newy.com.au – The federal and NSW governments have agreed to provide up to $2.5 billion over 10 years to keep Tomago Aluminium operating beyond 2028, ending months of uncertainty for more than 1000 workers at the Hunter smelter and thousands of people employed through its supply chain.
The cost will be divided equally between the two governments, with NSW’s contribution capped at $1.225 billion over the decade from 2029. Tomago Aluminium will invest at least another $1.1 billion, including $100 million for decarbonisation work and an expanded program allowing the smelter to reduce its electricity use when the NSW grid is under pressure.
Although described as a $2.5 billion package, two equal government contributions of $1.225 billion would total $2.45 billion. The headline figure appears to have been rounded, while the combined public and company commitments amount to at least $3.55 billion.
The assistance will not be paid as a single upfront grant. It is intended to support a long-term electricity arrangement after Tomago’s existing supply contract with AGL expires in December 2028.
Prime Minister Anthony Albanese and NSW Premier Chris Minns are expected to formally announce the agreement at the smelter on Thursday morning.
The foundation for Thursday’s announcement was laid late last year, when a preliminary agreement which was announced in December envisaged a long-term, fixed-price power purchasing arrangement and concessional finance to bring forward new renewable generation and storage in NSW. Snowy Hydro has been linked to the negotiations as a possible intermediary that could contract with energy projects and sell firmed electricity to Tomago at a more predictable price.
Current reports suggest the agreement could support between 2.5 and three gigawatts of new generation and firming capacity.
Tomago draws about 950 megawatts continuously, making it Australia’s largest single electricity load and accounting for roughly 10 to 12 per cent of NSW electricity demand. At that rate, the smelter consumes more than eight terawatt-hours of electricity in a year.
Electricity represents more than 40 per cent of its operating costs. Tomago began seeking post-2028 renewable and firm power proposals in 2022, but said last October that none of the coal or renewable offers it had received would allow the plant to remain commercially viable.
The company then began consulting employees over a possible closure when the AGL contract ended, before the Commonwealth and NSW governments intervened.
Under the agreement, Tomago will establish a larger demand-response program to help stabilise the grid during periods of constrained supply or unusually high demand. The smelter has previously reduced its load by hundreds of megawatts within minutes, including during bushfires and extreme summer conditions, but prolonged interruptions carry the risk of molten material freezing inside its potlines.
A joint government statement said the program aimed to make Tomago an international leader in electricity demand flexibility, while the wider energy arrangement would accelerate the decarbonisation of a consumer responsible for more than one-tenth of the state’s electricity use.
Tomago is Australia’s largest aluminium smelter, producing up to 590,000 tonnes a year, or about 37 per cent of the country’s primary aluminium. About 90 per cent of its output is exported to Asia-Pacific markets.
The company says it directly employs about 1000 people, uses the equivalent of another 200 full-time contractors and supports an estimated 5000 indirect jobs. It also works with more than 500 Hunter suppliers and claims to contribute $2.2 billion annually to the Australian economy, including $800 million spent locally.
Tomago is an independently managed joint venture rather than a wholly owned Rio Tinto operation. Rio holds 51.55 per cent, Gove Aluminium Finance owns 36.05 per cent and Norsk Hydro holds the remaining 12.4 per cent.
The full agreement will be closely examined for minimum production and employment requirements, taxpayer clawbacks if the smelter cuts operations, and whether Tomago can receive additional assistance through the Commonwealth’s separate $2 billion Green Aluminium Production Credit.
