NZ Herald
  • Home
  • Latest news
  • Video
  • New Zealand
  • Sport
  • World
  • Business
  • Entertainment
  • Podcasts
  • Quizzes
  • Opinion
  • Lifestyle
  • Travel
  • Viva
  • Weather forecasts

Subscriptions

  • Herald Premium
  • Viva Premium
  • The Listener
  • BusinessDesk

Sections

  • Latest news
  • New Zealand
    • All New Zealand
    • Crime
    • Politics
    • Education
    • Open Justice
    • Scam Update
    • The Great NZ Road Trip
  • On The Up
  • World
    • All World
    • Australia
    • Asia
    • UK
    • United States
    • Middle East
    • Europe
    • Pacific
  • Business
    • All Business
    • MarketsSharesCurrencyCommoditiesStock TakesCrypto
    • Markets with Madison
    • Media Insider
    • Business analysis
    • Personal financeKiwiSaverInterest ratesTaxInvestment
    • EconomyInflationGDPOfficial cash rateEmployment
    • Small business
    • Business reportsMood of the BoardroomProject AucklandSustainable business and financeCapital markets reportAgribusiness reportInfrastructure reportDynamic business
    • Deloitte Top 200 Awards
    • CompaniesAged CareAgribusinessAirlinesBanking and financeConstructionEnergyFreight and logisticsHealthcareManufacturingMedia and MarketingRetailTelecommunicationsTourism
  • Opinion
    • All Opinion
    • Analysis
    • Editorials
    • Business analysis
    • Premium opinion
    • Letters to the editor
  • Sport
    • All Sport
    • OlympicsParalympics
    • RugbySuper RugbyNPCAll BlacksBlack FernsRugby sevensSchool rugby
    • CricketBlack CapsWhite Ferns
    • Racing
    • NetballSilver Ferns
    • LeagueWarriorsNRL
    • FootballWellington PhoenixAuckland FCAll WhitesFootball FernsEnglish Premier League
    • GolfNZ Open
    • MotorsportFormula 1
    • Boxing
    • UFC
    • BasketballNBABreakersTall BlacksTall Ferns
    • Tennis
    • Cycling
    • Athletics
    • SailingAmerica's CupSailGP
    • Rowing
  • Lifestyle
    • All Lifestyle
    • Viva - Food, fashion & beauty
    • Society Insider
    • Royals
    • Sex & relationships
    • Food & drinkRecipesRecipe collectionsRestaurant reviewsRestaurant bookings
    • Health & wellbeing
    • Fashion & beauty
    • Pets & animals
    • The Selection - Shop the trendsShop fashionShop beautyShop entertainmentShop giftsShop home & living
    • Milford's Investing Place
  • Entertainment
    • All Entertainment
    • TV
    • MoviesMovie reviews
    • MusicMusic reviews
    • BooksBook reviews
    • Culture
    • ReviewsBook reviewsMovie reviewsMusic reviewsRestaurant reviews
  • Travel
    • All Travel
    • News
    • New ZealandNorthlandAucklandWellingtonCanterburyOtago / QueenstownNelson-TasmanBest NZ beaches
    • International travelAustraliaPacific IslandsEuropeUKUSAAfricaAsia
    • Rail holidays
    • Cruise holidays
    • Ski holidays
    • Luxury travel
    • Adventure travel
  • Kāhu Māori news
  • Environment
    • All Environment
    • Our Green Future
  • Talanoa Pacific news
  • Property
    • All Property
    • Property Insider
    • Interest rates tracker
    • Residential property listings
    • Commercial property listings
  • Health
  • Technology
    • All Technology
    • AI
    • Social media
  • Rural
    • All Rural
    • Dairy farming
    • Sheep & beef farming
    • Horticulture
    • Animal health
    • Rural business
    • Rural life
    • Rural technology
    • Opinion
    • Audio & podcasts
  • Weather forecasts
    • All Weather forecasts
    • Kaitaia
    • Whangārei
    • Dargaville
    • Auckland
    • Thames
    • Tauranga
    • Hamilton
    • Whakatāne
    • Rotorua
    • Tokoroa
    • Te Kuiti
    • Taumaranui
    • Taupō
    • Gisborne
    • New Plymouth
    • Napier
    • Hastings
    • Dannevirke
    • Whanganui
    • Palmerston North
    • Levin
    • Paraparaumu
    • Masterton
    • Wellington
    • Motueka
    • Nelson
    • Blenheim
    • Westport
    • Reefton
    • Kaikōura
    • Greymouth
    • Hokitika
    • Christchurch
    • Ashburton
    • Timaru
    • Wānaka
    • Oamaru
    • Queenstown
    • Dunedin
    • Gore
    • Invercargill
  • Meet the journalists
  • Promotions & competitions
  • OneRoof property listings
  • Driven car news

