Smelter
firm subsidy talks stall
Labour
has accused the Government of total mismanagement over Tiwai Point
negotiations, amid news Rio Tinto has walked away from talks.
2 April, 2013
The mining
giant had withdrawn after nine months of negotiations over possible
taxpayer subsidies and had now resumed discussions with state-owned
power company Meridian, Prime Minister John Key confirmed this
morning.
It was
revealed last week the Government had been negotiating with Rio Tinto
over the smelter after contract negotiations between subsidiary
Pacific Aluminium and Meridian effectively stalled.
The
Government had made it clear there would be no long-term support, but
agreed to look at short term bridging assistance because of the
thousands of jobs at stake, and to facilitate a smoother transition
should Tiwai Point close, Key told TV3's Firstline.
"We
made the call that we would look to help bridge a small amount of
that gap for a short period of time.
"They
came back over the weekend and said 'no, we are rejecting the
Government's intervention; we will go back and talk to Meridian'. So
that's what they are doing now."
He
acknowledged ultimately that might mean Tiwai Point closed.
The smelter
supports around 3000 jobs in Southland.
Labour's
Clayton Cosgrove said the Government had been repeatedly warned about
risk of going ahead with the partial asset sales before finalising a
deal with Rio Tinto.
"Rio
Tinto's bosses are licking their lips and look forward to laughing
all the way to the bank," he said.
Labour said
the sale of Mighty River must be stopped because there was too much
uncertainty.
NO
LONG-TERM DEAL
Key said
negotiations with Rio Tinto were against the backdrop of collapsing
aluminium prices and losses totalling tens of billions of dollars
following some bad acquisitions by the mining giant.
During that
period the New Zealand dollar had also risen "so the smelter has
gone from being quite a profitable entity for Rio, to be a losing
entity for Rio."
Across the
Tasman, the Australian government had sunk "billions" of
taxpayer dollars into subsidies to keep smelters there open and
agreed to 18-year power contracts, which New Zealand had rejected.
Rio Tinto
had first approached the New Zealand Government nine months ago, but
at that stage was told that it was a matter between them and
Meridian.
Meridian
and Rio Tinto had come close to reaching agreement for a four-year
period of power supply but "in terms of the magnitude of the
deal there is a small gap left", Key said.
While he
could give no assurances, he did not believe Rio Tinto would
immediately walk away, Key said.
They were
locked into a three-year contract, with a further two-and-a-half year
winding down provision, that would cost them a sizeable amount to
break.
"They
could do things faster, that means people would lose their jobs
quicker, but it will cost them an awful lot of money."
Rio Tinto
apparently decided to walk away after the Government made it clear it
would not subsidise the deal long-term.
Key
confirmed this morning the Government had no interest in that.
"If it
can't stand on its own two feet then long term it shouldn't be there.
We do think it made a bit of sense on balance to try and support the
process and that's where we've been simply because of the number of
jobs involved and power usage."
There was
now nothing more the Government could do.
"We
put our best foot forward and our only card on the table."
Rio had
made "lots of money" out of the smelter over the years.
ASSET
SALES GOING AHEAD
Key
rejected suggestions, meanwhile, that the uncertainty was a fresh
reason to delay the Government's sale of shares in the state-owned
power companies.
Shares in
Contact, another former Government owned power company, sank by just
over 3 per cent last week when it was revealed Tiwai Point might
close, but rallied to finish above their opening price, Key said.
Meanwhile,
Key said he was not losing hope completely.
"I'm
not nearly as convinced as others might be that they will walk away
but they certainly could walk away."
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