Mercury in ‘untrue’ and ‘unedifying’ tiff with Ruapehu mills

In an unwelcome retirement present for Mercury chief executive Vince Hawksworth, minister Shane Jones has backed Winstone pulp mills in an ugly war of words with the energy company.
The tiff was precipitated by a Newsroom interview in which Hawksworth confirmed his company was the mills’ biggest power supplier, but rejected responsibility for the high prices blamed for the mills’ proposed closure, at a cost of 230 jobs.
On Wednesday night it escalated with claims, counter-claims and allegations of untruths.
Hawksworth issued a media statement reiterating that its contract, to provide about half the power to the Ruapehu district pulp mill and saw mill, was “priced at a similar level to what is charged to other large corporates” including the Rio Tinto aluminium smelter, at Tiwai Point.
“This is significantly lower than spot prices and comparable to the prices Winstone has noted their international competitors are paying.”
Winstone chief executive Mike Ryan retorted that Hawksworth’s claims were untrue. “Up until now we have respected these commercial discussions, but since Mercury has put out a media statement that misleads the public, we wish to state the following…”
He said Mercury’s latest price offer was 56 percent higher than its previous deal, and more than double the price paid by Rio Tinto. It would have locked Winstone into the same high price for 10 years.
Hawksworth came back again, standing by his previous statement and insisting that high spot prices were not to blame for Winstone’s closure.
“We continue to engage with Winstone and still want to work with them to find a solution,” he insisted. “Our intention in releasing this statement was not to condemn Winstone in any way, but to correct the record based on what we know, that is, that commentary sheeting Winstone’s closure back to high spot prices does not portray a complete picture of the current situation.”
It’s believed Winstone sold off a month’s worth of hedges to pay its wage bill last month, leaving it more exposed to the volatile wholesale market.
Now, the associate energy minister has stepped in, calling the dispute “unedifying”.
“It’s quite extraordinary that this matter has broken into the public,” Shane Jones tells Newsroom.
He bemoaned the secrecy around power prices. “It’s all shrouded in commerciality. I think greater transparency across the entire industry is needed.”
New Zealand First has long campaigned for separation and transparency in the gentailers, he says, so customers and the public could see the prices they offered their own retail arms. “Sadly, that’s not the position of our cabinet, but it is a historic position that NZ First has had for many years.”
Last week, Jones said the gentailers should be able to do prices for the struggling mills that were comparable to the “sweetheart” prices they offered Rio Tinto. He did not accept Hawksworth’s assurance that the prices were already comparable.
And now, despite Hawksworth’s media statement, he’s sticking to his guns: “The big users of energy, provincially based, need a deal akin to a Rio transaction.”
He quotes Prime Minister Christopher Luxon as saying New Zealand’s power prices are no longer internationally competitive.
“This is an existential threat,” Jones adds. “When I was the forestry minister, I pleaded with the big forest owners to support New Zealand industry. In most cases, they didn’t, and many sawmills and other manufacturers went to the wall.”
The closure of the pulp mills and sawmills would jeopardise the market for New Zealand timber. “China is no longer purchasing that material and and I know for a fact if it wasn’t for the residual New Zealand businesses buying raw material from the forest owners, they’d have nothing. They’d have nowhere else to sell their product.
“Obviously the gentailers feel that energy security is not part of their role. But if we end up disembowelling vast swathes of industrial New Zealand just so that the gentailers can continue to reap their extraordinary profits, who do they actually think they’re going to sell all this new wave of energy to?”
Jones has met separately with local council and iwi leaders, and with Winstone Pulp’s leadership; he and the Forestry Minister Todd McClay are meeting again with forestry processing industry leaders on Thursday.
“It would be good to think that we could broker a pragmatic outcome,” Jones says.
“We’re in constant contact with the large manufacturing users, and taking advice from MBIE as to what we might be able to do to try and find common ground, but at this stage there seems to be an ongoing gulf.”