Rio Tinto is welcoming the Labour party’s election pledge that if re-elected to Government in October, it would encourage Transpower to renegotiate electricity prices for operations at the Tiwai Point aluminium smelter.

Kellie Parker, Rio Tinto’s managing director of Pacific Operations said yesterday the company welcomed the Labour Party’s recognition that the smelter had been paying too much for power, and was “always open” to conversations about fairer costs at the smelter.

There are strong calls from Southland leaders, iwi, unions and employees for the Australian mining giant to stick around for a few more years, allowing a managed exit, or Just Transition, from New Zealand’s economy. 

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More than 2600 jobs are threatened by Rio Tinto’s proposed closure in August 2021, which would leave an estimated $500 million hole in Southland’s economy.

The Labour Party has committed to supporting a locally-led, managed exit over the three to five years, with the bottom lines being protecting jobs and site remediation, Prime Minister Jacinda Ardern and Energy Minister Dr Megan Woods said in a statement on Monday.

The first phase of the Labour Party’s Just Transition plan is to secure Rio Tinto’s commitment to stay for three to five years

“Extending the life of the aluminium smelter requires an agreement on electricity transmission costs.” 

“Normally, any reduction in transmission costs for a major customer like the smelter would result in higher prices for other consumers. 

“Labour will negotiate a way forward to keep the smelter operating and prevent extra costs falling on other consumers. 

“We’ll do this by supporting Transpower to form an agreement with the smelter that preserves jobs in the medium term and gives Southland time to build a new economic future,” Dr Woods said.

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Rio Tinto’s decision to leave New Zealand has been influenced by the COVID-19 pandemic, world market prices for aluminium and high power transmission prices here.

“Both the Government and the Southland community have told us they would prefer a longer exit for the Tiwai smelter. 

“We welcome this recognition by the Labour Party that the smelter has been paying too much for transmission costs and of the value the Tiwai Point operation has contributed to New Zealand over the past 50 years.  

“We are always open to continuing conversations that would see fairer costs established for the smelter.  

“The ongoing uncertainty for our team at Tiwai and the Southland community is very hard but it is encouraging both major parties have now committed to working with us on a post-election decision,” Ms Parker said in a statement on Monday.

The National Party leader Judith Collins has also pledged to secure a five-year transition, should the National Party win the election and commercial deal be reached.

Conditions will be attached to the Labour Government's support policy for the Tiwai Point smelter. PHOTO: Supplied

Ms Ardern and Dr Woods said if terms could be agreed to extend the smelter’s life, “they will include conditions’’.

The deal must ensure the smelter continue operating for an agreed period of time and that Rio Tinto do work on site remediation, maintain employment at the site, and work with the government on the future use of the site, they said.

Southland Mayoral Forum chairman Tracy Hicks, of Gore, has also welcomed the Labour Party’s commitments but says “concrete funding commitments will be needed” to create new, sustainable industries and jobs.

“Labour’s announcement is an important step in the right direction, but we will need to see it backed by successful negotiations with Rio Tinto and firm funding commitments for economic development. We stand ready to work with Central Government following the election to get this plan underway,” Mr Hicks said.

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Radio New Zealand reported this week that Labour’s Tiwai Point policy includes a $5 million expansion of the Ministry of Business Innovation and Employment’s Just Transitions Unit budget, to be used in regions outside Taranaki.

The unit focuses on transitioning New Zealand to a low emissions economy. 

A Westpac Economic Bulletin published in August reported that the smelter uses 2% of the electricity grid but pays about 7% of the costs of the upkeep of the national network.

A new transmission pricing methodology is set to be introduced by New Zealand’s Energy Authority in 2024. That could reduce Tiwai Point’s annual transmission costs by about $11 million, Westpac reported.