself up for a flaying !! LMAO. I like your style.
Agree with you on the so called "green" fuels - they have methanol mixed with them which has a lower calorific value which means you actually wind up using more of it - a cunning plan but shows how well companies can read consumer preferences to turn a profit. I used to use Gulls EcoDiesel until I worked out I was getting 10% less mileage but it was costing me the same $/litre - back to Zs standard diesel I went

by OreoContrarian | 28th Sep 20, 3:10pm 1601259033

They can bring it on. One has to invert ones thinking. It helps see opportunities in lots of situations.
I think the average kiwi could be doing a lot better having invested in stocks like Altria (Phillip Morris) and maybe now even Exxon Mobil. At one stage I researched all the arms and weapons manufacturers out of favor with the all the pressure from funds managers to be all woke and there were good opportunities at the time. An example of inverting ones thinking.
I had a V8 diesel SUV and it was considered green but had one of the highest CO2 outputs of any engine at the time due to manipulation. Once you turn the start stop off permanently in the ECU it just blows NOX and CO2 out like crazy. But is was cheap to run 1000km on a 100 litre tank.
Most Green labeling is Green Washing. I have seen a few companies push a lot of green marketing which they just made up. After doing so sales have gone up.

by OreoContrarian | 28th Sep 20, 3:31pm 1601260265

Great example of Green Washing literally. Consumer: $10 laundry detergent barely better than water
https://www.stuff.co.nz/business/122908149/consumer-10-laundry-detergen…

by Hook | 28th Sep 20, 4:25pm 1601263552

Yeah read that, great example of the uneducated wanting to "do what's right" without reading the fine print - which most of them probably wouldn't understand anyway. It's not just Green Washing though - the same theme is rife in pretty much all consumer goods. Look at the "Health and Wellbeing" sector in FMCG

by Yankiwi | 28th Sep 20, 4:50pm 1601265001

Tres amuse...

My wife uses a small fraction of the recommended laundry detergent when washing. For her, it is about minimizing the highly annoying fragrance in the detergent. Our experiments show that the reduction in the detergent hasn't much changed the result. We've not yet attempted the now obvious extrapolation to zero... it must be time to give this a trial!

by Uninterested | 28th Sep 20, 7:07pm 1601273230

Agreed. You walk past the washing line of some people and the smell is overpowering.
Between you and me I use about 3/4 of a plastic cup of the stuff. My wife does not seem to notice the difference...

by Hamish | 28th Sep 20, 6:08pm 1601269681

There's one brand of detergent where I never saw the 'eco-friendly' refill pack at 750ml be cheaper than just buying another whole 1L heavy plastic container.

by linklater01 | 29th Sep 20, 11:31am 1601332317

OreoContrarian,

"No I don't pass moral judgements on who I invest in". I am curious as to how far you would take this. Is there no limit to what you would invest in if the returns were high enough?
I take a quite different view. Despite being primarily a dividend investor, I would not touch tobacco or gambling shares.

by Hook | 29th Sep 20, 4:34pm 1601350479

Horses for courses bud - lets face it, wars will be fought, people will smoke and gamble and consume alcohol, etc etc etc. I don't see how foregoing a good return is going to change human behaviour one iota.

by OreoContrarian | 29th Sep 20, 5:28pm 1601353701

If its in the S&P 500 or Nasdaq I own it now. Individually or via Vanguard VOO.
I am a long term holder of the stocks with 10 to 20 year or forever horizons.
My view is best summed up as follows (plagiarised):
Company managers and the investors that vote on their boards are wrong to impose their views of “doing good” on society. This is the shareholders’ money. Investors and managers cannot know what’s best for society. All they can do is work to maximize profits; the rest should be left up to government.

by Dumb itch | 28th Sep 20, 12:27pm 1601249252

More bloody subsidies, while the average kiwi is struggling.
Bring in the UBI and be done with all other benefits or subsidies.
It's where we are heading anyway.

by Independent_Observer | 28th Sep 20, 12:35pm 1601249700

Honestly - why don't we just admit that we're on the slippery slope towards communism across western society?

