Rio Tinto

James Weir at Stuff reports:

Opposition parties say Tiwai Point smelter’s majority owner is trying to force the Government into a subsidy for the $1 billion a year aluminium plant in a deal with not enough transparency.

A snag in negotiations between state-owned generator Meridian Energy and Rio Tinto over power prices at the Tiwai Point aluminium smelter may have implications for asset sales, with the Government lining Meridian up for a float after Mighty River Power.

Earlier today it was announced that despite government involvement, talks between Meridian and the smelter company had effectively broken down, with a deal “unlikely”.

Meridian said it still hoped to get a deal, and Prime Minister John Key has cautiously said asset sales can go ahead despite the snag.

Last year, Rio Tinto said the smelter could close if it did not get cheaper power prices from Meridian, even though a long-term electricity contract came into force this year. The smelter uses about 15 per cent of New Zealand’s electricity.

Green party co-leader Russel Norman said today: “Rio Tinto are using the Government’s asset sale programme to screw Meridian Energy for a better deal [on power prices], that is as plain as day.”

Yep, they are.

Rio Tinto are absolutely trying to use the situation to get better terms for a deal they had already signed up to.

Meridian as the commercial operator is best placed to make the decision about what sort of volume discount they give the smelter. The Government should not be involved in any price negotiation.

If Rio Tinto decide to closer the smelter because they can’t get a low enough electricity price, then that is their decision to make. It would be very sad for those who work down there, but would also mean that we’d probably see power prices drop all around New Zealand. That’s not an entirely bad thing.

The market would adjust, with some smaller power stations possibly closing.