Rio Tinto will not reimburse the $30million Government subsidy it received to keep Tiwai Point open, in spite of posting a $3.7billion profit this year.
Opposition parties have slammed the payment as "corporate welfare at its worst" in light of the profit announced today, but Prime Minister John Key says it was a necessary payment to save hundreds of jobs.
In August last year, the Government announced it would pay $30m to the New Zealand subsidiary of corporate giant Rio Tinto to persuade it not to close the Tiwai Aluminium smelter. But the Government only has a commitment from the company to stay 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 on Thursday is 15 per cent better than the US$1.67 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 Point. He ignored Treasury advice and, to rub salt into the wound, he made the deal tax free," Cosgrove said.
"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 $30 million hand-out 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."
But Key said today that Rio Tinto was exploring the viability of a number of its operations around the world, and just last week was shutting down a major mine in Australia's Northern Territory.
Key said the payment was a "modest step" aimed at saving hundreds of Southland jobs in the
medium-term and ensuring there was not a glut of unused electricity.
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 spend 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 straight away and Tiwai Point had closed in New Zealand then hundreds and hundreds and hundreds of jobs would have disappeared.''
A $30 million payment was not a major outlay in the context of the overall economy, he said.
He said the payment was a stop-gap measure and the Government had "no long-term interest"
in providing support to Rio Tinto.
The money would not be repaid, he said.
- Fairfax Media