Treasury advised the Government not to pay the owners of the
Tiwai Point aluminium smelter to keep the business running
during negotiations over power prices with Meridian Energy,
documents released this afternoon show.
Early last month the Government made a one-off payment of $30
million to New Zealand Aluminium Smelters' owners to help
secure a revised contract with Meridian "because of the
importance of the smelter to the stability of the New Zealand
electricity market"and "because it offers investors more
certainty"ahead of the Government's sale of Meridian, Finance
Minister Bill English said at the time.
A year earlier Treasury advised ministers that any request
for "Government assistance"from the smelters' owners "should
be rejected, because it would result in a significant
transfer of value from New Zealanders to Pacific Aluminium
and Rio Tinto shareholders."
However details of the level of assistance suggested and the
"value transfer from New Zealanders"per smelter employee were
redacted from the document.
When he announced the one off payment, Mr English said the
smelter's owners "asked for hundreds of millions of dollars
over the life of the contract".
"We said no to that."
The documents also reveal one of the options canvassed during
negotiations was for Meridian to buy the smelter, a
possibility dismissed as "not feasible".
"Even if Meridian could buy the smelter for $1, it would not
be sustainable as a stand-alone business, particularly when
Pacific Aluminium owns the mines that supply the smelter."
The smelter uses 12 per cent of New Zealand's electricity
production, and accounts for 40 per cent of Meridian's annual
revenue. With 800 direct employees and about a further 2000
owing their jobs to the smelter indirectly, it is the largest
employer in Southland.
A solution to the smelter contracts was important not only to
Meridian's and Southland's future, but also for the
Government's plans to float up to 49 per cent of Meridian in
a public share shortly.