Puzzles & Quizzes

  • Puzzles
    • All Puzzles
    • Sudoku
    • Code Cracker
    • Crosswords
    • Cryptic crossword
    • Wordsearch
  • Quizzes
    • All Quizzes
    • Morning quiz
    • Afternoon quiz
    • Sports quiz

Regions

  • Northland
    • All Northland
    • Far North
    • Kaitaia
    • Kerikeri
    • Kaikohe
    • Bay of Islands
    • Whangarei
    • Dargaville
    • Kaipara
    • Mangawhai
  • Auckland
  • Waikato
    • All Waikato
    • Hamilton
    • Coromandel & Hauraki
    • Matamata & Piako
    • Cambridge
    • Te Awamutu
    • Tokoroa & South Waikato
    • Taupō & Tūrangi
  • Bay of Plenty
    • All Bay of Plenty
    • Katikati
    • Tauranga
    • Mount Maunganui
    • Pāpāmoa
    • Te Puke
    • Whakatāne
  • Rotorua
  • Hawke's Bay
    • All Hawke's Bay
    • Napier
    • Hastings
    • Havelock North
    • Central Hawke's Bay
    • Wairoa
  • Taranaki
    • All Taranaki
    • Stratford
    • New Plymouth
    • Hāwera
  • Manawatū - Whanganui
    • All Manawatū - Whanganui
    • Whanganui
    • Palmerston North
    • Manawatū
    • Tararua
    • Horowhenua
  • Wellington
    • All Wellington
    • Kapiti
    • Wairarapa
    • Upper Hutt
    • Lower Hutt
  • Nelson & Tasman
    • All Nelson & Tasman
    • Motueka
    • Nelson
    • Tasman
  • Marlborough
  • West Coast
  • Canterbury
    • All Canterbury
    • Kaikōura
    • Christchurch
    • Ashburton
    • Timaru
  • Otago
    • All Otago
    • Oamaru
    • Dunedin
    • Balclutha
    • Alexandra
    • Queenstown
    • Wanaka
  • Southland
    • All Southland
    • Invercargill
    • Gore
    • Stewart Island
  • Gisborne

Media

  • Video
    • All Video
    • NZ news video
    • Business news video
    • Politics news video
    • Sport video
    • World news video
    • Lifestyle video
    • Entertainment video
    • Travel video
    • Markets with Madison
    • Kea Kids news
  • Podcasts
    • All Podcasts
    • The Front Page
    • On the Tiles
    • Ask me Anything
    • The Little Things
    • Cooking the Books
  • Cartoons
  • Photo galleries
  • Today's Paper - E-editions
  • Photo sales
  • Classifieds

NZME Network

  • Advertise with NZME
  • OneRoof
  • Driven Car Guide
  • BusinessDesk
  • Newstalk ZB
  • What the Actual
  • Sunlive
  • ZM
  • The Hits
  • Coast
  • Radio Hauraki
  • The Alternative Commentary Collective
  • Gold
  • Flava
  • iHeart Radio
  • Hokonui
  • Radio Wanaka
  • iHeartCountry New Zealand
  • Restaurant Hub
  • NZME Events

SubscribeSign In
Advertisement
Advertise with NZME.
Home / Business

Fran O'Sullivan: Govt intervention doesn't cut mustard

Fran O'Sullivan
By Fran O'Sullivan
Head of Business·NZ Herald·
29 Mar, 2013 04:30 PM5 mins to read

Subscribe to listen

Access to Herald Premium articles require a Premium subscription. Subscribe now to listen.
Already a subscriber?  Sign in here

Listening to articles is free for open-access content—explore other articles or learn more about text-to-speech.
‌
Save

    Share this article

John Key probably finds it hard to compute that his Government is now on the backfoot. Photo / Otago Daily Times

John Key probably finds it hard to compute that his Government is now on the backfoot. Photo / Otago Daily Times

Fran O'Sullivan
Opinion by Fran O'Sullivan
Head of Business, NZME
Learn more
Ministers prepared to sacrifice SOE model for short-term gain

John Key earned himself a fabulous reputation as one of the "big swinging dicks" of the international foreign exchange business.

