Australia's federal and New South Wales state governments have announced a $2.5 billion deal to secure the future of the Tomago aluminium smelter, located north-west of Newcastle in the Hunter Valley region of New South Wales. Mining giant Rio Tinto, the smelter's majority owner, had warned in December that it was considering closing the facility at the end of its current electricity supply contract in 2028. Prime Minister Anthony Albanese and NSW Premier Chris Minns visited the site on Thursday to announce the agreement, which will provide a 10-year below-market power supply guarantee funded equally by the federal and state governments, at roughly $250 million per year from 2028.

The centrepiece of the arrangement is an innovative financing structure involving Snowy Hydro, a government-owned energy utility, which will act as a specialist investment vehicle to supply renewable electricity to Tomago at commercially viable rates. By de-risking investment in new renewable projects — some already approved but not yet funded — the government hopes to underpin nearly 3,000 megawatts of new wind, solar, and battery storage capacity across New South Wales. Rio Tinto and its co-owners have committed to investing $1.1 billion in the smelter over the next 12 years, including $100 million specifically for decarbonisation. The deal targets 100% renewable energy supply for the facility by 2033, which would cut its annual greenhouse gas emissions by 7.1 million tonnes — equivalent to about 1.5% of Australia's total yearly climate pollution.

The urgency of the deal reflects aluminium smelting's exceptional dependence on electricity, which accounts for around 40% of Tomago's operating costs. As Australia's single largest electricity consumer — drawing more than 10% of NSW's total power generation — the smelter has for decades relied on cheap long-term supply contracts, most recently with coal-focused energy company AGL. That contract expires in December 2028, and with both coal and renewable electricity prices uncertain, Rio Tinto said it could not guarantee the plant's viability without government support. The smelter directly employs around 1,000 workers and is said to support approximately 5,000 more indirectly, making its potential closure a serious concern for the Hunter region's economy. Tomago produces up to 590,000 tonnes of aluminium per year, used in packaging, construction, solar panels, and wind turbines.

The announcement is part of a broader pattern of industrial support packages from the Albanese government, which has also committed $2 billion for Rio Tinto's Boyne smelter in Queensland and $2.4 billion for the Whyalla steelworks in South Australia. Opposition leader Angus Taylor said he did not oppose the deal, but called its $2.5 billion price tag a sign of failure in Labor's energy policy. Analysts, however, note that recent power price increases have been driven largely by global fossil fuel markets — including disruptions linked to Russia's invasion of Ukraine — rather than by Australia's net zero emissions targets. Independent MP Nicolette Boele argued that Australia was