Would appear nearly all businesses and households are reliant on state ownership/funding/intervention to remain solvent now. Such an odd situation we find ourselves in.

by Independent_Observer | 28th Sep 20, 12:36pm 1601249804

I really don't agree with this. If something isn't financially viable, it needs to die to promote new growth. Its cruelty dressed as 'kindness'.

by OreoContrarian | 28th Sep 20, 12:45pm 1601250343

Its only not financially viable due to power prices. Manapouri was built solely for Tiwai and there is no way to use the power elsewhere at the moment so who cares. Some estimates are $500m to build the infrastructure to get the power to where it can be used. We happily give subsidies to to make films in NZ and these are one off films where as this has employed people since 1971. Not many businesses have done that in NZ so this needs some respect. I would go even further and let then have free power to keep going as long as possible.

by Hook | 28th Sep 20, 1:02pm 1601251341

Unfortunately OC you'll never convince people who refuse to accept Manapouri's place as part of the smelter arrangement. I'm afraid it's a lost cause. We both know the advantages to keeping the smelter open even for a finite term but many here refuse to do the sums. And then there is PDK but he's in a whole different level of denial so probably isn't relevant

by Advisor | 28th Sep 20, 1:16pm 1601252182

Remember when the government tried to compensate the Taranaki region for future job and economic losses resulting from its offshore exploration permit ban with PGF funding towards tourism initiatives such as cycleways and parks?

That's how out of touch our policymakers have been from economic reality. I see a glimmer of hope here with this decision to keep the smelter alive until a suitable high-value alternative is worked out.

by Hook | 28th Sep 20, 1:25pm 1601252755

Yeah, used to do quite a bit of contracting down in the 'Naki on the Gas sites - not so much going on now. Ballance Agri were going to do a 250mil upgrade to the Kapuni plant - shelved. I'm sure the guys who were pulling 100Kpa plus enjoy riding around on those cycle tracks now they're out of work.

by Independent_Observer | 28th Sep 20, 3:28pm 1601260106

Hook - should government buy the smelter and make the whole operation state owned in your view? (honest question)

I'm struggling to understand the current mix of private/public ownership/government intervention. It seems like a complete mess.

by Hook | 28th Sep 20, 5:34pm 1601267641

IO, in my opinion govt should definitely not buy the smelter. It's an ageing toll processor in a commodity market that doesn't own or control the raw material. Govt does however own the majority share of Meridian and owns 100% of Transpower. It should imo sort out the Transmission pricing mechanism (which now we hear is on the table) and could (technically) forego it's dividends from Meridian to allow Meridian to supply VERY cheap power to NZAS. There is a simple resolution to the smelter issue financially but it's politically tricky - Labour doesn't want to be seen subsidising offshore corporates but also doesn't want to be responsible for another 2600 job losses. The financial sums glaringly stack up in favour of retaining NZAS, the political ones are hard to quantify

by Independent_Observer | 28th Sep 20, 7:50pm 1601275838

‘The financial sums glaringly stack up in favour of retaining NZAS’

Yes....glaringly...It would more appear to me that we have two economic models/ways of thinking bashing heads with one another and it’s unclear who the benefactors are.

Should we just tax the workers of the smelter more to pay the cost of keeping their firm open? Is this the line of thinking?

by Independent_Observer | 28th Sep 20, 3:25pm 1601259954

Should government just buy the smelter? Why is it a private firm?

by OreoContrarian | 28th Sep 20, 3:56pm 1601261796

Have the Government bought Weta Digital or any other movie producers? Have they bought AJ Hacket Bungee or Waitomoe Caves etc? They all have received subsidies and are chicken feed businesses compared to Comalco in terms of employment and export earnings. 49 years employing people paying good wages and salaries.

by Independent_Observer | 28th Sep 20, 4:34pm 1601264057

Agree with you.....and this lines up with my the original point - how much does the state carry these operations as 'private entities' until it makes no sense to do so into the future. Why not just make them state owned given that private ownership model doesn't appear to work? (again honest question/s). Or should we just let them fail and allow the 'free market' to efficiently allocate resources/adapt to market requirements. It would appear we're half pregnent on many fronts trying to mix ownership models or have external inputs to keep things on life support.

