Sweetheart deal for New Zealand aluminium smelter

by The REJIGIT Blog

June 2024

The Tiwai Point aluminium smelter is located in Southland, New Zealand and is ultimately owned by London and Melbourne headquartered Rio Tinto Group and the Sumitomo Chemical Company. In 2013 that consortium received a $30 million cash grant from the then National government by way of a bribe in order to provide for the Tiwai Point smelter to continue to operate until 2017.

At that time the consortium probably thought their bully-boy tactics had worked a treat and they obviously resolved keep their corporate boot on the throat of the government.

In 2017 the consortium negotiated a confidential, preferential electricity price effective through to the end of 2024. The New Zealand Electricity Authority calculated that electricity consumed by the smelter during the term of the said deal resulted in every NZ household effectively paying an additional $200 a year arising from the subsidy. It begs the question; if a government deal impacts directly on every electricity customer, why shouldn't they all know the precise detail of such deals.

The consortium which consumes 13% of the country’s entire electricity generating capacity have recently concluded new twenty year electricity deals with Meridian, Contact and Mercury Energy. The deal requires that in the event of NZ electricity supply pressures, the Tiwai Smelter will reduce its electricity usage by up to 185 megawatts to mitigate any risk of brown-outs or black-outs throughout the New Zealand power transmission network.

Electricity consumed by the smelter is deemed to be fully renewable and as a consequence, Rio Tinto is able to sell Tiwai Point Smelter’s aluminium production at a premium price notwithstanding that in 2022, by way of example, the smelter emitted 600,000 tonnes of carbon dioxide equating to approximately one percent of New Zealand’s total greenhouse gas emissions.

New Zealand climate change strategy provides for greenhouse gas emitters (emissions intensive and trade exposed entities “EITE”) which export products to receive carbon credits at no cost in terms of a process known as industrial allocation. The intention is to assist New Zealand exporters to compete on international markets against competitors which are not subject to carbon emission levies such as those imposed by New Zealand's Emissions Trading Scheme. The Tiwai Point smelter operation received 605,000 such credits in 2022.

There are some who argue that existing international carbon emissions trading schemes are artificial and nebulous constructs and there are few if any who fully understand how they actually operate. 

It may transpire that the international industrial community may at some time come to understand the whole fandango is a scam in which case many may fly apart. Ukraine has been a major player in this cowboy industry – which of Ukraine's posse of wide-boys have trousered the revenue.

Many thinking New Zealander’s are sick of hearing about Rio Tinto’s extortionate tactics and they would probably be well pleased if some government, at some time, has the balls to invite Rio Tinto and their cohorts to sling their hook.

It is to be hoped that the Smelter’s operating contract contains water-tight provisions relating to toxic waste clean-up and environmental remediation at the Tiwai Point smelter site.