2020 Election: Labor promises to keep Tiwai Point on life support, but there’s a catch

The work promises to keep Southland’s Tiwai Point smelter on life support for another three to five years while the government works to transition the region’s economy.

If reelected, the party would work to reduce the amount of money the smelter pays for electricity, the main reason Rio Tinto said it would close the plant.

But there is a catch.

If the company wants cheaper energy prices, it must keep current employment at the site, agree to work on remediation, and work with the government regarding future use of the plant.

If the foundry does not meet these “bottom line” results, the deal will be taken off the table.

Meanwhile, a Labor-led government would work to transition the Southland economy to create greener jobs.

Union leader Jacinda Ardern said the three- to five-year extension would protect jobs now, as well as give the community time to consider and plan for the future.

“We will invest in the economic development of Southland based on a transition plan developed by local leaders and the community,” he said.

In July, Rio Tinto announced plans to close its New Zealand aluminum smelters, including Tiwai Point.

In a statement to ASX, the company said its strategic review had shown that the business was “no longer viable given high energy costs and a challenging outlook for the aluminum industry.”

The Southland smelter employs about 1,000 people directly and creates another 1,600 indirect jobs in the region.

Tiwai Point is one of the largest electricity consumers in New Zealand.

At the time, Deputy Prime Minister Winston Peters hinted at a government buyout of the foundry.

But Ardern today ruled that out.

“We have made it clear to the Government that there will be no more direct subsidies for Rio Tinto to continue operating the Aluminum Smelter,” Labor policy said.

Labor’s energy spokeswoman Megan Woods said extending the life of the aluminum smelter requires an agreement on electricity transmission costs, and that takes time.

With the current system, electricity users (businesses and consumers) pay for their energy and the costs associated with maintaining the electricity grid as a whole, based on the amount they consume.

Rio Tinto’s position has said that it pays a disproportionate amount for transmission infrastructure in New Zealand, given that they get most of their electricity from the nearby Manapouri hydroelectric plant.

Labor has promised to change how this works so the company doesn’t have to pay as much; would change the Transmission Pricing Methodology.

Under normal circumstances, any reduction in transmission costs for a major customer like Tiwai would result in higher prices for other consumers.

But Woods said Labor would negotiate a way forward to keep the smelter running and prevent additional costs from being passed on to other consumers.

“We will do this by supporting Transpower to form an agreement with the foundry that will preserve jobs in the medium term and give Southland time to build a new economic future.”