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SPEECH: Tiwai Point – eyes wide open facts not fiction

Rt Hon Winston Peters, Leader of New Zealand First

Thank you for coming today. We are in the heart of Southland, the biggest exports per capita province in this country, to join the fight to save thousands of jobs in your region and the finest quality aluminium production plant in the world.

What we do here today, if we don’t prevail and restore honesty and common-sense to this issue, will have disastrous effects here and across the country.

The wrong decision here, will see job losses everywhere. Where electricity prices are set will have a profound effect:

  • In Taranaki as gas and gas-fire generation becomes uneconomic;
  • Job losses as base-load thermal power stations, such as Huntly, review operations;
  • Hundreds of new highly skilled construction jobs for new renewable generation “shovel ready” projects not proceeding for 5-10 years;
  • And, wind and geo thermal projects likely to be put on hold or developments stopped due to being uneconomic.

As an example of what has already happened, Contact Energy has put its $600 million Tauhara geothermal project in the Taupo region on hold – effecting 400 new jobs as a result.

If we go down this pathway of abandoning Tiwai Point, in favour of a transition package as some politicians would advocate for, the results will be dwarfed by what happens here and the wider impact on employment across New Zealand.

There will be a devastating loss of the annual wage contribution from the Smelter to Southland, wider job losses in the energy sector, expected exits of other large industrials, and then the deferral of other investments in newer renewable energy projects with a huge annual financial impact.

The future financial hit the government will face, vastly outweighs any cost for future support of Tiwai Point.

To the point:

  • Meridian has already cancelled is special dividend programme;
  • There is already a reduced valuation of SOEs as the market confronts these threatened constraints and reduced demand;
  • Talk of closure has already wiped $1 billion off the taxpayers’ investment in Meridian, Genesis and Mercury;
  • There will be a reduction in oil and gas royalties, and it follows like night follows day, that there will be;
  • A reduction in corporate taxes from the energy sector, across SOEs and the private sector.

New Zealand’s aspiration for heavy industry to balance our dependency on exports is now being needlessly put at risk.

It’s already happening:

  • New Zealand Steel has announced a strategic review and the threatened additional transmission costs will wipe out its current profit;
  • New Zealand Refining has implied it will be closing at Marsden Point in Northland. 

The fact is that the response that you give today, if it’s not the right response, won’t just effect Southland, but there will be adverse effects right across New Zealand.

A country where we once used to have a cutting edge advantage to every business and home owner, has seen one of the great advantages of New Zealand over the years sabotaged against the interest of nearly all of our population. That great advantage decades ago was low energy costs to household and business.

Now New Zealanders will face higher electricity transmission costs. As if they are not unjustifiably inflated already.

New Zealand Aluminium Smelter today uses 2% Transpower’s network, but pays 8% of its costs. That is $50 million each year.

If it closes, that $50 million of transmission costs will be reallocated to other users - residential and commercial.

In other words and more importantly, those increased costs will go to – you -  and your fellow citizens all around New Zealand.

Ladies and gentlemen, aren’t you asking yourself this question: why am I hearing this for the first time?

Here is the tragic irony. South Island hydro will be forced to spill and waste water because of transmission constraints. How barren of vision is that?

The result of all this unnecessary increased volatility, will undermine further investment in New Zealand. In this sea of disorganised, unchecked uncertainty, instability in the energy sector for the next decade has serious consequences. It will scare off the very investment New Zealand needs to bring about a phased transition to a carbon-neutral economy. At the same time it will lead to disproportionally high job losses in the regions.

If we do not make the right decision here today, the effect is that New Zealand will export that carbon impact.

Why? Because right now we are producing clean aluminium using green energy in New Zealand. If there is closure here then our aluminium production will be substituted with aluminium production offshore, produced using coal and gas overseas.

This means increasing global emissions.

Political parties must answer this question. How in the light of all the facts just raised now, will they deliver a carbon-neutral New Zealand?

Experience matters. The truth behind what happens here matters. The facts matter. And seeing those facts “eyes wide open” matters.

Workers and their families matter. Particularly over the years when they have put together the finest aluminium product in the world. And yet, here in this hall today you are wondering, “what on earth have we done wrong?”

Ladies and gentlemen, I did not come down here today to talk to anybody else expect those who really matter. That is the workers and families whose jobs, incomes, present and future dreams are dependent on Tiwai Point.

In other words, I’m only interested in what you think.

I’m not interested in what the people whose salaries you pay think.

I’m here today to talk with the workers.

It’s breath-taking that this debate has been held without your presence as though you don’t matter; as though you are just collateral damage.

Your livelihoods, your choice.

Ladies and gentlemen, you workers are being crucified upon a cross of ideology. This idea prospects your future. You’re going to be asked to “live to work” not “work to live” as you are doing right now.

After all, these threats to your future comes from those trained as middle management consultants, and you need to ask this question – what would they know about you, your life and your future? Ladies and gentlemen, Tiwai contributes over $450 million annually to Southland and New Zealand, and 2,600 families depend upon it. A one off “$100 million tea and sympathy fund” won’t even touch the sides down here.

You will all remember that on the West Coast, a province with 86% ownership by the Crown, and 14% by the ratepayers paying all the rates was dished up $120 million by Prime Minister Helen Clark and told to stop extraction businesses.

Nine years ago I visited Invercargill and Tiwai Point to state New Zealand First’s support for the ongoing production of the smelter and its workers.

I’ve watched down through the decades one of New Zealand’s great businesses being dealt blow after blow by politicians.  Watched Wellington’s message to the media and the wider population, a lie which they have even you here in this hall today, sadly believing to be true.

Remember the heinous Hitler comment “if you’re going to tell a lie, tell a big one – the people are more likely to believe it.”

