A $200 million deal to secure the future of Alcoa's Portland smelter could be signed within a week after a marathon 12-hour meeting led to an agreement in principle between the parties involved.
The future of the aluminium smelter, in Victoria's west, has been uncertain following the end of a generous power subsidy contract with the Victorian government and stalled negotiations with power supplier AGL.
Last week Victorian Premier Daniel Andrews, who is on holidays, was forced to intervene so that negotiations could resume.
On Sunday the parties met for 12 hours and struck what sources said was an "in principle agreement" on the price and terms of the electricity supply to the troubled plant.
The federal and Victorian governments in a joint statement said "significant progress has been made over the weekend, with great demonstrations of good faith from all parties working to find a solution for the future of the Portland smelter".
"All parties are committed to working towards finalising a positive outcome in the very near future," the statement said.
Alcoa and AGL refused to comment.
It is understood the Victorian government will provide $200 million over four years to Alcoa and the federal government will provide a $40 million interest-free loan to help the company resume full production.
The Victorian government was unable to extend the power subsidy that expired in November leaving Alcoa – Victoria's largest energy user – to negotiate a commercial power supply deal with AGL Energy.
Negotiations were under way as French energy giant Engie announced in November it would close the Hazelwood power station, resulting in a drop of energy supply in the state and price surges of 13 per cent likely this year.
The Portland smelter employs 540 people directly and about 2000 indirectly. A blackout in December led to the forced closure of one of the potlines and workers were forced to take unscheduled leave over the Christmas period.
Production at the plant is estimated at about 30 per cent and a decision has to be made whether or not the company will restore all of its facilities or close altogether.
Federal Industry Minister Greg Hunt and Victorian Industry Minister Wade Noonan recently met with Alcoa global boss Roy Harvey in New York to convince him to keep the plant open.
Alcoa's Point Henry Smelter closed in 2014 as its own, subsidised, power contract came to an end.
Australian Workers' Union national secretary Daniel Walton said it was now 47 days since the catastrophic outage, and the smelter "desperately needs certainty on power supply if we want to get things back online and save the local economy".
"AGL carries a very serious weight of responsibility here," Mr Walton said.
"Building the smelter in Portland gave AGL the security to establish its network across the region. Now the smelter, in its hour of need, requires AGL to come to the party. We are very hopeful AGL understands what is at stake."
