Budget includes help for industry to ride out gas transition crisis

Monday, 25 May 2026

The Government has confirmed plans to extend a helping hand to industries struggling with gas costs in the latest pre-Budget announcement.

Last winter was brutal, with hundreds of regional jobs lost in industry closures due to high operating costs.

Over the past two years, six wood processing facilities have closed across New Zealand, including the Kinleith Mill in Tokoroa and the Eves Valley Sawmill near Nelson.

This year it was announced that both Heinz Watties and McCain Foods would wind down operations partly due to gas and electricity costs – taking hundreds of jobs with them.

And over the weekend a public meeting was scheduled amid concerns about the future of two of the Far North town’s timber mills.

The help will come in the form of Crown backed loans, with the Government guaranteeing 80% of each eligible loan in exchange for banks offering lower interest rates to the borrowers.

“This will make loans more affordable for firms wishing to switch fuel sources,” Finance Minister Nicola Willis said.

“The Gas Transition Loan Guarantee Scheme is a practical, helpful Budget 2026 initiative which is expected to make up to $1.2 billion of bank loans available to businesses to eliminate or reduce their dependency on gas.”

$48 million has been set aside in the Budget to cover potential losses from the scheme. A further $5.9m will go to the Energy Efficiency and Conservation Authority to work with businesses exploring options to transition away from gas.

Businesses will be eligible for the scheme if they use more than 1000 GJ of gas a year (for comparison, an average household with gas for cooking and heating uses about 25 GJ a year). Participants will need to achieve gas savings of at least 15% while maintaining or increasing production.

The loans will need to have a maximum new lending value of $50m.

Asked a couple of weeks ago whether she was concerned about the reliance of some industries on gas, Finance Minister Nicola Willis replied with one word: “Yes”.

“I know that many businesses are looking at that, saying, What should we do about it? And what we've said, as a government, well, as in the first instance, we're working to ensure there's more investment in electricity generation, but some of them, of course, will need to make investments in transitioning to use that electricity instead of gas.”

But she was less categorical about the Government’s need to support any businesses in transitioning away from gas.

“I don't think it's the government's responsibility to do that. I think the government should be very aware of that issue in thinking about how it can be addressed.”

In 2023, Willis wound down an initiative from the previous government aimed at helping industry move away from gas and other fossil fuels – the Government Investment in Decarbonising Industry (GIDI) Fund.

That fund, which was launched in 2020 and dubbed “corporate welfare” by Willis, provided co-funding for decarbonisation projects. The largest investments went to decarbonisation efforts by NZ Steel and Fonterra and totalled $230m of Government investment.

This year, it was reported that $4m worth of cancelled grants from the fund had been allocated by Cabinet for procuring a liquefied natural gas (LNG) import facility.

On Monday, Willis insisted this loan scheme is different.

“The GIDI Fund was hundreds of millions of dollars handed out willy nilly at the behest of a minister. This is commercial banks determining who is credit worthy and making loans, so that firms can invest their own money in the transition,” she said.

“This is not letting businesses off the hook for their own investments, as the GIDI Fund was doing. This is simply about providing a Crown guarantee to support and accelerate [that investment].”

Regional Development and associate energy minister Shane Jones, who refused to tell Stuff whether the Budget included support for gas-reliant industries recently “for fear of the finance minister plucking my eyes out”, said the Budget also includes legislative changes to improve transparency in the gas market.

The amendment will mean improved information disclosure requirements for industry participants.

“The most recent figures show a 23% decline in New Zealand’s gas reserves in the past year and production this year is now expected to be 15% lower than expected at the beginning of the year,” he said.

“Fragmented and incomplete information on supply and demand is weakening market confidence and contributing to upward pressure on prices.”

The amendment the Gas Act will be passed as part of Budget measures.

Industry, advocates, welcome announcement

The move has been welcomed by business and advocacy groups across the board. While Business NZ praised the Government for pursuing a transition plan that will “protect jobs, production, and New Zealand’s economic base”, Greenpeace Aotearoa called it “a major admission by the Government that the fairytale they have been telling the country, that there is more fossil gas, was always nonsense”.

According to former National Party leader and Auckland Business Chamber CEO Simon Bridges, “the reality is New Zealand is running out of gas. That, alongside wider energy challenges, has led to slow but steady deindustrialisation, SMEs shutting up shop, and real hardship for households and businesses alike.”

Labour leader Chris Hipkins said he would keep this policy if elected prime minister in November, but he wouldn’t say whether he would make transitioning to renewable energy a criterion.

Energy Minister Simeon Brown said on Monday the loans didn’t necessarily have to fund a move to cleaner energy – meaning the Government could potentially back a company choosing to increase reliance on coal, for example.

“I haven't had a chance to see the detailed criteria that the Government are putting around it yet. So we'd want to consider that, but we would like to see a heavy emphasis on moving to renewable energy wherever that's possible,” Hipkins said.

“On coming into government three years ago, the National Party dismantled support for businesses transitioning to renewable energy and away from gas. It's good that they finally discovered that some of those businesses need that support it’s just a shame it's taken thousands of job losses across the country for them to wake up.”