That lie is that Tiwai’s electricity has been subsidised. That’s been a lie since 1977, a year before I entered Parliament, and is just as big a lie today.

Ladies and gentleman, I’ve got with me the legislative foundation of this smelter – right here in my hand. 

It sets out the actual cost of supply of electricity plus a 10 percent margin.

Everything you have been told about this agreement being a secret is a lie, and the evidence has been sitting on the statute books since 1963.

None of these people who have come recently from Wellington to talk to you about your future demise, have ever shown you this legislation. The reason being, if they had of shown you, you’d know the rest of their comments were BS - bovine scatology.

It means that you are the victims of the mushroom policy, kept in the dark, enabling successive governments to repeat the myth of subsidised electricity. Because the community didn’t know any better, the smelter has struggled with this deceit as have the workers.

Ladies and gentlemen, independent studies show that your aluminium smelter is one of this country’s most successful developments. As long ago as 1971 the estimated annual return to New Zealand, in terms of net economic benefit, was 10%.

How many other developments can boast a 10% real annual return?

Later studies which factored in the full economic cost of the electricity, estimated increasingly higher returns.

The problem is that Comalco and its partners where the victims of appalling, unprincipled government behaviour. Breaching the letter and the intent of their agreements by demanding extortionate increases in electricity pricing to the smelter.

This smelter, in its first agreement, paid the actual cost of supply plus a 10% margin. But the original agreement was breached and the 10% margin dramatically increased to the great benefit of the Crown, and destruction of the smelter’s competitiveness. In doing so it was a warning to foreign investors of New Zealand’s high sovereign risk.

Here’s the truth. The smelter was paying the full cost of the power scheme at Manapouri and every other electricity asset linked to the smelter, every 14 months.

Before this smelter our country was desperately trying to increase export volumes and move away from wholesale dependence on agricultural products.

Before this smelter began, the government was so desperate for something like Comalco to start that it made the decision to provide the power, even before Comalco made the commitment to build.

It was that government commitment which enabled the New Zealand Aluminium Smelter consortium to start - knowing it could use the electricity.

Facts Matter

Who would build a massive smelter if they knew they were going to be charged the same price for electricity as a household?

But the real economics was that if a company was taking a large quantity of electricity on a “take or pay” basis, every minute for 24 hours, every day, over a short span from Manapouri at the very high end of efficient voltage of 220,000 volts, then that cost plus power price was both fair and economically smart for New Zealand.

Sadly, and as a former National Party member in 1977, and a year before I came to Parliament, Prime Minister Robert Muldoon, ratcheted up an extortionate price increase of 350% on the company. Threatening to break the agreement by legislating to do so.

For any business engaged in a highly competitive international market, this was calamitous. Using the deceit that the smelter was being subsidised, Muldoon demanded a massive increase over the 10% profit margin of the Crown.

Respect for the rule of law and fair dealing simply flew out the window.

The smelter had maliciously been portrayed as the bogeyman. An easy target where the truth and facts didn’t matter.

The smelter has struggled ever since, sometimes helped with lifts in the aluminium price, but mostly making dramatic cost reductions and driving productivity increases.

Ladies and gentlemen I’ve watched over the years electricity pricing, from the Max Bradford’s 1998 electricity reforms, which instead of making electricity costs plateau – made them vertical. Straight up. Alongside privatisations and a massive bureaucracy at an extortionate cost of electricity to business and home owners.

If you want to look for a bogeyman in this matter, look straight to the Crown and the politicians and the privatising plotters and schemers that encouraged them.

When the Crown is the beneficiary of extortionate prices why would you expect the Crown to do something to help you?

The major generators have had no regards for national interest and even less regard for you. The result has been appalling examples of exploitative behaviour, and from a national interest lens, by generators, including managing capacity or events to maximise prices and profits, whilst appearing blind to the impact on households and businesses. 

This smelter produces the finest aluminium in the world, and if it and its workers were not the victim of deceitful, appalling, political propaganda it would last for decades to come.

Before Rio Tinto, under Comalco, the smelter had an excellence in processes and systems, world-leading productivity and product quality together with a highly-paid, all-star workforce.

An important exporter of non-agricultural goods setting very high standards of environmental and safety performance, and a huge contributor to Invercargill, Southland and beyond.

Its economic return to New Zealand was excellent.

Sadly with all the deceit and political interference much of that hope has been lost. But this smelter could be revived again, and go on making a significant contribution to Southland and New Zealand.

My Party is here today to oppose any idea of closure and to promise that if we go on having a say in government, then we commit to a 20-year agreement with a 10 year review, with a fair electricity cost based on the cost of supply and a respectable margin. And what’s a respectable margin? Something like the original agreement of 10% when this great enterprise first started.

And we are going to ensure that New Zealand procurement, by New Zealand, applies to our aluminium and not give preference to junk aluminium coming from offshore.

For example, why are we selling aluminium trailers with a two-year guarantee life? Why should you buy trailers made with imported aluminium with a guarantee of only two years? Whilst your own aluminium is passed over?

And we will signal to the world that New Zealand is a safe, not a dangerous place to invest in.

If you want that policy to become a reality then you are going to have to do something.

First, recognise that you’ll be facing all sorts of enemies that don’t give a rat’s derriere about you, your family, your town, your city or your province.

That includes politicians that know you are being ripped off, but won’t raise a finger to help you.

If you really want a future, and you sure deserve to have it, then you’re going to have to send Wellington a very clear message “We’ve had a gutsful and we’re not taking anymore”.

In short you have to “Back your Future.”

Let me hear you tell Wellington loud and clear “we’ve had a gutsful and we’re not taking anymore.” 

Tell the capital city, that you’ve joined the fight to save Tiwai Point.

Tell’em, that down here in Invercargill, and Southland, and Tiwai Point, you “Back your Future”.

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