Point Henry smelter offered a $42 million lifeline by the Gillard government

The Point Henry aluminium smelter has been offered a $42 million lifeline by the Gillard government which, if accepted, would guarantee the future of the Geelong plant for the next two years and save hundreds of manufacturing jobs on the eve of the introduction of the carbon tax.

Under the terms of a three-way deal being negotiated between the plant's majority owner, Alcoa, and the federal and Victorian governments, Point Henry would receive half the bailout money as an immediate capital injection.

The Baillieu government will make assistance available to suppliers and contractors expected to be adversely affected by Alcoa's cost-cutting measures, and is negotiating with the company to reduce its share of the plant's carbon tax liability.

It has not been determined how many of the 600 workers would lose their jobs if the company agrees to the package, but a figure of about 60 has been discussed.

A company source said no decision had been made on the fate of the plant, which has become unprofitable because of the strength of the Australian dollar and the collapse of global aluminium prices.

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News of a sizeable federal assistance package has increased hopes the plant will stay open.

Point Henry process controller Ian Heinrich, who has worked at the plant for 25 years, said it was a relief the government was stepping in to keep the smelter open.

"Even though we've had no announcement, the news we're hearing is pretty good," he said.

Labor MP Richard Marles, whose federal seat of Corio takes in Point Henry, stressed the significance of Point Henry to the Geelong economy.

"We've been working really hard with the company, and while we don't have an agreement, I have a sense of hope for the future of Point Henry," he said.

Tony Abbott called the rescue package a "carbon tax bailout", saying it would be the first of many as the government was forced to intervene to prop up companies hit by the carbon package, which comes into force next week.

Climate Change Minister Greg Combet, who has led the government's negotiations with Alcoa, said the Opposition Leader was trying to deceive the community by blaming the review of Point Henry on the carbon price.

"His deceit, so easily exposed, represents contempt for the workers at Alcoa, who deserve to hear the facts," Mr Combet said.

Alcoa's Australian managing director, Alan Cransberg, has said that while the carbon tax represents a cost to the company, the review of Point Henry, announced in February, was forced by the twin effect of softening metal prices and the rising Australian dollar.

Opposition climate action spokesman Greg Hunt said the size of the bailout package "almost perfectly matches" the cost of the carbon tax to Alcoa over two years.