Renewable energy like hydropower is suppose to be cheap. It is...

Renewable energy like hydropower is suppose to be cheap. It is until Governments try to rip-off companies and overturn contracts. The story below is worth a read, the New Zealand Government over the years have destroyed the Tiwai smelter due to their own greed.

How Muldoon mugged Tiwai's owners
Michael Fallow05:00, Aug 01 2020



Robert Muldoon

Comalco felt it could safely stand on its rights. In this they reckoned without Muldoon.
That’s not Winston Peters talking. It’s Hugh Templeton, a former Awarua MP and member of the Muldoon cabinet.
Nowadays Peters is fulminating against what he insists is the black lie that has the public believing the Tiwai smelter has been a parasitical presence in the nation, fed by subsidised power from our own Manapouri hydro scheme.
Templeton and Peters are hardly transposable figures. One’s a Rhodes Scholar of academic and gentlemanly demeanour and little in the way of combative political talent. The other is Winston Peters.

Templeton in his book All Honourable Men: Inside the Muldoon Cabinet 1975–1984 provides his own perspective on a pivotal point in the smelter’s history, central to Peters’ reproach.
It’s the impact of Muldoon’s intervention in 1977, and his threat to change the law to break the deal that had drawn Comalco and its parent company Rio Tinto to New Zealand in the first place.
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It’s almost counter intuitive to think of a monstrously sized multinational being a victim of anything much.
But here’s the case.

DOM POST/STUFF
Ralph Hanan.
Rio Tinto didn’t just show up in New Zealand, looking around with reddened eyes for a place to plonk a smelter. It was asked in.
The idea of building a power station using lakes Manapouri and Te Anau had been around for a long time and in this Southland had a champion - Invercargill mayor, and then MP, Ralph Hanan who had throughout the 1950s worked hard to interest Rio Tinto’s Comalco in the scheme.
An agreement in 1960 gave the company exclusive rights for 99 years to develop the Manapouri station and build a smelter, but two years later the company wanted back to the table to renegotiate.
Templeton: “Comalco...reneged on the cost of developing the huge hydro-power scheme’’.
By his account it was Hanan who then persuaded the Holyoake government to commit finance and build the Manapouri station.
Peters: “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.’’

ROBYN EDIE/STUFF
New Zealand First leader and Deputy Prime Minister Winston Peters held a âSave Tiwaiâ public meeting at the Invercargill Workingmen's club on Friday.
Give Peters the chance and he would stand on Jacinda Ardern’s coffee table to brandish the 1963 legislative foundation for the smelter.
There it is, recorded in statute, he told a public meeting in Invercargill last week – the company would be charged the actual cost of supply of electricity, plus a 10 percent margin.
“How many other developments can boast a 10 per cent real annual return?’’ he felt the need to add.
Things change. For New Zealand, the 1970s oil shocks were belters. By 1977 the smelter bulk power price of 0.2 cents a unit was well behind the national bulk power price of 1.2 cents.
Templeton: “We could not sustain a differential of a full cent while we were busily imposing higher energy prices on the NZ consumer.’’
Comalco was outraged. Its huge demand warranted heavy discounting and this was the only basis that it could compete in the world market.
And in any case, a contract was contract.
This did put Muldoon and his ministers in a spot.
Then came a misstep. Like his new antagonist, Comalco chief executive Don Hibberd was himself a shortish, combative man.
He announced he would close the smelter rather than pay up.
That just gave zest to the fight for Muldoon.Templeton: “He waded in with the sort of imperative he loved. His precious New Zealanders were suffering from the 1973 oil shock. Comalco as a rich multinational should share in the pressure. Contract or no contract, a sovereign state was a sovereign state.
Muldoon said it flatly: The government would legislate to change the price.

TALIA CARLISLE/STUFF
Hugh Templeton
Templeton remembers encountering a crumpled Hibberd.
“I found him after he left Muldoon’s offices, white and shaken. Muldoon had successfully battered into submission a multinational partner and a company which had come to New Zealand at the Government’s request.’’
The PM admitted he was lucky Hibberd had played too tough a negotiating game.
“Now they were ‘selfishly’ refusing to share with New Zealanders the increased costs of the oil shock,’’ Templeton wrote.
Few New Zealanders appreciated the importance of foreign investment in the country’s development so Muldoon was able to rely on traditional suspicion of “exploiters’’.
“He could play easily on the small man’s fear of the multinational investor. In the process he broke Hibberd.’’
Peter says Comalco and its partners were the victims of appalling, unprincipled government behaviour, breaching the letter and the intent of their agreements by demanding extortionate increases in smelter electricity of 350 per cent.
Of great benefit to the Crown, yes, but destructive to the smelter’s competitiveness and a warning to foreign investors of high sovereign risk.
Tiwai survived this and subsequent increases, sometimes helped by lifts in the aluminium price but mostly, Peters says, by making dramatic cost reductions and driving productivity increases.

BARRY HARCOURT
Meridian Energy's power station at Lake Manapouri's West Arm
Now that Rio Tinto has announced the smelter will close next year, much attention further north has been on what’s to be done with the Manapouri energy.
Peters wants the smelter saved by a buyout, albeit not by the Government. (He’s advocated local management and staff step up, but they have dismissed this emphatically.)
Peters would have the Government renegotiate a power deal in line with what he considers the decent original – electricity costs based on the cost of supply and a margin something like 10 per cent.
Closing Tiwai would have disastrous effects, nationwide, he says. The company uses 2 percent of Transpower’s network but pays 8 per cent of its costs, so if it closes $50 million of transmission costs would be reallocated to other users.
Transmission constraints would force South Island hydro to spill and waste water – “how barren of vision is that?’’ The instability of the energy sector for the next decade would itself scare off investment, and mean the deferral of other investments in newer, renewable energy projects.


Lindsay Buckingham
Lindsay Buckingham, an independent project manager who has spent nearly two decades implementing projects at Tiwai, says he’s probably biased as a result but the fact remains the Manapouri power station, which was built exclusively to supply the smelter, is being repurposed as a generating resource for more widespread benefits.
This ignores the fact that Manapouri was built for the regional development of Southland, along with consequential economic benefit to all of New Zealand.
“Maybe the original negotiations were poorly done,’’ Buckingham says.
“However the cumulative benefits to Southland and New Zealand are enormous and have the potential to continue to be so.’’
Politicians created the smelter and collectively they have sucked it dry of any residual financial viability with increasing power prices, he says.
“There is room to negotiate a fair deal for cheap electricity – will they choose to pursue or even consider it?’’
A power price indexed to global aluminium prices would benefit all parties, Buckingham says.
Meridian Energy has shown no interest in renegotiations. However Peters has reminded everyone that the Government is its majority owner.
Commentators who are telling Southland to dream big and find a replacement industry should themselves wake up.
Instead of dreaming big, New Zealanders need to wake up, Buckingham says.
“Aluminium remains the metal of the future. Let’s not chuck that away.’’
Meantime, he asks, can we hear a distant hum? A spinning turbine maybe?
“No. It’s Ralph Hanan turning in his grave.’’