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Alcoa's Portland smelter gets lifeline from Victorian government Alcoa's Portland smelter rescued by federal and state government bailout
(35 minutes later)
Victoria’s struggling Alcoa aluminium smelter will stay open with a “significant” contribution from the state government. The federal and Victorian governments have announced a rescue package for the Alcoa aluminium smelter in Portland, including $30m in federal funds in return for a guarantee it will stay open until at least 2021.
On Friday, the premier, Daniel Andrews, announced a four-year deal to keep the smelter open because of the vital role it played in the state’s economy. Malcolm Turnbull announced the package with premier Daniel Andrews in Portland, Victoria on Friday. It comes as Alcoa finalised a new four-year power supply agreement with AGL Energy.
The energy provider AGL has also announced a new four-year agreement to supply electricity to Alcoa, which was to be affected by the closure of the Hazelwood coal-fired power plant. The smelter and the future of its 650 workers was at risk after a major power outage in December knocked out more than half of its production capacity.
“We promised Portland workers we would leave no stone unturned in our efforts to keep the smelter open – and we have delivered certainty to thousands of local workers and their families,” Andrews said in a statement. The Victorian government estimates the smelter creates more than 1,600 supply chain and indirect jobs and contributes $120m to the local area. Alcoa is the region’s largest employer and biggest taxpayer.
The Victorian treasurer, Tim Pallas, told ABC 774 the state government’s contribution was worth about $50m a year. Under the agreement with the federal government, Alcoa will receive $30m for capital improvements and repairs to help it return to producing 300,000t of aluminium a year, its output before the outage. It must maintain output of at least 90% of this level.
A power cut on 1 December damaged equipment and left Alcoa operating at just 30% capacity, putting the smelter at further risk of closure. If the smelter closes or reduces output before July 2019 it will have to repay the full $30m plus interest. If it remains open beyond July 2021 it keeps the money, with several graduated payment points if it closes between those dates.
The deal comes after months of negotiations, including trips by state and federal ministers to Alcoa’s New York headquarters to plead for the smelter to stay open. Turnbull said the government was standing up for Australian manufacturing and export jobs.
Andrews said Alcoa had 650 direct employees and contractors, injected more than $120m a year into the Portland region and created about $386m of broader economic benefit. “We were determined to make sure that we provided the support that secured your jobs, your future, Portland’s future,” he said addressing workers at the smelter.
The federal government will also make a contribution to Alcoa to keep the smelter open. Asked whether it signalled a change in stance on industry policy, Turnbull said Alcoa was a “very particular case” because it was a viable business that had been struck by an unlikely “catastrophe” when transmission lines to the plant broke down.
The Alcoa chief executive, Roy Harvey, thanked the state and federal governments for their “unwavering support”. In a statement Andrews and Victorian industry minister, Wade Noonan, said the state would “make a significant contribution over four years to sustain the smelter”.
“Today’s government and energy agreements will help make the Portland smelter more resilient against market volatility, maintain hundreds of jobs and provide a bridge to a potential long-term energy solution,” he said in a statement. A spokesman for Noonan refused to disclose the amount of assistance being provided and at the press conference Andrews also refused to say, although it is reportedly more than $200m.
Alcoa will immediately begin work to restart smelting capacity that was lost because of the power fault, and the process is expected to take about six months. “There is a cost, of course. But it’s more of an investment and it represents value ... for the Victorian taxpayer,” Andrews said, citing the fact the aluminium sector contributed $1bn to Victoria a year.
Before the electrical fault, the smelter had been operating at nearly 85% of its capacity of 385,000 metric tonnes a year. “We promised Portland workers we would leave no stone unturned in our efforts to keep the smelter open – and we have delivered certainty to thousands of local workers and their families,” he said.
At the press conference Turnbull credited the Australian Workers Union and its state secretary Ben Davis for support of the workers and the agreement.
“This is a great case of governments working together. As Ben Davis said – you never know, it might catch on! Let’s hope so!”