The Federal and New South Wales governments have agreed to a $2.5 billion funding package over 10 years to prevent the closure of Tomago Aluminium, Australia’s largest aluminium smelter, beyond 2028.
Owner Rio Tinto had previously warned that rising coal-fired and renewable power costs could force the site to shut down when its energy contract expires.
Prime Minister Anthony Albanese and NSW Premier Chris Minns are expected to visit the site on Thursday morning to formally announce the agreement. The cost will be split equally between the Commonwealth and the NSW government, with the state’s contribution capped at $1.225 billion over a decade starting in 2029.
Rio Tinto will contribute at least $1.1 billion in additional investment to reduce energy consumption and transition the plant toward renewable power.
Tomago Smelter to Get More Renewable Power
The Tomago smelter consumes approximately 10 per cent of NSW’s total annual power supply, making it the state’s largest single electricity user. The bailout is linked to power purchase agreements with government-owned utility Snowy Hydro and is expected to generate nearly 3GW of new energy supply.
As part of the investment, $100 million is dedicated to decarbonisation and a “demand-response program” to make the smelter a global leader in electricity flexibility and support NSW power grid stability. This follows a 2021 commitment by Tomago to be powered almost entirely by renewables by the end of the decade.
Why the Tomago Deal Matters to Australia’s Aluminium Industry
Operating 24 hours a day since 1983, the facility employs about 1,000 workers and produces up to 590,000 tonnes of aluminium annually for use in construction, solar panels, wind turbines and industrial packaging.
“This site isn’t just important for Newcastle and the Hunter, it’s a critical asset for the country and our manufacturing future,” Mr Albanese said, adding that the deal delivers on promises made to workers in December.
Premier Chris Minns said the agreement ensures the Hunter remains an industrial powerhouse, complementing a $12 billion investment to return train manufacturing to the region.
Electrical Trades Union organiser Brad McDougall said the announcement brings relief to staff who had spent months uncertain about their employment, noting employees had been waking up every day not knowing if the news would be positive or negative.
Government Support for Australia’s Heavy Industry
The Tomago deal follows several taxpayer-funded rescues for Australian heavy industry. The Albanese government has provided $600 million to Glencore’s copper smelter and refinery in Mount Isa, and $240 million to smelters in Hobart and Port Pirie.
Other major commitments include $2 billion for Rio Tinto’s Boyne smelter in Queensland and $2.4 billion for the Whyalla steelworks in South Australia.
Nationals leader Matt Canavan criticised the reliance on government funding, arguing it is unsustainable for massive industries to live from “government blank cheque to government blank cheque.” While stating he does not want Hunter workers to lose their jobs, Mr Canavan called for the scrapping of net zero by 2050 policies to give businesses a sustainable economic footing.
The intervention comes despite Rio Tinto recording a $10 billion profit after tax for 2025 in its latest annual report.
