Tuesday, April 02, 2013



No subsidies for Rio Tinto


When we learned last week that it looked like Meridian and Rio Tinto would not be able to reach a deal over the latter's (already extremely generous) electricity prices, the government quickly stepped up and offered them a subsidy. Now Rio Tinto has rejected that subsidy. But not because they're opposed to the idea of effectively getting their profits from the kiwi taxpayer, no - they're rejecting it because its not big enough:

Rio Tinto has rejected the Government's offer to subsidise the Tiwai Point Aluminium Smelter power bill.

The smelter needs help to survive - it has been shedding staff and could close if it can not get an agreement with hydroelectricity generator Meridian Energy, possibly throwing the Southland region into economic crisis.

[...]

But Prime Minister John Key told Newstalk ZB's Mike Hosking that the company came back over the weekend to turn down the offer made by the Government, saying they wanted a longer term deal than the Government was prepared to offer.


"A longer term deal" meaning long-term subsidies. Which seems to be Rio Tinto's new business model: screwing governments for subsidised electricity, and threatening to leave if they don't give in. While I'd like to say I'm glad that our government hasn't bowed to the pressure, I'm not sure we can safely conclude that yet; with asset sales and their surplus on the line (not to mention 3,000 jobs in Bill English's electorate), National could yet decide to give in to Rio Tinto's demands after all.

They shouldn't. If a business isn't profitable without government support (whether in the form of direct financial subsidies, or regulatory or environmental ones), then it is not profitable and should go under. End of story.