The Australian and NSW governments have announced a combined $2.5 billion investment to support the long-term operation of Tomago Aluminium, with the governments saying the agreement will secure more than 1,000 direct jobs and around 5,000 indirect jobs across the Hunter region.
The agreement is designed to provide Tomago Aluminium with a long-term renewable energy supply following the expiry of its existing electricity contract on 31 December 2028.
According to the Australian Government, the arrangement will support the smelter’s continued operation beyond 2028 and underpin almost 3 gigawatts of new renewable generation and firming capacity.
Tomago Aluminium has separately agreed to invest at least $1.1 billion in the smelter through to 2038, according to the government and Rio Tinto.
The investment includes $100 million for decarbonisation initiatives and a demand-response program intended to allow the smelter to adjust its electricity consumption in response to conditions on the NSW grid.
Under the agreement, the NSW Government’s contribution will be capped at $1.225 billion over 10 years from 2029, while the Commonwealth is contributing the remainder of the $2.5 billion government package, according to the Prime Minister’s media release.
The governments said the arrangement will allow Tomago Aluminium to continue operating after its current electricity supply contract expires, providing what they described as greater certainty for workers, businesses and the Hunter region.
Prime Minister Anthony Albanese said the agreement followed discussions between the governments, Tomago Aluminium, workers, unions and local representatives.
“This site isn’t just important for Newcastle and the Hunter, it’s a critical asset for the country and our manufacturing future,” Albanese said in the government’s announcement.
“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.”
NSW Premier Chris Minns similarly described the agreement as providing greater certainty for the region, saying it would secure more than 1,000 jobs at Tomago as well as other employment connected to the smelter.
“This is a good day for the Hunter. This agreement secures more than 1,000 jobs at Tomago and thousands more that rely on the smelter, and gives the region certainty about its future,” Minns said.
Federal Industry and Innovation Minister Tim Ayres said maintaining aluminium production in Australia was important to the country’s industrial capability.
“Australia’s end to end aluminium industry – from bauxite to complex aluminium finished products – is critical for Australia’s national resilience,” Ayres said.
“Keeping this capability here in Australia matters. It makes our economy stronger, drives new electricity projects and maintains thousands of good quality blue collar and engineering jobs right here in the Hunter.”
Federal Climate Change and Energy Minister Chris Bowen said the agreement reflected the smelter’s need for reliable and affordable renewable electricity.
“Tomago Aluminium has made it clear: to remain competitive and secure its future the smelter needs a reliable and affordable supply of renewable energy, with ageing coal-fired power options being prohibitively expensive,” Bowen said.
NSW Climate Change and Energy Minister Penny Sharpe said the investment would link the future of the smelter with renewable energy development in NSW.
“This investment secures more than 1,000 local jobs and connects key manufacturing to a long-term pathway to run on renewable energy,” Sharpe said.
Rio Tinto, which owns a 51.55 per cent interest in Tomago Aluminium, welcomed the agreement and said it would provide the smelter with electricity supply certainty through to 2038.
Rio Tinto said Tomago Aluminium will enter into a 10-year power purchase agreement following the expiry of its current electricity contract. Under the agreement, electricity supplied to the smelter will come from 100 per cent renewable sources from 2033.
Rio Tinto Aluminium & Lithium chief executive Jérôme Pécresse said the agreement would support the smelter’s workforce, customers and the Hunter region.
“This agreement secures Tomago Aluminium’s long-term future, supporting Australian manufacturing, skilled jobs and the Hunter community, as well as providing security of supply to the smelter’s global customers,” Pécresse said.
“It demonstrates what can be achieved when industry, governments and workers come together to strengthen Australia’s manufacturing sector.”
Rio Tinto said Tomago Aluminium’s $1.1 billion investment will include $100 million for decarbonisation initiatives, while the smelter will continue to provide demand-response services to the NSW electricity system.
The company said the move to 100 per cent renewable electricity from 2033 is expected to reduce Tomago Aluminium’s Scope 1 and 2 operating carbon emissions by 7.1 million tonnes per year.
Rio Tinto also said the agreement would maintain what it described as a critical part of Australia’s domestic manufacturing capability, while supporting aluminium supply to its global customers.
Meanwhile, the Australian Conservation Foundation welcomed the renewable energy component of the agreement, with national climate policy adviser Annika Reynolds describing the move as an important step in the transition of energy-intensive industry.
“Renewable energy is now at the heart of Australian industry and economic growth, revitalising the country’s manufacturing base and green metal export potential,” Reynolds said.
The ACF said the agreement demonstrated how aluminium production could move away from reliance on coal-fired electricity through a combination of wind, solar and storage.
The Climate Council also welcomed the announcement. Senior adviser Ben McLeod described the agreement as significant for the development of lower-emissions industrial production.
“Powering our single-largest electricity user with wind, solar and storage is a light bulb moment for clean industry,” McLeod said.
“This deal to lock-in the future of the Tomago Smelter shows what renewable power makes possible: secure jobs, a stronger grid, and less climate pollution.”
The government said the arrangement also includes provisions under which revenue will return to the Commonwealth when aluminium prices are high, potentially providing a financial return on the governments’ contributions.
Tomago Aluminium, established in 1983, can produce up to 590,000 tonnes of aluminium a year, according to Rio Tinto. The company said this represents almost 40 per cent of Australia’s annual aluminium production.
Rio Tinto said the smelter directly employs around 1,000 people and has approximately 200 full-time equivalent contractors, while supporting an estimated 5,000 indirect jobs.
Tomago Aluminium is an independently managed joint venture owned by Rio Tinto, Gove Aluminium Finance and Norsk Hydro.
The agreement follows a separate arrangement announced in March between Rio Tinto and the Commonwealth and Queensland governments to support the long-term future of the Boyne aluminium smelter at Gladstone.
According to Rio Tinto, the Tomago and Boyne agreements give Australia’s two largest aluminium smelters pathways to long-term, cost-competitive and lower-carbon electricity beyond the expiry of their existing power contracts.
