Federal and NSW governments to inject $2.5bn into Rio Tinto’s Tomago smelter
The deal, split evenly between Canberra and Sydney, includes capital improvements and new power purchase agreements with Snowy Hydro to ensure long-term operational stability.
Prime Minister Anthony Albanese and New South Wales Premier Chris Minns are set to announce a joint federal-state bailout of up to $2.5 billion to secure the future of Rio Tinto’s Tomago aluminium smelter. The funding, split 50-50 between the two levels of government, is designed to keep the facility operational beyond the expiry of its current electricity supply contract, which ends amid rising energy costs that have threatened the site’s immediate viability.
The agreement, valued at $2.5 billion over 10 years, includes approximately $1 billion in capital improvements expected to be funded by the site’s owners, Rio Tinto. The deal is linked to power purchase agreements with the government-owned utility Snowy Hydro, which is expected to create about 2.5GW of new energy supply. This infrastructure investment aims to stabilise power costs for the smelter, which accounts for more than 10% of energy use in New South Wales.
Tomago, located north-west of Newcastle, employs approximately 1,000 workers and produces up to 590,000 tonnes of aluminium annually. The metal is used in a wide range of products, including consumer and industrial packaging, construction materials, and components for solar panels and wind turbines. Resources Minister Tim Ayres is expected to join the announcement, having been involved in the negotiations regarding the site's future.
The bailout follows a warning from Rio Tinto in December that it may cease operations at Tomago if a sustainable energy solution is not found. The company had previously announced in 2021 that the site would transition to 100% renewable energy by the end of the decade. Prime Minister Albanese has previously emphasised the strategic importance of domestic aluminium production, noting the significant knock-on effects for other industries if Australia ceases to produce the metal.
The announcement comes as the federal government has offered similar support to other processors, including $600 million for Glencore’s copper smelter in Mt Isa and $240 million for smelters in Hobart and Port Pirie. However, the approach has drawn criticism. Nationals leader Matt Canavan warned against providing "government blank cheques" and called for the scrapping of net zero by 2050 policies, although he stressed he did not want Hunter region workers to lose their jobs.