But in going toe-to-toe with Rio Tinto over the Tiwai Point smelter electricity negotiations, all the signs are his Government is about to be screwed by a major player with plenty of form in the tough world of international brinkmanship.

Cruel observers of this political game would probably say it's just another example of the "swinging dick to limp dick" syndrome which afflicts too many business people when they enter national politics.

The Key Government has already shown itself a willing player when it comes to talking down and dirty with SkyCity over the "pokies for convention centre" deal which the Deputy Auditor-General frowned on. The deal to keep Sir Peter Jackson's The Hobbit here attracted opprobrium (though not from me).

Advertisement
Advertise with NZME.
Advertisement
Advertise with NZME.

But this particular market intervention does not cut the mustard.

Key probably finds it hard to compute that his Government is now on the backfoot as it tries to scramble together a short-term subsidy to prop up the energy-hungry smelter for a few more years, all the while as the Treasury floats down 49 per cent of the shares in Meridian Energy (which supplies electricity to the smelter), and other state-owned electricity generators like Mighty River Power and Genesis Energy.

The problem is Key's Cabinet ministers - particularly State-Owned Enterprises Minister Tony Ryall - have become so captive to the Budget forecasts which Finance Minister Bill English wants to make good on when he unveils the next major numbers in Parliament on May 16, that they are prepared to sacrifice the integrity of the State-Owned Enterprises model for short-term gain.

Cabinet ministers are not supposed to bypass an SOE board when it comes to negotiations between the company and its customers.

Yet Ryall - without even a blush - has done just that.

This is a questionable tactic at best. And (in some quarters) would be viewed as bordering on outright market manipulation. A major shareholder who pulled such a stunt in the commercial sector would be seen as operating a very dubious support mechanism to artificially hold up the price of major revenue streams to enable that very same shareholder to realise artificially high gains when it comes to floating down comparable assets.

Discover more

Opinion

Fran O' Sullivan: Key's Latin American trip adds to our shine

15 Mar 04:30 PM
Opinion

Fran O'Sullivan: Spring Creek delay racked up debts

19 Mar 04:30 PM
Opinion

Fran O'Sullivan: Brain fade great tool for those tight spots

22 Mar 04:30 PM
Opinion

Fran O'Sullivan: Zespri in bind following Chinese verdict

26 Mar 04:30 PM

It should be investigated by market authorities.

The Government will say that the short-term subsidy will give the smelter owners breathing time until the international aluminium price (and forward orders) recover.

Advertisement
Advertise with NZME.

But the truth is what the Government is proposing in its secret talks with Rio Tinto (Meridian's board is not part of this play) is merely a transitional taxpayer subsidy to keep the smelter owners in New Zealand until the aluminium price recovers and they can run the asset from their own balance sheet. In fact, Rio Tinto's balance sheet is strong enough to fund that itself - if it chooses.

But the problem for the Key Government is it has been gamed by Rio Tinto.

Late last year, Key believed the Government could call Rio Tinto's bluff. Rio Tinto can't just close the smelter down. It has a take-or-pay agreement for power from Meridian's Manapouri station until 2016. After that - even if it decides to close the plant - current contracts stipulate a wind-down phase of about two and a half years. It also faces remediation costs to put the site back into a good environment condition.

Problem is ministers have become spooked.

If they had strong guts they should simply call Rio Tinto's bluff (as Key originally signalled would be the case).

If the aluminium company walks away the price of electricity will come down (no bad thing) and Meridian will have the potential to market renewable power to attract other energy-hungry international users like data centres instead of a company which just adds to our carbon emissions profile.

Advertisement
Advertise with NZME.

