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Thursday, March 28, 2013

Helter Smelter

Here we go again...

NZ Herald:
The Government has opened discussions with Tiwai Point aluminium smelter's ultimate owners Rio Tinto in a bid to broker a deal after talks between the smelter and Meridian Energy reportedly broke down.[...]Should the smelter - which uses one seventh of New Zealand's electricity output - close wholesale power prices are likely to fall, affecting the earnings potential of all power companies including Mighty River.
Ryall added that "all relevant information - including about the smelter electricity contract - will be reflected in the Mighty River Power offer document which is currently being finalised"

This sounds like negotiation tactics rather than Rio Tinto pulling the plug, so no-one should be panicking... just yet. However the notion that the government can step in to help out their power companies is sending all sorts of signals.

Will they do these favours after they sell 49% of Mighty River Power? Are the looters queing up to buy into MRP shares going to reap additional benefits of state muscle after the float? Then there are the conflicts of interest: Does the government want lower power costs (lowering cost of production and benefiting everyone), or does the government want higher power costs (more returns to the state and the shareholders)?

The Tories will back the private shareholders and the foreign smelter every time. Every government has backed deals which are essentially a subsidy to keep the smelter business and its cashflow in the country. Labour and National both; but the last thing the Nats want is to reduce people's power bills if that means their "mum and dad" investors might lose out in the anticipated capital gain and/or reduce the stream of dividends. The government will have to argue that the "public interest" is served by screwing over the vast majority in order for a small few (many of whom will be foreign shareholders) to gain.

 Big contracts like this bring the issues to the surface - more so now privatisation is a matter of weeks away. There has been so much secrecy over the smelter deals in the past that NZers have come to have a very cynical view of Tiwai Point and the relationship with government (and later the corporatised power companies). It's all a bit too matey and it's all a bit of a mystery.  All we know for sure is that if the smelter was turned off we would have surplus generation capacity and thus our retail electricity prices would drop and there would be less need for new generation and perhaps a closing of the more inefficient and polluting thermo plants like at Huntly. That's all good - unless you own shares in an energy company of course. The downside would be a spike in Southland unemployment and the loss of foreign revenue to the country (and taxation revenue to the government). This doesn't seem much of a concern as compared to cheaper power across the nation. 


At 30/3/13 8:03 pm, Blogger Phil said...

Does anyone know what Rio Tinto is paying per kWh presently? I would love to know, but it is 'commercially sensitive', of course. Perhaps, if the govt gave it to them for free, we wouldn't know any better, would we? This has all the makings of another scam of secret dealings with huge corporate interests I.e SKY TV AND Casino, Fletchers Construction in Quake city, WARNER Bros. Doesn't get much bigger than Rio Tinto. In Australia presently, and their TV is way more intelligent than ours in Kiwi land. Sad to say, but true. Keep fighting and never give up, or move to Oz.

At 31/3/13 5:46 pm, Anonymous factboy said...

Why don't we sue Rio Tinto for not honoring the contract they presently have?
Also IF they leave, GREAT NEWS as they can't take the smelter with them, so someone (say NZ super fund) could buy the works for 10cents on the dollar and reopen it.
Problem solved. NO MORE tax payers money GIVEN to foreign companies, and John Key at last does something in the best interest of MOST Kiwis.

At 4/4/13 4:59 pm, Blogger countryboy said...

So Southlands economy didn't exist prior to 1971 and an aluminum smelter built NZ right ? And if they go , it means domestic power prices drop ? Well , as far as I'm concerned , they can just fuck right off then . Rio Tinpot-O can blow-me-O ! I mean really , what a load of wank-O .

I reckon jonky-stien tried to up the power price to TinPotO to help his mates buying into Mighty Dribble so they retaliated by telling him to find his tight , mean little arse hole and shove something up it . Like electricity .

Now , I don't know about you but I'd pay money to see that .


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