Do/did profits of the smelter stay in NZ or were they paid to foreign owners?

by OreoContrarian | 28th Sep 20, 5:14pm 1601266457

I am sure dividends have flowed offshore. But it makes significant payments into the NZ economy for power, contractors and payroll taxes on high salaries and huge payments to ACC. Any business that can do this in NZ for 49 years is a good business. These payments are for production of goods not paper shuffling or selling the same houses to the next guy for more and more. It brings in huge export dollars.
I don't think the Government ownership could improve the situation in any way. They would install a CEO who has no idea and pay him 800k and a deputy on 500k. Plenty of examples around the world of Countries giving incentives to industries to employ thousands. If you don't do it they go elsewhere. The Government run business would not have the ability to source the raw materials as Rio does or sell it once produced. Its about sticking to ones circle of competence and for the Government this doesn't include running an aluminum smelter.

by Independent_Observer | 28th Sep 20, 5:21pm 1601266909

Yes and bizarrely the ‘competent’ people you quote who you think should be running the show don’t think it’s financial viable to keep operating but you want to keep it open - go figure.

Remind me what private sector executive wages are?

Doesn’t make much sense to me but hey I’m not trying to protect the status quo which appears to be falling apart at the seams.

by OreoContrarian | 28th Sep 20, 5:30pm 1601267453

Comes down to power prices. If power is cheap enough they will stay. Might have been part of the negotiation tactics of Rio but they are risk when it looses money not the taxpayer. I would give them free power to employ all the workers and contractors as we wont be able to replace them.
The Government departments and SOE CEO's could not get there pay in the private sector in Wellington. One the jobs don't exist in Wellington. Further they are not at risk. There is no profit motive. In the private sector you get the boot from the shareholders for not performing. Also its shareholders money and if they are happy to pay then that fine. But public sector workers should not be on 500k or 800k its ridiculous. Cap it at the PM's salary. Civil servants on 800k is ridiculous......

by Independent_Observer | 28th Sep 20, 5:56pm 1601269003

Haha but people working in private sector roles it’s fine? Given the government subsidies given to private entities to stay afloat I’m really struggling to see the difference....sorry.

by Hook | 28th Sep 20, 6:12pm 1601269953

The Govt subsidies provided to the private sector were to keep employees engaged and employed. The Public sector did not have the same pressures on them i.e if you are a govt employee your job was pretty much safe. Given the majority of Public sector jobs are not affected by economic conditions (or dare I say it competency) is why the subsidies to the private sector were appropriate

by Independent_Observer | 28th Sep 20, 6:36pm 1601271408

That’s the whole point of the private sector is it not? To be private and adapt to changes in the environment? And if you don’t adapt and you aren’t competitive or suited to the environment you die and somebody else dies the job better?

The government can be blamed for the lockdown, sure accept that, but a recession was on its way. Question is whether the state should have been paying for it or not for private entities - remind me how much our bank executives get paid again? And just confirm that without fiscal (and monetary) intervention, they’d quite likely be insolvent right now - I.e their private entity business management/model is wrong and would have failed. Why should tax payer keep them afloat while executives get paid millions per year? Double standards/hypocrisy if you ask me. But again, I’m not trying to protect the status quo which you appear to be because it’s working in your favour (most probably)?

