Rio Tinto aluminum smelter secures $1.8 billion government bailout

The owners of Australia's largest aluminum smelter, including Rio Tinto Group, have secured a A$2.5 billion ($1.8 billion) government bailout to keep the facility operational amid persistently high energy costs.

Majority shareholder Rio and its partners at the Tomago smelter in New South Wales have obtained financial backing from both federal and state governments, according to reports from the Sydney Morning Herald and the Australian Financial Review. Under the agreement, the venture will invest A$1.1 billion into the smelter. The funding will also enhance the plant's operational flexibility, enabling it to curtail power consumption during periods of peak grid demand.

Rising electricity costs have strained aluminum smelters worldwide, forcing some operators to idle plants or scale back production as competition intensifies from lower-cost, subsidized facilities in China. Rio has previously stated that electricity accounts for more than 40% of Tomago's operating expenses. Prime Minister Anthony Albanese pledged financial support in December, following Rio's warning that surging energy costs could force the smelter to close when its current power supply contract expires later this decade.

Rio holds a slightly majority stake of just over 50% in the Tomago plant, which has been producing aluminum for more than four decades. Gove Aluminium Finance Ltd. and Norsk Hydro ASA are also shareholders in the venture that operates the facility.

As part of the bailout arrangement, the smelter's owners have additionally committed A$100 million toward adopting emissions-reduction processes.