Taxpayers will only pay to support Bell Bay Aluminium when aluminium prices fall, under a $200 million deal capped at $50 million a year.
Energy Minister Nick Duigan said on Thursday no support would be paid when aluminium prices were high, with payments rising on a sliding scale as the London Metal Exchange price fell.
The federal and state governments will split the cost 50-50 over five years.
Prime Minister Anthony Albanese said that “At the moment the price is very good, very high. So, we expect that the exposure is very small in the early years,”
The smelter employs 550 workers and supports about 1,000 indirect jobs across northern Tasmania.
Federal Industry Minister Tim Ayres said the money would be paid to Rio Tinto to “fill that gap” between Hydro Tasmania’s electricity price and what the company needed.
Duigan said the power deal between Hydro and Rio Tinto was struck on commercial terms “at arm’s length from government”. The price has not been disclosed.
Duigan had previously put the gap between what Rio Tinto needed and Hydro’s commercial offer at around $60 million a year.
Albanese said the deal was concluded only a couple of days ago, following talks on Monday afternoon.
Labor MP Janie Finlay questioned where the evidence was for the $60 million figure and said Hydro had always had the ability to offer Rio Tinto a competitive deal.
“This should have happened a long time ago,” she said.
Finlay said the existing contract already included a profit-sharing element, with the new package “almost a reverse” of that arrangement.
The deal starts on January 1, 2027 and runs to the end of 2031. Duigan said there would be a three-year review period to “look at what the future of this smelter looks like going forward”.
The five-year term falls short of the 10-year deal initially sought.
Duigan said “a few things have moved in the last few weeks” in a “live negotiation”.
Premier Jeremy Rockliff said the state’s share was a small price for $5 billion of economic activity over five years.
“If someone came to me and said can we invest $0 to $100 million over the next five years to secure a $5 billion economic value… I’d say you beauty,” he said.
Rockliff said Rio Tinto would also put about $1 billion into TasPorts, TasNetworks, Hydro and payroll tax.
Asked why the multinational miner should receive taxpayer support, Ayres said the government was “unapologetically” backing local manufacturing.
He pointed to similar interventions to secure smelters at Tomago in New South Wales and in central Queensland.
Duigan said it became clear earlier this year that Bell Bay would not be supported through the federal $2 billion Green Aluminium Production Credit scheme.
Rio Tinto Bell Bay General Manager Richard Curtis said the agreement gave the 71-year-old smelter a pathway to the end of 2031.
