Anthony Albanese and the New South Wales premier, Chris Minns, are preparing to mount a major bailout of Australia’s largest aluminium smelter, in a deal worth as much as $۲.۵bn.
Resources giant Rio Tinto said in December it was contemplating ceasing operations at the Tomago aluminium smelter in NSW at the end of its current electricity supply contract.
The site accounts for more than ۱۰% of energy use in the state and employs about ۱,۰۰۰ workers.
Albanese and Minns were expected to visit Tomago, located north-west of Newcastle, on Thursday morning to announce a joint federal-NSW funding injection, which would come as rising energy costs put the site’s immediate viability in doubt.
Guardian Australia has been told the looming deal is worth $۲.۵bn over ۱۰ years, with as much as $۱bn in capital improvements expected from the site’s owners.
Multiple sources confirmed the announcement was due to take place on Thursday morning, with the costs split ۵۰-۵۰ between the federal government and NSW.
The Australian Financial Review first reported the looming announcement on Wednesday, linking the deal to power purchase agreements with the government-owned utility Snowy Hydro.
Guardian has been told the deal will create about ۲.۵GW of new energy supply.
The government also offered $۶۰۰m to keep Glencore’s copper smelter and refinery in Mt Isa operating, as well as $۲۴۰m for smelters in Hobart and Port Pirie.
The bailout comes as a number of smelters prepare to switch to ۱۰۰% renewable energy in the coming decade. Tomago had announced in ۲۰۲۱ it would “for all intents and purposes” be ۱۰۰% renewable by the end of the decade.
Federal Labor has offered a growing list of taxpayer-funded bailout packages to help metal processors around the country. Promises of $۲bn for Rio Tinto’s Boyne smelter in Queensland and $۲.۴bn for the Whyalla steelworks in South Australia have attracted criticism.
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The industry minister, Tim Ayres, has been involved in the negotiations and is expected to join the announcement with Albanese and Minns. Ayres has previously highlighted “a very tough and volatile global trading environment” for trade in aluminium, for reasons including the “over-subsidisation in some markets, tariff responses in others”.
Albanese in December forecast a deal to provide Tomago with clean power and keep the site operational.
“If Australia doesn’t produce aluminium, then the knock-on effect in other industries is significant because aluminium is increasingly a vital product,” the prime minister said at the time.
Asked about Tomago on Tuesday, the Nationals leader, Matt Canavan, warned it would not be “sustainable for our country to have to expect massive industries to live government blank cheque to government to blank cheque”.
Stressing he did not want workers in the Hunter region to lose their jobs due to tough economic conditions, Canavan said businesses needed to have a sustainable economic footing, calling for the scrapping of net zero by ۲۰۵۰ policies.
Tomago produces up to ۵۹۰,۰۰۰ tonnes a year of aluminium, used in the manufacture of a wide range of products including consumer and industrial packaging, construction materials, solar panels and wind turbines.
