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Portland smelter's future secured after four-year power supply deal struck

Richard Willingham

The mid-term future of Alcoa's Portland aluminium smelter has been secured after a deal was struck with energy provider AGL and funding from state and federal governments.

The four-year power contract for the biggest user of energy in Victoria was signed on Thursday night after months of negotiations. 

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A $30 million Commonwealth grant will see the Portland aluminium smelter stay open for the next four years saving around 2000 Victorian jobs. Courtesy ABC News 24.

The future of the Portland plant, which is the lifeblood of the south-west coast town, had been thrown into jeopardy without a new power deal.

The four-year deal and government investment buys Alcoa time to work out the long-term future of the Portland site.

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The potential for closure was very close, Premier Daniel Andrews told Fairfax Media, with last month's power outage and damage to the smelter's pot lines raised the prospect of a shut down.

The state government has committed around $200 million to Alcoa to ensure the plant remains open for the next four years, although the Premier declined to reveal the figure and details at the press conference in Portland.

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However, treasurer Tim Pallas told 3AW earlier in the morning that the state's contribution is "around the $50 million a year mark, which is about half the pre-existing transmission subsidy arrangements that had been put in place."

It was also critical in brokering a power deal with AGL, with the Premier taking time out from his holidays on several occasions to talk directly with Alcoa's chief executive in New York.

Ministers from Victoria and the federal government also flew to New York for talks.

The Turnbull government has also committed $30 million in relief funding to help the plant recover from December's potentially disastrous power outage.

"The financial support is conditional on operations at the smelter continuing until at least June 30, 2021 and maintaining production to at least 90 per cent of pre-outage levels," Mr Turnbull said in a statement.

Stephen Mikkelsen, AGL's executive general manager for energy markets, said the contract was for a volume of 510MW, which is about 10 per cent of Victoria's total electricity load.

The contract will provide AGL with additional flexibility including rights in relation to the curtailment of the smelter at times of high electricity spot price.

Mr Andrews said his government was committed to a strong industry policy to secure jobs.

Alcoa provides work for 1600 people in the town of 10,000.

"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," Mr Andrews said.

Asked if the cash grant signalled a new federal policy of providing money to embattled business, Mr Turnbull said Portland Aluminium was a "particular case" with the loss of power in December crippling the site.

"This is a viable business. This is a technologically advanced plant, it was hit with a mishap and catastrophe that should have never occurred," Mr Turnbull said.

The Prime Minister said it was essential to provide affordable electricity.

The decision was warmly welcomed in Portland, with praise heaped on the workers and community for coming together in the face of challenging circumstances

Workers at the site had worked closely with management to ensure the plant could continue to operate including wage freezes and taking leave while the plant was inoperable.

We need to harness the spirit of co-operation that allowed us to find a solution in Portland and apply that to planning the future for manufacturing jobs," Australian Workers Union state secretary Ben Davis said.

"It is time to work together to ensure that all Victorians, indeed all Australians can have a future that includes jobs."

Attention now turns to the long term life of the smelter and for Portland to diversify its economy. Mr Turnbull said the plant was one of Alcoa's most technologically advanced in the world and had good prospects.

Industry Minister Wade Noonan said it appeared Alcoa was committed to trying to find a long term solution to the smelter.

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