by OreoContrarian | 28th Sep 20, 6:20pm 1601270412

99% of the private sector don't get subsidies. You will say they have in Covid thats because Cindy lost her rag and and ordered them all to shut. So on reflection they should have got compensation.
But no private sector business I have been involved in has got subsidies. The last one just paid big amounts of tax, above market salaries to its workers and bought in big export dollars for 20 years.
Note I did not get any covid payments from Cindy and Co. Only costs of lost interest on cash deposits and loss rents to commercial tenants.
So don't assume the private sector are somehow all on subsidies. I know plenty of others in the same position. Civil servants should not be getting paid more than Cindy as PM.

by Independent_Observer | 28th Sep 20, 6:28pm 1601270910

Could you post a link to show 99% didn’t receive subsidies please? Not what I read but happy to be convinced otherwise if you have evidence.

by OreoContrarian | 28th Sep 20, 6:31pm 1601271104

I said 99% of the private sector don't get subsidies (outside of the Covid Cindy payment). What subsidies do businesses ordinarily get from the Government?

by Independent_Observer | 28th Sep 20, 6:42pm 1601271750

Haha ok I completely miss your point then. Just confirm only 1% of people working in the private sector are receiving WFF or accommodation supplement or any other government subsidy because the private sector isn’t profitable enough to support a living wage?

It would appear the private sector is failing many of working class while over remuneration executives while doing their very best to pay little of no tax. It’s a very odd system.

by Hook | 28th Sep 20, 6:49pm 1601272186

How the f@#k do you come up with that BS?? Are you saying that as an employer, when assessing two candidates, I should employ the one who wants $50/hr vs one that wants $25/hr for the same skillset?? You have got to be sh1tting me!!

by Independent_Observer | 28th Sep 20, 6:52pm 1601272320

‘How the f@#k do you come up with that BS??’

Can you not handle the reality of what is happening in our economy?

And is that the most mature response you can come up with a perspective that doesn’t fit your narrative?

I thought I read you run a company - is that how you talk to your staff?

by Hook | 29th Sep 20, 4:39pm 1601350740

Stupid comment deserves a reply in kind. And yes, if an employee does something blatantly dumb they sure get to hear about it! Thankfully I have no blatantly dumb employees

by Independent_Observer | 28th Sep 20, 6:54pm 1601272488

I’m just pointing out the failures of this neoliberal economic system that you appear to have false delusions of perfection about.

by OreoContrarian | 28th Sep 20, 6:52pm 1601272371

I can see you are not working in the private sector. I am a capitalist and we see things so differently. Haha. I have not come across such strange thinking before. But I will attempt to understand it. People getting WFF or AS is not subsiding private companies? AS is subsidizing the private rental market. But that's nothing to do with private companies. Are you Government employee?
The living wage to me is BS emotional crap. Our living wage is higher than the proposed living wage in London. Our Government allows a monopoly to exist in so many industries which if they broke them up the costs of food and housing would fall. On the food front Costco USA opening in Auckland may help do this. I call it the Great New Zealand Rip Off. It exists in many industries in NZ.
If you cant make enough from your normal regular job get another one on weekends and save more. Personal responsibility.

by Independent_Observer | 28th Sep 20, 6:59pm 1601272753

You can make false assumptions if you like about me - I invest domestically and internationally so a capitalist in many regards - but I can also see how the system is failing.

Worked both private and public and understand pros and cons of both. Have you?

by OreoContrarian | 12th Oct 20, 2:07pm 1602464870

by Hook | 28th Sep 20, 6:42pm 1601271743

NZ Govt does not subsidise private Businesses - that is an immutable fact. In the Covid payment era businesses were paid a subsidy which legally had to be passed on to employees in totalality. You are blurring the lines of "subsidies" for production or trade purposes vs what the recent payments were actually for.

by Independent_Observer | 28th Sep 20, 6:49pm 1601272155

Yes it does - could you just confirm how many families receive money from the government to pay rent and buy food because their wages don’t support living costs in NZ - let me know what you find out.

Could you ask around your company to see how many are receiving government support?

