Rio Tinto has long set the gold standard for twisting New Zealand governments and power suppliers around its little finger. Whenever anything it deems adverse crops up vis a vis its Bluff aluminium smelter (such as someone having the temerity to suggest it should pay the going rate for its electricity), it threatens to take its bat and ball and go home. Which leads to NZ politicians, at both local and central government level, falling over themselves to offer it inducements to stay.

In 2013 the Key National government handed it $30 million of taxpayers' money as a bribe to stop it carrying out its then most recent threat of shutting down and leaving the country. Rio Tinto has been making those threats and being mollified by the Government throughout its half century in NZ. Watchdog has been chronicling this for as long as we've been in existence.

In 2020 Rio Tinto announced that it would close the smelter in August 2021 (the first one of these tiresome threats to have an actual date attached to it). This set off the predictable stampede to mollify the angry giant. Lo and behold, in January 2021, it was announced that Rio Tinto and its power supplier, Meridian, had reached a new electricity agreement that will keep the smelter open until the end of 2024. Meaning that Rio Tinto had ex-tracted a lower power price out of Meridian.

Think about that timing for a minute. 2024 pushes the "closure" out past one more election (2023), one more opportunity to threaten and cajole the Government into making more concessions to Rio Tinto, one more chance for NZ's biggest bludger to suck up all the corporate welfare on offer, one more chance to see if an even more malleable Government is elected which will provide even easier pickings.

And, hold the front page! "Rio Tinto and senior Government Ministers have discussed changing the mining giant's plan to close the Tiwai Point aluminium smelter in 2024, documents released under the Official Information Act show. The smelter, which is majority owned by Rio Tinto, announced in January (2021) that it would continue operating until the end of 2024, after beating down Meridian Energy on the price it pays for electricity" (Stuff, 8/10/21, Tom Pullar-Strecker).

Meridian Plays Hard To Get

In 2022 Rio Tinto picked up where it left off in 2021. In February it was reported that: "The company that runs the Tiwai Point aluminium smelter has signalled majority owner Rio Tinto is keen to keep the smelter open beyond the end of 2024, but Meridian Energy says it is not in discussions over a new power contract ... Rio Tinto negotiated down the price it pays Meridian for electricity from about five cents a kilowatt-hour to about 3.5c/KWh in a deal agreed early in 2021 that saw the mining giant shelve plans to close the smelter by the end of August 2021".

"But the contract has no right of renewal and Meridian has described the price the smelter now pays for power as unsustainable, meaning the smelter would need to reach a new power-supply deal - probably at a higher price - to stay open beyond the end of 2024. Prior to the 2021 agreement with Meridian, Rio Tinto had also sought, but failed to secure, a separate reduction of tens of millions of dollars a year in the electricity transmis-sion fees it pays to national grid operator Transpower".

"That was after Rio Tinto rejected a one-off offer from the Government for clean-up costs that would have been tied to the smelter staying open until 2024. There has been a growing assumption within and outside the electric-ity industry that Rio Tinto would seek to keep the smelter open beyond 2024, on the back of soaring aluminium prices which in October 2021 climbed to a record high of $US3,178 ($NZ4,793) a tonne. Documents released under the Official Information Act to Stuff in October 2021 showed Rio Tinto and senior Government ministers had discussed changing the 2024 closure date" (Stuff, 7/2/22, Tom Pullar-Strecker).

"The negotiations, though in the interests of Meridian's shareholders' and therefore ultimately inevitable, will be further complicated by the possible involvement of the market regulator, the Electricity Authority. It estimated in October 2021 that households were paying an extra $200 a year for electricity on average because Meridian and Contact had an incentive to provide electricity to the smelter rather than sell it on the open market. The Authority raised the prospect that it might seek the power to require generators to have large power contracts approved by the Authority in future. That would in effect give it the right to veto any new deal to supply the smelter, if it thought the price was too low and the effect anti-competitive".

"All this could ultimately work out well for Kiwis and the environment. The ongoing uncertainty over the future of the smelter has been a slowly-unfolding environmental disaster because it has been responsible - along with the country's massively flawed electricity market - for curbing much needed investment in new, renewable power plants" (Stuff, 8/2/22, Tom Pullar-Strecker).

Later in February 2022, Meridian said it was "certainly not averse to having discussions" about extending the contract. Its Chief Executive, Neil Barclay, said that Rio Tinto would need to "demonstrate proper environmental responsibility, they'll need to pay a fair and enduring price for electricity and they'll need to make a long-term commitment to New Zealand. If Rio Tinto are serious about decarbonisation then 10 to 15 or even 20 years is not unreasonable".

"Meridian has been talking up the potential for establishing a 'green hydrogen' plant in Southland as an alternative buyer for its hydro power. But Barclay said the company could 'have our cake and eat it. We believe the industry can support both green hydrogen at scale and the continuation of the smelter'" (Stuff, 22/2/22, Tom Pullar-Strecker).

The Cat Always Lands On Its Feet

Jane Clifton in the Listener (19/2/22, "Faux Eco-Warrior", subsection of "Cometh A Behemoth") summed up the situation best. "When it comes to infuriating behaviour around the concepts of 'in' and 'out', the average family cat generally tops the leader board. Rio Tinto, however, is now the challenger of record. Having melodramati-cally signalled 'Outta here!' a couple of years back, after interminable passive-aggressive hovering around the exit to see what further treats it can wheedle out of the Government to keep its Tiwai Point aluminium smelter going, it has now declared it will stay after all".

"At least the cat never claims it's staying in because it has been reborn as an eco-warrior. The global mining titan says it's staying not because aluminium prices have firmed up a treat now China is restraining its output, but because it makes such pure, green aluminium here, this is its chance to pursue further decarbonisation. Tiwai does produce more sustainably than most other smelters, but to believe this is suddenly the priority would be to accept that Mr Fluffy is staying by the heater in order to renounce his predation of lizards and birds".

"Households pay an estimated average of $200 more a year because two big power companies have an incen-tive to provide power to Tiwai rather than sell it on the open market. For gallows humour, we still have to import aluminium because Tiwai's product isn't usually suitable for local manufacturers. The populist headline has al-ways been 'Corporate welfare!', but this has to be weighed against the benefits to power-company shareholders, Tiwai's huge workforce and Southland. The power the smelter uses cannot yet physically be delivered outside the region".

"Add the hassle and expense of site clean-up and what to do with what's left, and packing Mr Fluffy off may be less trouble than keeping on indulging his demands. What a pumped-hydro future might mean for Tiwai is a byz-antine puzzle - but the prospect will have the cat door flapping furiously again before long". To take the cat analogy further - they always land on their feet. Rio Tinto, likewise, has perfected that survival skill.

Pumped-Hydro Proposal

"At least as big as any Think Big-era colossus, this Lake Onslow behemoth would almost certainly give the Government the ability to control electricity prices, and would mean never running of power whatever the weather. It would also cause an almighty dung out in the electricity sector. Some assets would be stranded and shareholder fortunes depleted".

"This prospect at least has a superficial charm for householders, and many businesses, who have a shrewd idea they're paying artificially elevated prices even though repeated official inquiries have been ambivalent on the point. A further benefit is that at $4 billion, this is a much easier sell to voters than the $14 billion now earmarked for Auckland's light rail, on which there is little prospect of consensus - not least because a change of Government would halt it" (ibid.).

CAFCA's position on the Tiwai Point smelter, aka New Zealand's biggest bludger, has been consistent for half a century - shut it down, subject to a managed transition for its workers, contractors and suppliers. It has been ripping us for far too long. The costs far outweigh the benefits.