Tiwai’s twilight years

Thursday, April 4, 2013

Asmelter is a finite thing and doom, eventually, does await the Tiwai Point smelter. But Southland is known for its twilights; there’s more than a little productive, valuable life in it yet. In that respect the recent hardball power price discussions are not yet something to be abandoned as an undone deal.

That said, we must face it that 3000 southern jobs and the economic wellbeing of the province are not top of any of the major players’ agendas. Not the Government’s. Not Pacific Aluminium and its overlord Rio Tinto’s. Not Meridian Energy’s. We have no guardian angels among that little lot.

The promise of Southland jobs hardly swayed the Government when it rejected Solid Energy’s entreaties for serious extra financial support. Similarly, Prime Minister John Key has ruled out the considerably increased long-term support — a subsidy that dare not speak its name — that Pacific Aluminium wants by way of a renegotiated power contract for Tiwai, akin to the deals screwed out of the Australians over the Bell Bay smelter and Gove alumina refinery.

Fewer and fewer people regard Mr Key as a long-term thinker at the best of times. Long-term subsidies? Forget that. Short-term reactions are different, however, and it was in character when the Government abandoned its pose of Olympian detachment and slipped into the Tiwai power negotiations a short-term finance offer that the smelter owners deemed inadequate.

In spite of what you may have heard, Rio Tinto doesn’t have the Government entirely over a barrel because of the implications for the Mighty River Power float of all that freed-up Manapouri power hitting the grid and sending prices down. The death of the smelter, when it’s lingering rather than violent, might be a manageable matter as far as potential power company investors are concerned. Certainly, talk of a 5-year or even 10-year ‘‘orderly transition’’ seems to be having a calming effect on the Government, at least.

It matters, politically, that the public reaction has been far from a straightforward surge of empathy for the plight of Southland. The prospect of people’s own power bills dipping the length and breadth of the country is proving an agreeable one. (Although that is likely to be far from the emphatic consequence many assume it to be. As Manapouri enters, other plants are likely to close, though the the dynamics of spot pricing and power company supply-and-demand machinations confound simple analysis. Whether prices could, should and will go down are three markedly different questions.)

Political perceptions come into it too. The Government must know that after some inglorious and widely scorned kowtowing to big business, to be seen for once to be unwilling to subsidise one of those greedy internationals is not without its up-sides.

For all its reputation as a sabre rattler, Rio Tinto does close smelters and it is hardly bluffing about being in the gun financially. It’s not just a problem of a cyclical downturn in aluminium prices. The giant company has made some notoriously bad decisions. It has to pay for them somehow and fairly soon.

Mr Key is not wrong when he says that if the smelter cannot stand on its own two feet it should not be there in the long term. If that’s not a scary enough prospect, there’s concern that as a province we are not half as developed in preparing for that evil day as we should be. That strikes to the very heart of why Venture Southland was set up and supported. So what serious scoping plans has it carried out?