It's fair to say that Rio Tinto (forget Pacific Aluminium which owns the smelter as it is just a subsidiary) believes it has the Key Government by the short and curlies as it endeavours to get the New Zealand taxpayer to subsidise its operations at Tiwai Point, instead of either ponying up the running costs itself, or closing the smelter if it is indeed uneconomic for the longer-term.

It's a far cry from late last year, when Key - and his senior ministers - believed they could finesse the Australian headquartered multi-national as it began the softening up process to try to get us taxpayers to subsidise the smelter to continue operations here.

Back then Key was playing the margins. He believed (and this remains true) that Rio Tinto was merely playing games.

The smelter uses around one-seventh of all electricity consumed in New Zealand since it opened in 1972. It's always played hardball. But it's time an New Zealand Government returned serve.

Meridian's board has not been cut into the Government's secret negotiations with Rio Tinto's representatives.

The Meridian directors include some tough players: chairman Chris Moller formerly chaired the NZRU for five years and also chairs NZ Cricket; Mark Cairns runs a tight ship at Port of Tauranga and Jan Dawson, formerly head of KPMG, and Ballantyne's chief executive Mary Devine weren't brought down in the last shower.

Advertisement
Advertise with NZME.

So far, they are remaining a cone of silence.

They should simply resign - as they have been neutered.

Save

    Share this article

Latest from Business

Premium
Media Insider

Noise ban, off-limit interviews: TVNZ's rules as RNZ moves in; Ad agencies take aim at global merger

09 May 10:58 AM
Premium
Tourism

'Nothing was going to stop me': Pioneer who built ski resort from scratch sells up

09 May 07:00 AM
Premium
Shares

Market close: NZ sharemarket rises as gentailers make gains

09 May 06:03 AM

“Not an invisible footprint”: Why technology supply chains need optimising

sponsored
Advertisement
Advertise with NZME.

Latest from Business

Premium
Noise ban, off-limit interviews: TVNZ's rules as RNZ moves in; Ad agencies take aim at global merger

Noise ban, off-limit interviews: TVNZ's rules as RNZ moves in; Ad agencies take aim at global merger

09 May 10:58 AM

Untimely deaths of 3 respected NZ journalists; NZME set to take on Trade Me for car sales.

Premium
'Nothing was going to stop me': Pioneer who built ski resort from scratch sells up

'Nothing was going to stop me': Pioneer who built ski resort from scratch sells up

09 May 07:00 AM
Premium
Market close: NZ sharemarket rises as gentailers make gains

Market close: NZ sharemarket rises as gentailers make gains

09 May 06:03 AM
Premium
'Very happy': Jim Grenon to join NZME board with Steven Joyce in peace deal that ends bitter battle

'Very happy': Jim Grenon to join NZME board with Steven Joyce in peace deal that ends bitter battle

09 May 05:42 AM
Deposit scheme reduces risk, boosts trust – General Finance
sponsored

Deposit scheme reduces risk, boosts trust – General Finance

NZ Herald
  • About NZ Herald
  • Meet the journalists
  • Newsletters
  • Classifieds
  • Help & support
  • Contact us
  • House rules
  • Privacy Policy
  • Terms of use
  • Competition terms & conditions
  • Our use of AI
Subscriber Services
  • NZ Herald e-editions
  • Daily puzzles & quizzes
  • Manage your digital subscription
  • Manage your print subscription
  • Subscribe to the NZ Herald newspaper
  • Subscribe to Herald Premium
  • Gift a subscription
  • Subscriber FAQs
  • Subscription terms & conditions
  • Promotions and subscriber benefits
NZME Network
  • The New Zealand Herald
  • The Northland Age
  • The Northern Advocate
  • Waikato Herald
  • Bay of Plenty Times
  • Rotorua Daily Post
  • Hawke's Bay Today
  • Whanganui Chronicle
  • Viva
  • NZ Listener
  • What the Actual
  • Newstalk ZB
  • BusinessDesk
  • OneRoof
  • Driven CarGuide
  • iHeart Radio
  • Restaurant Hub
NZME
  • About NZME
  • NZME careers
  • Advertise with NZME
  • Digital self-service advertising
  • Book your classified ad
  • Photo sales
  • NZME Events
  • © Copyright 2025 NZME Publishing Limited
TOP