Wednesday, August 7, 2013

Mixed reaction to Tiwai Point deal - TVNZ

There has been a mixed response to the Government's decision to contribute millions of dollars to help keep the Tiwai Point smelter open.

After a year of "robust negotiations" it was announced this morning that Meridian Energy and New Zealand Aluminium Smelters (NZAS) have reached an agreement on their supply contract.

As part of the negotiations, the Government agreed to give $30 million to the smelter to "secure the medium-term future" of NZAS.

In the deal, Meridian will also reduce the price of power paid by NZAS to pre-July 2013 levels, in exchange for guarantees on contracts from NZAS's parent, Pacific Aluminium, a subsidiary of global metals giant Rio Tinto.

However, while the new contract still runs to 2030, as did the contract it replaces, it now includes a faster exit clause for the smelter.

According to Meridian Chief Executive Mark Binns, NZAS can terminate the deal from January 2017, with 15 months notice.

But Labour MP Clayton Cosgrove says that the Government's payout is only a short-term solution for those employed by the smelter.
 
"This is a short term deal that is huge win for Rio Tinto. National is so desperate to get Meridian sold off that it has given Rio Tinto a $30 million bonus to sweeten the deal and all the company has to do is keep the smelter open for three and a half years.

"By 1 January 2017 we will be back where we started. Rio Tinto will yet again have the right to walk away and will be in a position to hold the Government, taxpayers and the people of Southland to ransom once more," he said.

Similarly, Green Party Co-leader Dr Russel Norman said that the Government had forked out the money in order to clear the way for the partial sale of Meridian in October.

"Now, John Key and National have proven once again what terrible negotiators they are," said Dr Norman.

"The public is $30 million poorer so that National's asset sales can go ahead and all the smelter workers get is a temporary reprieve with no long-term job security," he said.

Job security for Southland

However, the union representing workers at the Tiwai Point smelter has welcomed the agreement.

"This agreement protects jobs and offers some stability for the workers and the community of Southland," said EPMU's Trevor Hobbs.

"It's concerning that the agreement only guarantees the smelter will stay open for a few more years, but our members and their families now have some breathing room. 

Mr Hobbs said that the Tiwai Point smelter is worth 3200 jobs and $1.6 billion a year to Southland's economy.

"The job security which the smelter provides for the people of Invercargill is hugely important," says Trevor Hobbs.

We'll be following up with the smelter owners to get clarification about the details of the deal and how it might affect the smelter workers in future."

The deal

Meridian's Mark Binns said that it is now "back to business as usual" for both parties.

"We have reached an agreement that is commercially acceptable to both parties and provides a greater level of certainty for Meridian," he said.

The deal still allows for price increases should the New Zealand dollar value of aluminium rise above agreed levels.

It also provides the smelter with more flexibility in its operations, whereby it can reduce its contracted volume from 572 MW to 400 MW from 2015.

"Meridian is delighted that the parties could find a mutually acceptable position - and trusts that the new pricing framework and associated arrangements assist NZAS in establishing a competitive cost position for the future," he said.

Finance Minister Bill English said that the Government contribution is a "one-off" and will be funded by operating contingencies.

Minister for State Owned Enterprises Tony Ryall said that the Government was not directly involved in the negotiations between Meridian and NZAS.
 
However, the contract renewal looks likely to see a writedown in the value of Meridian ahead of Government plans to sell up to 49% of the shares in the electricity company by September 30.

Copyright © 2013, Television New Zealand Limited. Breaking and Daily News, Sport & Weather | TV ONE, TV2 | Ondemand


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