Perhaps the executives of private companies could reduce their wages and pay their staff more so that the government doesn’t need to fill the gap between wages paid by private entities and the cost of living in NZ?

by OreoContrarian | 12th Oct 20, 2:08pm 1602464912

.....

by Independent_Observer | 28th Sep 20, 7:11pm 1601273514

How did you remain competitive if you overpaid everyone?

Well done though, I’m sure you were very successful. Trust you paid your fair share of taxes if you retired so early!

by OreoContrarian | 12th Oct 20, 2:13pm 1602465190

....

by Independent_Observer | 28th Sep 20, 7:43pm 1601275425

Good stuff - we clearly need more business models like yours in NZ.

by OreoContrarian | 12th Oct 20, 2:16pm 1602465374

...

by Independent_Observer | 28th Sep 20, 8:01pm 1601276516

Great to hear

by powerdownkiwi | 28th Sep 20, 6:56pm 1601272616

Hookie is a farmer, no? Would a road go to/past his farm, perchance? Infrastructure spends are all about subsidising business. Only things like health and schools are aimed at people as people - and the neoliberal approach has been to try and commercialise them.

by Hook | 28th Sep 20, 7:04pm 1601273071

Yes I own a farm, and yes a road goes past it - a state highway that floods and constantly discharges runoff onto my property and has rubbish pilling up against my boundary fences. Don't talk to me about subsidies - I'm constantly mowing the boundary to keep the weeds down and the fire danger low during summer - I don't need a fire in my hay paddocks

by Independent_Observer | 28th Sep 20, 7:15pm 1601273754

I’m guessing the farm made losses each year so no taxable income?

Could be wrong of course and great if you paid plenty of tax!

by Hook | 28th Sep 20, 6:57pm 1601272620

You forgot WFF - should the employer also pay for your decision to breed?? (which incidentally they do, indirectly) You seem to forget the laws of supply and demand which are inextricably linked with payrates.

by Independent_Observer | 28th Sep 20, 7:14pm 1601273674

Who would eat your farm products if nobody had children? Should other people pay for your children via taxes/wff or should their respective employer by paying appropriate wages that reflect he cost of living here? You can’t have it both ways.

by Hook | 28th Sep 20, 6:02pm 1601269365

"Do/did profits of the smelter stay in NZ or were they paid to foreign owners?" - The accounts of NZAS are notoriously murky. They are a fully owned subsidiary of RIO and Sumitomo Chemicals. It's suspected that RIO games the price of alumina (which they own) supplied to NZAS and Sumitomo also is murky about what it actually pays for the end product. To be honest noone really knows how profitable NZAS really is except RIO and Sumitomo.

by Hook | 28th Sep 20, 5:50pm 1601268657

Have a read of my comments above. I'd add to them by saying RIO has all the aces
Threat of 2600 job losses
They could (technically) push NZAS into receivership and walk away from the site - something not unheard of, nor has it been examined as a possibility
If RIO walks away - who cleans up the site?
RIO and Sumitomo could actually just shut it down and retain ownership - no requirement to remediate the site.
If the site is shut down Meridian (and the Govt) are big losers and will remain so for at least 5yrs

by colinchch | 28th Sep 20, 12:48pm 1601250502

Kerry McDonald: The Aluminium Smelter Saga - There Has Never Been an Electricity Subsidy ???
https://breakingviewsnz.blogspot.com/2020/07/kerry-mcdonald-aluminium-s…

by OreoContrarian | 28th Sep 20, 1:33pm 1601253217

GREAT ARTICLE. Before making off the cuff calls on Tiwai one should educate themselves about the true facts of Tiwai and what it has done for NZ.

by Hook | 28th Sep 20, 1:34pm 1601253275

Great find !! This should be compulsory reading for the "shut it down and tell 'em to p1ss off" brigade. Crystallizes all the issues into one easy to read article.

by Squishy | 28th Sep 20, 1:01pm 1601251305

When did we arrive at having two major centre right governments in New Zealand? Offer Rio Tinto a financial reach around if you want but don't try to sell it as for the good of New Zealand, it's a subsidy to a failing industry.

by Roger the dodger | 28th Sep 20, 1:03pm 1601251380

"Seems sensible to me. Whatever happens we are years away from being able use the power from Manapouri elsewhere. So buying time is a good option. Seems likely that the current govt will do the same thing."

