Rio Tinto ecstatic as Tomago smelter gets its power secured through 2038

Image obtained via official press release

The wait is over. A day after reports that Australia’s largest aluminium smelter was on the verge of receiving a government-backed AUD 2.5 billion lifeline, the deal has now been formally announced.

Tomago Aluminium has reached an agreement with the Australian Government and the New South Wales Government that secures a long-term power supply for the smelter through 2038, removing the immediate threat posed by the expiry of its existing electricity contract in December 2028.

The agreement also puts Tomago on a defined path towards 100 per cent renewable electricity from 2033, while the smelter itself has committed AUD 1.1 billion of investment through 2038.

Tomago’s power uncertainty finally gets an answer

As reported by AL Circle on August 12, Tomago’s future had been hanging in the balance because its existing electricity supply agreement with AGL expires on December 31, 2028. With electricity costs critical to the economics of aluminium smelting, securing competitively priced power was essential to keeping the Hunter Valley facility operating.

The new arrangement provides the answer: Tomago Aluminium will enter into a 10-year power purchase agreement (PPA) covering electricity supply through to 2038. The PPA will commence after the current contract expires.

The Australian Government has committed AUD 2.5 billion to support the long-term viability of the smelter, with the funding package supporting new electricity generation capacity. Reuters reported that the package will help enable 3 GW of new generation capacity and support the transition to renewable electricity.

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100 per cent renewable power from 2033

The biggest change is not simply that Tomago will have electricity beyond 2028. It is where that electricity will come from.

Under the new PPA, Tomago’s electricity supply will be sourced from 100 per cent renewable sources from 2033. Rio Tinto estimates that this will reduce the smelter’s Scope 1 and Scope 2 operating carbon emissions by 7.1 million tonnes per year.

The renewable transition gives Tomago a longer-term pathway to producing aluminium with a lower emissions footprint while retaining its position as a major domestic primary aluminium producer.

Tomago to invest AUD 1.1 billion

Tomago Aluminium will invest AUD 1.1 billion in real terms between now and 2038, including A$100 million for decarbonisation initiatives. The smelter will also continue providing large-scale demand-response services to the NSW electricity system, helping reduce electricity consumption during periods of system stress.

That is significant because Tomago is not a marginal industrial facility. Founded in 1983, the smelter can produce up to 590,000 tonnes of aluminium annually, equivalent to almost 40 per cent of Australia's annual aluminium production.

It directly employs around 1,000 people, alongside approximately 200 full-time-equivalent contractors, and supports an estimated 5,000 indirect jobs.

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From potential closure risk to long-term security

The new agreement gives Tomago, its workforce, customers and the Hunter region long-term certainty while preserving a significant part of Australia's domestic aluminium-making capacity. Rio Tinto, which owns 51.55 per cent of Tomago Aluminium, welcomed the agreement as a means of strengthening Australian manufacturing and maintaining sovereign manufacturing capability.

Jérôme Pécresse, Chief Executive of Rio Tinto Aluminium & Lithium, said the agreement “secures Tomago Aluminium's long-term future” while supporting Australian manufacturing, skilled jobs and the Hunter community.

The agreement also follows the March 2026 arrangement between Rio Tinto and the Australian and Queensland governments to secure the long-term future of the Boyne aluminium smelter in Gladstone. Rio Tinto now says Australia's two largest aluminium smelters have a pathway to long-term, cost-competitive and lower-carbon power beyond their existing electricity contracts.

What changes for Australia’s aluminium industry?

The Tomago agreement goes beyond keeping one smelter open. It demonstrates how Australia is attempting to balance three competing priorities: maintaining domestic aluminium production, securing affordable electricity and decarbonising energy-intensive industry.

For Tomago, the immediate risk was the 2028 power cliff. The new PPA pushes that uncertainty out to 2038. For Australia, the bigger test will now be whether the combination of government-backed power support, new renewable generation and private investment can keep energy-intensive manufacturing internationally competitive over the long term.

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