Key facts
- Australia's federal and NSW governments committed A$2.5bn ($1.76bn) to Rio Tinto's Tomago aluminium smelter.
- The smelter will operate until 2038 and transition to 100% renewable energy by 2033.
- The deal supports 3GW of new renewable generation and firming capacity.
- Rio Tinto will invest A$1.1bn in the facility, including A$100mn for decarbonisation.
- The agreement secures Australia's largest power user's operations and sovereign manufacturing capability.
Australia's federal and New South Wales state governments have committed A$2.5 billion ($1.76 billion) to secure the future of Rio Tinto's Tomago aluminium smelter, Australia's largest power user, until 2038. The deal includes a new 10-year power purchase agreement (PPA) set to commence in 2029, transitioning the smelter to 100% renewable energy by 2033. This financial package will support the development of 3 gigawatts of new renewable generation and firming capacity.
Rio Tinto will invest at least A$1.1 billion in the facility as part of the agreement, with A$100 million allocated for further decarbonisation efforts. The company had previously warned that the smelter, built last century to leverage cheap coal-fired power, could face closure if commercially viable energy solutions beyond its current contract, which expires at the end of 2028, were not secured.
Rio Tinto holds a 51.55% stake in the Tomago joint venture, with Gove Aluminium Finance owning 36.05% and Norsk Hydro holding 12.4%. This latest government support follows similar multi-billion dollar pledges to other Australian smelters, including Rio Tinto's Boyne smelter, Glencore's Mt Isa copper smelter, and Nyrstar's two smelters, as well as the Whyalla steelworks.
The government anticipates potential financial returns from taxpayers if aluminium prices rise, though prices could be impacted by factors such as the resolution of Middle East conflicts or increased production from Indonesia. Aluminium prices were trading at $3,307.250/t on August 12.