Comalco Agreement

Press, Volume CVIII, Issue 31727, 10 July 1968, Page 12

Comalco Agreement

How good is the agreement between the New Zealand Government and the three companies proposing to build an aluminium smelter at Bluff? The Commonwealth Aluminium Corporation’s predecessor, Consolidated Zinc Proprietary, exchanged its rights to the water resources of Lake Manapouri and Lake Te Anau for an option on a supply of electric power to be produced by the New Zealand Electricity Department from the lakes. No other user of the electricity from this source has been considered; and in the absence of competition for this power it is impossible to say whether the agreement should have been more favourable to New Zealand. One can only set the cash returns, the savings in aluminium imports, and the likely benefits to New Zealand industry and employment against the special price for the electricity, the apparently inescapable taxation concessions, and the possibility of other, more profitable, uses for the electricity arising. The aluminium smelters will enjoy some of the cheapest electricity in the world. It will certainly be much cheaper than in any of the home countries of the companies—Australia, Japan, the United States, and Britain. The price is expected to be less than a fifth of a cent a unit, even with the agreed 10 per cent increase. Power can be sold to a continuous, heavy user of electricity at a much lower price than would be justified for an intermittent demand. The capital cost is determined largely by peak loads. The price at which power is being offered to the aluminium industry is presumably the bedrock price; and the benefits of having the industry established in New Zealand will not be measured by the revenue from the sale of nower. The Minister of Industries and Commerce (Mr Marshall) has drawn attention to the New Zealand content of the smelting works—a cost that will mean an inflow of overseas exchange greater than the whole overseas expenditure- on the Manapouri scheme. The early recovery of overseas capital expenditure is especially advantageous in present economic conditions. As the proposed tax concessions will be limited to overseas companies processing minerals to the primary metal stage, New Zealand-owned industries should suffer no disadvantage. The very large capital requirements of such industries virtually preclude New Zealand companies from entering this field on a substantial scale. Only the future will test the wisdom of the agreement and of this allocation of New Zealand’s energy resources. The commitment of Manapouri to aluminium was virtually settled years ago. But for the aluminium industry, the Manapouri electricity scheme would not now have been developed to its present stage. The full benefit of the whole undertaking will not be felt until Manaoouri’s output, far more than Comalco can use, is effectively powering the expansion of South Island industry.