Called it.

by iconoclast | 28th Sep 20, 1:26pm 1601252769

It's cheaper to pay Rio Tinto $50 million a year to keep going
John Key bought RIO off for 3 years with $40 million sit-down-money
In todays washing machine laundry that was pocket-fluff
It is known that it requires a $600 million upgrade to Cook Strait cable
Then there is the connection from Manapouri to the main grid
Now there is a plan to evaluate a pumped-water dam at Lake Onslow
$30 million to do the evaluation
$3 billion to build the dam

compare
Whanau Ora was paid establishment costs of $140 million
Whanau Ora was paid $100 million opex costs last year
It's still not operational
This year Whanau Ora cobbled together $42 million for a JV with ACC & OT
Kohanga Reo $100m
Maori Party want $600 million for Mokopuna Maori Entity

by Lanthanide | 28th Sep 20, 1:38pm 1601253488

Whanau Ora has been operational for a decade now. not sure what you're talking about.

by iconoclast | 28th Sep 20, 1:49pm 1601254180

It's been established for 10 years - what has it accomplished - they don't publish financial accounts

by nigelh | 28th Sep 20, 6:20pm 1601270449

Do you need financial results? I'ts well being!

by OreoContrarian | 28th Sep 20, 6:21pm 1601270502

So more and more homeless and hungry? Are these the results of well being?

by KH | 28th Sep 20, 8:31pm 1601278266

Whanau Ora has accomplished nothing much. The organisations do ok though. It's nickname in the trade is "Provider Ora"

by nigelh | 28th Sep 20, 1:11pm 1601251905

There are a few entities that appear to have been asleep at the wheel. To name the parties and the degree of doziness is the left for each to decide. The politicians and in this instance solely Labour even if National initiated the can kicking. The Commerce Commission, the Electricity Authority (EA) and Transpower(TP). I suspect there has been a great deal of finger pointing behind the scenes between these parties saying its not my problem. The main problem as I see it being the Electricity Authority and Transpower. A few years ago Transpower couldn't f...t without the EA checking up on what TP had just eaten. Because of the interaction of these parties it requires someone at a higher level to sort out strategic issues even if at face value they do not always pass the economic smell test at the time. This is probably the Minister or Ministers in charge of those various bodies. If more than one minister there's a problem straightaway let alone their technical/financial competence which with Labour leaves much to be desired and I'm not sure that National has the competence either.
In addition the bemoaning of those highly skilled technical people loosing their jobs should not be such an issue as I thought NZ had a technical skillsshortage and those suffering could easily relocate elsewhere with their skills. But no, where are you going to live when you have to sell up in Southland. You'll have to live in a shack elsewhere to cover the cost of your house.

by Apex Andy | 28th Sep 20, 1:13pm 1601252010

They are only doing it so Southland house prices don't drop.

by waymad | 28th Sep 20, 2:07pm 1601255239

Perhaps, Interest, it would be worth quizzing Woods over the statement that "We’re already hearing from a range of other energy users interested in setting up in Southland, such as for hydrogen production, data centres, or solar panel production." Inquiring minds and all that.....

Because there are only a coupla playaz in the Data Centre market of any note: Microsoft and AWS, solar panel production is heavily subsidized worldwide (except in NZ....) as to residential purchases and is competed internationally to within an inch of its life, so would likely need massive concessions. Hydrogen - well, maybe, especially in some of the derived compounds. It just sounds like mouf exercises from Woods to me....

by Casual Observer | 28th Sep 20, 6:36pm 1601271374

waymad - have you seen this. Fonterra could be interested in the power for its factories so it can stop burning coal. https://www.rnz.co.nz/news/business/422440/how-meridian-fonterra-and-ti…

