Every time that Rio Tinto, the gargantuan mining and processing transnational which owns 80% of the Bluff smelter, feels that its charmed existence in New Zealand is going to become less cushy, it threatens to pull the plug, close the smelter and walk away. Last time it did so (in 2008) was because of the Labour government’s proposed emissions trading scheme. This time it is trying it on as a tactic to try to pressure Meridian over its power price contract, which has already been negotiated and is due to take effect in January 2013. It has succeeded in whipping up a storm of uncertainty among its workers, the union representing some of them, the Southland public and their local body politicians.

Rio Tinto has relentlessly peddled the line that its new power price from Meridian – which hadn’t even taken effect yet – must come down, because of the falling world price for aluminium. But what it hasn’t said is that: “The agreed base price is subject to escalation with reference to a multi-year average market price for electricity in New Zealand, the world price for aluminium (as determined by an independent benchmark), and a component as proxy for price inflation”. The quote – with our emphasis added – is from Meridian’s latest financial reports. In plain English, the world price of aluminium is already factored into its new power contract with Meridian. Once again, Rio Tinto is just trying it on, with every expectation that Meridian will fold. And why wouldn’t Rio Tinto expect that? For the past nearly 50 years it has twisted every New Zealand government and State-owned electricity supplier around its little finger. The Campaign Against Foreign Control of Aotearoa (CAFCA) calls upon Meridian to break the mould and surprise us all by sticking to its guns.

Close It & Bugger Off

And we call Rio Tinto’s bluff (pun intended). Stop crying wolf, stop using your New Zealand workers as disposable pawns in your cynical game, stop holding Southland and the country to ransom. Go ahead and close the smelter and bugger off. See if we care, the country will be much better off without you. Don’t take our word for that. Transpower’s Chief Executive, Patrick Strange, told the media in October 2012 that if the smelter closes, the surplus power would go to the rest of the grid, meaning lower prices for consumers. CAFCA says bring on the lower prices for long suffering consumers who have been waiting since the 1990s for any tangible benefits from the “electricity reforms”. All we’ve seen is ever increasing power prices.

The smelter is the country’s single biggest user of electricity, consuming one sixth of the total, 24/7 for more than 40 years. It pays a top secret, super cheap price that is not available for any other user and all it does is export electricity from NZ in the form of alumina, while being subsidised by all other electricity users. The smelter is the textbook example of corporate welfare in New Zealand. It is the biggest bludger in the country. Those who extol the bracing discipline of market forces for everybody else are strangely coy when it comes to this corporate recidivist.

Benefits Overstated By 80%

Rio Tinto won the 2011 Roger Award for the Worst Transnational Corporation Operating In Aotearoa/New Zealand. It was nominated for lobbying two Governments “over several years to secure excessive allocations of free emissions units under the NZ Emissions Trading Scheme”.  The Roger Award judges agreed, concluding: “It appears therefore, that the New Zealand taxpayer is subsidising a transnational corporate rort of the emissions trading scheme… The significance of this stance cannot be underestimated; a major transnational player within New Zealand materially benefits from its non-compliance with a strategy to reduce global climate change and its ecological effects”.

The Judges’ Report concludes that the company has a 50 year history of “suborning, blackmailing and conning successive New Zealand governments into paying massive subsidies on the smelter’s electricity; dodging tax, and running a brilliantly effective PR machine to present a friendly, socially responsible and thoroughly greenwashed face to the media and the public. Its milking of the Emissions Trading Scheme is entirely in character”. The extremely detailed Financial Analysis reveals that the smelter’s claimed benefits to NZ, namely annual export earnings of “around $1 billion” are, in fact, overstated by four fifths. The full, damning, 2011 Roger Award Judges’ Report can be read at http://canterbury.cyberplace.co.nz/community/CAFCA/publications/Roger/Roger2011.pdf  

Liability To NZ, Not An Asset

Equally undeniably, it has been good for Southland, in terms of jobs, etc. So what about the people who work for the smelter, directly or indirectly? The tobacco industry used to employ a lot of people here, but that was deemed to be no longer in the public interest. Lacing lollywater with booze and selling it to kids supports a lot of jobs too but there’s plenty of public demand to get rid of that particular industry as well. The P industry provides an income for thousands of people too, but we don’t hear any demand for that insidious trade to be kept going to keep them in a job. History is full of examples of horrible industries that kept people in jobs (such as the slave trade) but which were banned and/or abolished for the greater good. This smelter constitutes a crime against the people of New Zealand and has done for its entire existence. In the national interest, it must be closed and the sooner the better.

This was published, minus the subheadings, as an Opinion piece in the Southland Times (1/11/12). It wasn’t written with that in mind but as a CAFCA press release entitled “Rio Tinto, Tell The Truth: The World Price For Aluminium Is Already Included In Your New Power Contract With Meridian”. Full credit to the Invercargill paper that it decided to publish it in full (no other media outlet touched it), with the only change being a new, much shorter, and eyecatching title. It caused a predictable uproar in Southland, including from Invercargill’s Mayor Tim Shadbolt, my old comrade in arms from many decades ago. MH

New Power Contract Is A Derivative

There is something else important about Meridian’s new power contract with the smelter that the long suffering NZ taxpayer needs to know. Sue Newberry (who wrote the Financial Analysis in that 2011 Roger Award Judges’ Report) has done her usual meticulous research and e-mailed CAFCA to point out that “the agreement that takes effect in January (2013) is not a power supply agreement. Rather Rio Tinto will obtain what electricity it requires from the ‘market’ and the agreement between Rio Tinto and Meridian is a pricing agreement. In other words, the agreement is a derivative”. Meaning that, it is exactly one of those exotic financial instruments that caused the Wall Street crash of 2008 and the ongoing Global Financial Crisis. Remember, you read it in Watchdog first.