Energy Minister Chris Bowen hints at taxpayer bailout of aluminium smelter Tomago under certain conditions

Taxpayers could be forced to bail out Australia’s biggest aluminium smelter with Energy Minister Chris Bowen hinting this was possible to ensure its long-term survival.

Tomago Aluminium, majority-owned by mining giant Rio Tinto, on Tuesday announced its future beyond December 2028 was in doubt when its existing electricity supply contract with AGL ran out.

The Newcastle plant is Australia’s biggest aluminium smelter, producing 590,000 tonnes of the metal a year and employing more than 1000 full-time staff and 200 contractors.

Asked if the Federal Government may have to step in to save a 24-hour a day operation that started in 1983, Mr Bowen said this would be “considered carefully by Cabinet”.

“It goes to strategic importance, regional importance and the long-term viability,” he told ABC Radio National on Wednesday.

“Sometimes a facility can be temporarily facing challenges but you can see that in the long term, they get through those challenges, they will be viable.

“Where those strategic interests are served, then we will take the appropriate action.”

The uncertainty surrounding Tomago’s future is shaping up as Newcastle’s biggest potential loss of industrial capacity since the closure of the BHP steelworks in 1999 after 84 years, which saw the NSW and Federal governments fund a Pathways program to retrain workers over 45.

A bailout of Tomago would not be unprecedented with the Federal and South Australian governments in February committing $2.4 billion to prop up the Whyalla Steelworks, Australia’s biggest producer of long steel used for railways, high-rise buildings and wind turbines.

Former Labor industry minister Kim Carr told The Nightly a bailout was more likely.

“Probably. Too big to fail,” he said.

But Emeritus Professor Roy Green, an industry expert at the University of Technology Sydney who advised former prime ministers Kevin Rudd and Julia Gillard on manufacturing, said a taxpayer-funded bailout wasn’t a foregone conclusion if there was a co-investment in green energy.

“Not necessarily is the answer. There are a number of options between bailout at one end and closure at the other,” he told The Nightly.

“No taxpayer money for Rio, just co-investment in clean energy.”

With electricity accounting for 40 per cent of its operating costs, Tomago Aluminium chief executive Jérôme Dozol blamed “significant uncertainty” about electricity bills for threatening its future.

“Unfortunately, all market proposals received so far show future energy prices are not commercially viable, and there is significant uncertainty about when renewable projects will be available at the scale we need,” he said.

Mr Bowen interpreted that to mean the four-decade ago Tomago Aluminium plant’s leadership was endorsing the need for more renewable power under Labor’s plan to cut carbon emissions by 62 to 70 per cent within a decade.

“So, they’re not saying they need less renewables, they’re saying they need more renewables. We agree with that. That doesn’t solve the immediate challenge today and tomorrow and the next month of discussions with Tomago,” he said.

“I’m not here to engage in blame. Tomago does have responsibilities to the communities that has supported it for the last 40 years.

“It’s a very old plant. It is more than 40 years old which in the terms of these things, it’s not cutting edge, international technology but again, I’m not here to start pointing fingers and say they should have done this or should have done that.”

The Australian Workers Union’s assistant national secretary Chris Donovan called on the Federal and NSW governments to subsidise Tomago’s power bills.

“Affordable power is the number one challenge for energy-intensive manufacturing in Australia,” he said.

“For aluminium smelters that need bulk electricity, that means deploying gigawatts of new generation as quickly and as cheaply as possible. Government can use its market power to secure a better electricity price for Tomago and set it up for the future.

“This isn’t about blank cheques to big business. With Rio on board and government’s help, we can secure a new power deal that both saves Tomago and protects the taxpayer.”

Tomago is majority owned by Rio Tinto having a 51.55 per cent stake, while Gove Aluminium Finance holds 36.05 per cent and while Norwegian renewable energy group Norsk Hydro has the remaining 12.4 per cent which it this week marked down to zero value.