$30m subsidy 'not a major outlay'

Last updated 16:17 14/02/2014
Tiwai

TEMPORARY REPRIEVE: The Government paid $30 million to foreign giant Rio Tinto to keep the Tiwai Point smelter open.

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Rio Tinto will not reimburse the $30 million Government subsidy it received to keep Tiwai Point open, in spite of posting a $3.7 billion 2013 profit.

Opposition parties have slammed the payment as "corporate welfare at its worst" in light of the profit announced today.

However, Prime Minister John Key said the payment had been necessary to save hundreds of jobs.

The Government announced in August last year it would pay $30m to the New Zealand subsidiary of corporate giant Rio Tinto to persuade it not to close the Tiwai Pt Aluminium smelter. In return, the company gave the Government a commitment to keep the smelter until January 2017.

Rio Tinto yesterday surprised investors with a better-than-expected profit and dividend in its full-year results presentation.

The diversified miner announced a dividend of US$1.92 (NZ$2.30) after reporting underlying earnings of US$10.2b for 2013.

The dividend announced yesterday is 15 per cent better than the US$1.67 that was returned to shareholders last year.

Labour state-owned enterprise spokesman Clayton Cosgrove branded the government subsidy as "corporate welfare at its worst".

"[Finance Minister] Bill English bent over backwards to stitch up a deal with Rio Tinto over Tiwai Pt," Cosgrove said.

"He ignored Treasury advice and, to rub salt into the wound, he made the deal tax-free.

"Rio Tinto must be laughing all the way to the bank. It can pack up and leave Tiwai in 2016, minus any obligations and having pocketed millions in taxpayer cash."

Greens co-leader Russel Norman said the payment was "unjustified".

"National gave a $30m handout of taxpayer money to Rio Tinto last year," Norman said.

"Now that company has posted a $3.7b profit, John Key should be asking for our money back."

Key said that Rio Tinto was exploring the viability of several of its operations around the world, and just last week was shutting down a major mine in Australia's Northern Territory.

The Government's payment had been a "modest step" aimed at saving hundreds of Southland jobs in the medium term and ensuring there was not a glut of unused electricity, Key said.

The Government also admitted last year the subsidy would help the subsequent partial sale of Meridian Energy because it would give investors greater certainty.

"And the Greens spent a long time telling us that they care about jobs and they care about New Zealanders and at the core of this, if Rio Tinto had closed straightaway and Tiwai Pt had closed in New Zealand then hundreds and hundreds and hundreds of jobs would have disappeared."

A $30m payment was not a major outlay in the context of the overall economy, he said.

It was a stopgap measure and the Government had "no long-term interest" in providing support to Rio Tinto.

The money would not be repaid, he said.

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- Fairfax Media

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