Election 2020: Labour promises to keep Tiwai Point on life support – but there's a catch

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. Photo / Greg Bowker

Labour is promising 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 re-elected, the party would work to reduce the amount of money the smelter pays for electricity – the major reason why Rio Tinto said it was closing the plant.

But there is a catch.

If the company wants cheaper power prices it needs to maintain current employment at the site, agree to work on remediation and work with the Government when it comes to the future use of the plant.

If the smelter does not meet these "bottom lines", the deal will be taken off the table.

In the meantime, a Labour-led government would work to transition Southland's economy to create greener jobs.

Labour 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 be investing in Southland's economic development based on a transition plan developed by local leaders and the community," she said.

In a statement, Rio Tinto's, Managing Director of Pacific Operations Kellie Parker said it welcomes the recognition by the Labour Party that the smelter has been paying too much for transmission costs.

"We are always open to continuing conversations that would see fairer costs established for the smelter.

"The ongoing uncertainty for our team at Tiwai and the Southland community is very hard but it is encouraging both major parties have now committed to working with us on a post-election decision."

In July, Rio Tinto announced its plans to wind down New Zealand Aluminium Smelters Ltd, including Tiwai Point.

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

The Southland smelter employs about 1000 people directly and creates a further 1600 indirect jobs in the region.

Tiwai Point is one of the highest electricity users in New Zealand.

At the time, Deputy Prime Minister Winston Peters hinted at a Government buyout of the smelter.

But Ardern today ruled that out.

"We've been clear in Government that there will not be any further direct subsidies for Rio Tinto to continue operating the aluminium smelter," Labour's policy said.

Labour's energy spokeswoman Megan Woods said extending the life of the aluminium smelter requires an agreement on electricity transmission costs – and that takes time.

Under the current system, electricity users – companies and consumers – pay for their power and the costs associated with maintaining the electricity grid as whole, based on how much they use.

Rio Tinto's position has said it pays a disproportionate amount for the transmission infrastructure across New Zealand, given it obtains most of its electricity from the nearby Manapouri hydroelectric power station.

Labour has promised to change how this works so the company won't have to pay as much; it would change the Transmission Pricing Methodology.

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

But Woods said Labour would negotiate a way forward to keep the smelter operating and prevent extra costs falling on other consumers.

"We'll do this by supporting Transpower to form an agreement with the smelter that preserves jobs in the medium term and gives Southland time to build a new economic future."