Winstone Pulp International's Raetihi premises, in the central North Island. Photo: Alexa Cook/RNZ
- Winstone Pulp International, which employs 230 workers across two large North Island mills, is looking at closing its entire NZ operation due to high wholesale power prices
- Its main supplier, Mercury, denies it is to blame, saying its contract with Winstone was "significantly lower than spot prices"
- Mercury posted a net profit for 2023/24 of $290m, a 159 percent increase on the year before
- Local mayors are lobbying the government to crack down on "price gouging"
- Ministers have been meeting to discuss how the government could help businesses struggling due to high wholesale power prices
Mercury Energy and forestry products company Winstone Pulp International at are loggerheads over whether rising electricity prices are to blame for the mill's potential closure.
Winstone is considering closing its entire operation due to high wholesale power prices, and an emotional public meeting was held on Tuesday to discuss the potential loss of 230 jobs.
But while the pulp company blamed their struggles on skyrocketing spot prices for power, Mercury said that was "factually incorrect".
"Mercury currently provides a contract that helps set the price for about half of the power that Winstone International uses. This is priced at a similar level to what is charged to other large corporates including New Zealand Aluminium Smelters Limited," it said in a statement.
The smelter at Tiwai Point in Southland is majority-owned by Rio Tinto.
Mercury's contract was "significantly lower than spot prices and comparable to the prices Winstone has noted their international competitors are paying".
The statement came as ministers were meeting to discuss how the government might help those businesses having to close due to high wholesale power prices.
Minister for Resources Shane Jones said the meeting, which included Winstone and Pan Pac, would focus on what the companies need from power suppliers.
Mercury chief executive Vince Hawksworth said they had been talking with Winstone since July, and had provided them with another contract more than two weeks ago "to reduce their exposure to the spot market", priced at a similar level to the existing arrangement - and the power company was still waiting to hear back.
"We completely sympathise with those individuals who are impacted by the current process that Winstone Pulp International are working through," Hawksworth said.
"However, based on what we know, commentators sheeting this back to high spot prices does not portray a complete picture of the current situation."
Winstone pushed back on the Mercury response, however.
In a statement, chief executive Mike Ryan said Mercury's statement was also "factually incorrect".
He agreed the two companies had been in discussions for several weeks, had been "exchanging emails regularly", and had a call scheduled for 4pm on Wednesday.
"To say we had not responded to their offer is untrue."
Currently, he said, Winstone bought its power through an intermediary known as a clearing house, rather than direct from power companies.
Until now, Winstone had respected the commercial nature of the discussions, he said, "but since Mercury has put out a media statement that misleads the public, we wish to state the following facts".
Mercury's latest offer was a 56 percent increase on their current expiring fixed rate with them, on 10-year terms, which would lock them into high costs for the next decade "at a time when energy companies are assuring the public that prices will come down given the scale of their planned investment", Ryan said.
Winstone's situation was not unique, he said, other companies were struggling, too.
"Mercury cannot avoid the fact that, while it enjoys record profits, New Zealand's manufacturing and export businesses are under extreme pressure.
"Fonterra, Silver Fern Farms, Balance, Oji and Pan Pac have all made public comments about the impact the energy crisis is having on their businesses.
"Mercury won't disclose the price enjoyed by the Tiwai smelter. But based on the generally accepted speculation in the market, we understand that their latest offer to us is more than double that price."
Minister for Resources Shane Jones has been meeting with companies affected by soaring power prices. Photo: RNZ / Tess Brunton
New power contract 'stinks' - Shane Jones
Earlier, Jones told Nine to Noon he and his colleagues were looking at how to assist struggling companies.
He had previously accused the big power companies of profiteering.
"I see no evidence that the gentailers are going to help the Crown shoulder the burden or share the pain.
"So when we have our meeting and we look at some options later on today, we will find out whether or not there is a way of us brokering some sort of middle ground - as Rio Tinto enjoy down there in the South Island.
"I'm as keen as mustard to get the gentailers to offer the same terms to our manufacturers that Rio Tinto were privileged to receive.
"It costs about $65 for these gentailers, at most, to generate the energy, and they want $500-$800. Stinks."
Last week, Jones met with several Japanese-owned mill operators, including Hawke's Bay company Pan Pac.
"They have clearly stated that unless they get some relief [in the form of] better energy prices, they see their future in NZ only for a short time," he said.
No Cabinet decisions were imminent, Jones said.