I spoke to a young chap who made mega$ selling off a software company when he lived off shore. NZ is now his home. He said a data centre in Invercargill wouldn't be attractive to investors.

by Jack Lumber | 28th Sep 20, 6:55pm 1601272530

Fonterra commented that it needs a carbon price of $200 to switch to electricity or $100 if heavy subsidies. Delay the closure by 3 years or so - time to upgrade the transmission lines to Benmore. I believe the receivers at either end of Cook Strait are the other issue - not to hard to fix and then look out Genesis as Manapouri produces the cheapest power in NZ by miles even allowing for transmission loss. Good for Meridian shareholders as seen by the jump in share price today. In effect the Government will get the transmission cost reduction to Tiwai back by maintaining the Meridian dividend.

by Chris Morris | 29th Sep 20, 6:06am 1601312773

As I commented upthread, the upgrades will get relatively little power to Benmore. To fully use Manapouri in the north Island, they need to build a complete new line from Southland to Whakamaru, including Cook Straight cable.

by waymad | 29th Sep 20, 1:46pm 1601340378

Thanks Chris. Far too much Hopium, Winner-Picking and plain Engineering Ignorance on this here thread.

by Uninterested | 28th Sep 20, 3:16pm 1601259419

If Ardern puts this idea as a: "If you vote for us we will do this..", type thing, why the F did she hold off and not do this months ago?

by OreoContrarian | 28th Sep 20, 3:51pm 1601261510

Cindy thought they were going to make EVs at Tiwai as she told Mike Hosking. When her advisors and handlers finally pointed out to Cindy that we could not make a few houses in NZ let alone a volume car factory her handlers advised her we need to save these jobs. It finally sunk in this morning and this resulted in Cindy's announcement today. If you are still wondering why watch this video https://www.youtube.com/watch?v=g9rsxFaq6Ig
Cindy and Roberston could have made East German trabants at Tiwai using heavy subsidies https://en.wikipedia.org/wiki/Trabant

by powerdownkiwi | 28th Sep 20, 7:04pm 1601273051

You're a wee piece of work, aren't you.

High opinion of self, parasitic, no moral compass and misogynistic to boot.

Good luck with that. I'm no believer, but I suspect there WAS a fellow a couple of thousand years ago, who made the odd intelligent comment. One was that it is harder for a rich man (sic) to enter the kingdom of heaven, than it is for a camel to get through the eye of a needle. I don't think he was talking of a life hereafter - that was a promise made by the Elite of the day to keep the plebs in line. I think he meant a mental ease with one's conscience - a comfortable state of mind.

by Hook | 28th Sep 20, 7:09pm 1601273353

Ideally you'll go back and ask him to clarify his opinion. In today's world he'd be called a terrorist or a subversive or a separatist - or all of those

by OreoContrarian | 28th Sep 20, 7:18pm 1601273900

Haha. I was pissing myself reading your post. I love it.
You need to invert, invert you may learn something from my way of thinking. I will attempt to do the same based on your posts.
You don't believe in diversity on boards and equality of outcome do you?

by Pusheen | 29th Sep 20, 12:20am 1601292011

Can be seen clearly where's the Labour heading, almost practically any ventures out there that involves the masses and in trouble? will be bail out - We should encourage all citizens to support local Casino business, gamble out to the neck, the more venturing to 'this kindness' the more likely it's going to be bail out in the future by Labour lead govt.

by powerdownkiwi | 29th Sep 20, 12:08pm 1601334533

member for how long?

Actually, National bailed out a lot of unsustainable farming - indeed suspended local Democracy to force the transfer of Commons-owned water to private use. And they paid Rio Tinto to kick the can. And they oversaw the use of DoC infrastructure/effort, to subsidise private gain. Been going on forever - just a different echelon. Ask who owned Clutha Transport or Nelson Transport Holdings - and who dumped rail in those regions at that time?

Ultimately, society will ask to be bailed out - it's unretrievably in overdraft......
https://www.overshootday.org/