Anthony Albanese and Chris Minns announce $2.5bn bailout for Tomago aluminium smelter

Anthony Albanese and the New South Wales premier, Chris Minns, will mount a major bailout of Australia’s largest aluminium smelter, in a deal worth $2.5bn.

Resources giant Rio Tinto said in December it was contemplating ceasing operations at the Tomago aluminium smelter, located north-west of Newcastle, at the end of its current electricity supply contract.

The site accounts for more than 10% of energy use in the state and employs about 1,000 workers.

Albanese and Minns will visit Tomago on Thursday morning to announce a joint federal-NSW funding injection to keep the site operational beyond 2028.

Guardian Australia reported on Wednesday the deal is worth $2.5bn over 10 years, with as much as $1.1bn in capital improvements expected from the site’s owners. About $100m will go towards further decarbonisation activities and new measures to support the NSW electricity grid.

Costs for the plan will be split 50-50 between the federal government and NSW.

The Australian Financial Review first reported the looming announcement, linking the deal to power purchase agreements with the government-owned utility Snowy Hydro.

Nearly 3GW of new energy supply will be created from the plan.

The government also offered $600m to keep Glencore’s copper smelter and refinery in Mount Isa operating, as well as $240m for smelters in Hobart and Port Pirie.

The bailout comes as a number of smelters prepare to switch to 100% renewable energy in the coming decade. Tomago had announced in 2021 it would “for all intents and purposes” be 100% 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 $2bn for Rio Tinto’s Boyne smelter in Queensland and $2.4bn for the Whyalla steelworks in South Australia have attracted criticism.

The industry minister, Tim Ayres, has been involved in the negotiations and is expected to join the announcement alongside Albanese and Minns.

Albanese said he was delivering on promises made to workers in December.

“This site isn’t just important for Newcastle and the Hunter, it’s a critical asset for the country and our manufacturing future,” he said.

“I’m proud of the work we’ve done with the company, with the Minns Labor government, with local members and with the workers here on site to secure Tomago’s future beyond 2028.”

Minns thanked Albanese for the joint funding agreement, which comes after months of negotiations.

“The Hunter has powered NSW and helped build this country for generations. This agreement is about making sure it remains an industrial and manufacturing powerhouse for generations to come,” he said.

“This is part of our bigger plan for the Hunter, securing the good jobs and industries that are here today, while investing $12bn to bring train manufacturing back to the Hunter and create good, secure jobs for decades to come.”

Asked about Tomago on this week, 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 2050 policies.

Tomago produces up to 590,000 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.