MELBOURNE (Reuters) – U.S. aluminium giant Alcoa Corp snared government aid and a power deal to keep its Australian smelter open for another five years, saving more than 500 jobs as the country battles to recover from the pandemic slump.
The Portland aluminium smelter’s future had been in doubt after Alcoa flagged in October 2019 it was looking to improve, sell or shut 1.5 million tonnes of smelter capacity in a bid to cut costs and carbon emissions.
Alcoa said on Friday it had reached new, five-year electricity supply agreements with AGL Energy, Origin Energy and Alinta Energy for the smelter, which is the biggest single power user in the state of Victoria.
It also lined up about A$160 million ($124 million) in aid from the Australian and Victorian state governments.
“The government’s support for Portland recognises its important position, not just as a large employer and key manufacturer, but also for its vital role in keeping the lights on in Victoria,” Prime Minister Scott Morrison said.
Alcoa President Roy Harvey said the power agreements would “help to improve the smelter’s competitiveness” of the plant, which has been running at around 85% of its 358,000 tonnes a year capacity. Financial terms of the deals were not disclosed.
Australia’s rapidly evolving power grid, increasingly reliant on wind and solar power, has made the plant vulnerable to outages over the past several years as it consumes about 10% of Victoria state’s electricity. The worst instance was in December 2016, when the plant lost two-thirds of its capacity.
The plant has since become crucial to balancing electricity supply and demand, being paid by the market operator to lower its power use at peak demand times, typically during heat waves or when there are sudden generator outages.
The federal government’s aid will ensure the smelter earns at least A$76.8 million ($59 million) through June 2025 in grid security payments. Alcoa said Victoria has agreed in principle to match the federal support.
The smelter is co-owned by Alcoa, Australia’s Alumina Ltd, CITIC Resources and an arm of Japan’s Marubeni Corp.
