Prime Minister Anthony Albanese and NSW Premier Chris Minns will announce a billion-dollar power-purchase agreement on Thursday that will secure Tomago Aluminum's future beyond 2028.
The deal between the plant's owner, Rio Tinto, and the state and federal governments will secure the jobs of 1500 smelter workers and thousands of indirect jobs in the broader Hunter economy.
It is believed the bailout, which could cost taxpayers between $300 million and $470 million a year over the next decade, will be the largest rescue package for an Australian smelter to date.
The federal government has to date contributed to bailouts worth $2 billion for Rio Tinto's Boyne smelter in Queensland, $2.4 billion for the collapsed Whyalla steelworks in South Australia, and $600 million for Glencore's copper smelter and refinery in Mt Isa.
Tomago's current coal-fired power contract with AGL expires at the end of 2028.
Based on market proposals received to date, the cost of both coal-fired and renewable energy options from January 2029 would increase significantly, fundamentally changing operating economics and leaving the smelter unviable.
The package to be announced on Thursday will involve a power-purchase agreement to ensure the smelter can obtain a financially sustainable supply of electricity.
Tense negotiations over the past several months have focused on the breakdown of the state and Commonwealth contributions to the deal.
NSW Treasurer Daniel Mookhey previously argued that, given the federal government collected 81 per cent of the nation's taxes, it was appropriate for it to do the majority of the heavy lifting.
Clean Energy Finance Corporation chief executive Oliver Yates said Australia's aluminium industry was built as a result of a deliberate post-war nation-building policy and cooperation between state and federal governments.
"It is encouraging to see governments taking a similarly active approach to securing this Australians remaining industrial base today," he said.
"OECD data highlights that global competitors have benefited from up to US$70 billion in state support, largely delivered via energy subsidies and concessional finance. If we want to be competitive - we need to recognise and see what China, Québec, and the Middle East are doing to actively back their industrial bases.
"Support for Tomago is a strong integrated solution. Australia retains critical sovereign industrial capacity. If this was lost, we wouldn't be able to get it back. It's strategic to use a national asset like Snowy to support a strategic asset like sovereign aluminium production."
