$60m Government bailout to save Fletcher's cement plant

The Government’s carbon credit trading scheme could have shut New Zealand’s only cement manufacturing plant, so Fletcher Building has today announced it got a $60 million bailout to keep it running.

The Government gave Golden Bay Cement that money to support the continued operation of Golden Bay Cement’s Northland operations.

The $60m is not a loan.

This reflects a specific, one-time response to an exceptional set of circumstances, the company said.

Golden Bay Cement had committed to continue producing cement at its Northland plant until at least 2040, and to invest at least $150m through to 2040, phased over time.

The deal recognises the strategic importance of domestic cement manufacturing to New Zealand’s infrastructure supply chain and national resilience and addresses the carbon cost disadvantage that Golden Bay Cement faces relative to imported cement, Fletcher said.

Golden Bay Cement plant on the waterfront. Photo / Tania Whyte

Economic Growth Minister Nicola Willis said the decision to support Golden Bay was not taken lightly.

“Ultimately, we concluded that this is an exceptional case, which meets the very high bar needed to justify taxpayer support,” she said.

“Before entering negotiations we undertook a rigorous supply chain assessment of the role domestically produced cement plays in the economy, analysed the underlying financial factors at-play, and gave careful consideration to potential precedent risks,” Willis said.

Economic Growth Minister Nicola Willis said the Government did not take the Golden Bay decision lightly. Photo / Mark Mitchell

Fletcher said Golden Bay Cement operated New Zealand’s only domestic cement manufacturing facility at Portland, near Whangārei.

It supplies nearly 60% of the cement used in New Zealand.

About 95% of its output is sold domestically.

Golden Bay Cement participated in an independent assessment which confirmed that without support, rising costs, including carbon costs, would force closure and a shift to an import-only model from 2030.

The agreement reflects the strategic importance both parties place on retaining domestic manufacturing capability.

Golden Bay Cement has invested heavily in modernisation upgrades and alternative fuels to remove fossil fuels from its process, meaning the domestic supply this agreement secures is materially lower-carbon than the imported cement it would otherwise be displaced by.

Golden Bay Cement has committed to spend at least $150 million through to 2040 in continued operations, and optimisation, resilience and decarbonisation initiatives, at Golden Bay Cement’s Northland plant.

An aerial view of the Golden Bay cement works at Portland, just south of Whangarei.

This will be phased over time and remains subject to Fletcher’s normal capital governance and approval processes, with the specific programme to be agreed with the Government.

Fletcher CEO Andrew Reding said: “Domestic cement production matters for New Zealand’s resilience as much as for its economics.”

Andrew Reding (left) with Prime Minister Christopher Luxon at the NZICC opening earlier this year. Photo / Michael Craig

An onshore source reduces exposure to shipping disruption, supply shocks and price volatility, an increasingly important consideration as global supply chains become more unpredictable.

Golden Bay Cement employs more than 150 people and supports a further 450 jobs across the Whangārei district, underpinning the company’s ability to build homes, hospitals, roads and infrastructure with locally sourced materials, Reding said.

“Without Government support, increasing costs, including carbon emission costs that our competitors importing cement from overseas do not currently incur at the same level, would likely have required us to close the plant and move to an import-only model from 2030.

“This agreement removes that risk, providing the certainty to keep investing in domestic manufacturing, operational resilience and lower-carbon production. It’s a strong example of business and Government working together in the national interest.”

Anne Gibson has been the Herald’s property editor for 26 years, written books and covered property extensively here and overseas.