Rio Tinto screws taxpayers for $30 million

The Herald reports:

Meridian Energy has resolved its negotiations with Rio Tinto subsidiary New Zealand Aluminium Smelters locking in the Tiwai smelter until at least January 2017 – with the help of a $30 million subsidy from the New Zealand government.

The deal, which has been a year in the making, will help clear the way for Meridian’s $5 billion float on the stock exchange – expected to go ahead before the end of the year.

Resolution of the negotiations has been viewed as essential for the Government to get a good sales price for Meridian because the smelter is a key customer of Meridian.

It also makes up around 13 per cent of New Zealand electricity demand and closure of the plant would have impacted power prices across the board.

Meridian chief executive Mark Binns said in an announcement just released that it had reached a deal that was commercially acceptable to both parties and provided a greater level of certainty for Meridian.

The agreement includes Meridian cutting its electricity charges from July 1 2013 and allowing NZ Aluminium Smelters to reduce it contracted volume from 572 MW to 400 MW from 2015.

I’ve got no problem with the pricing agreement between Meridian and Rio Tinto, as that is a commercial contract.

But bloody annoyed they screwed $30 million from the taxpayers as a subsidy. I think the Government shouldn’t have given them a cent. If the smelter closes, so be it. It is not the job of taxpayers to subsidise unprofitable industries.

I guess the risk of losing so many jobs in Southland was too much for the Government. But if they had called Rio Tinto’s bluff, I don’t think they would have closed the smelter. Their strategy is to wait for the global price to recover and then sell it.

Just as taxpayers shouldn’t have to bail out Solid Energy, we also shouldn’t be subsidising Tiwai Point. The best jobs are those that are sustainable without taxpayer funding. The rare exceptions are attracting globally mobile ventures (such as films) to NZ, but that is quite different to subsidising a struggling or failing firm or industry.

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