Alcoa deal with AGL secures Portland smelter, jobs

The nine-year extension of AGL’s existing contract secures half the energy needs of the Portland aluminium smelter but Alcoa will still need to source the rest of its supply after 2026.

Alcoa has struck a nine-year deal with AGL Energy for the supply of 50 per cent of the energy needs for its Portland aluminium smelter, safeguarding the future of the facility and more than 700 jobs.

AGL is one of three current energy providers to the Portland site, with that deal expiring in 2026. The near-200 year old energy company on Friday announced its new deal to supply 300 megawatts of power supply from July 1, 2026.

This volume represents approximately 50 per cent of the energy required to meet the facility’s nameplate capacity of 358,000 tonnes of aluminium per year. The smelter is currently producing about 75 per cent of that volume, Alcoa said.

Alcoa Australia president Matt Reed said the agreement was good news for the smelter’s workforce of more than 760 employees and contractors.

“This agreement … provides a strong platform for the long-term future of the smelter, which is central to the social and economic fabric of the region,” Mr Reed said.

The Portland smelter produces around 20 per cent of nation’s aluminium, and the ongoing future of the facility will be welcomed by the federal Labor government and its Victorian counterparts.

Prime Minister Anthony Albanese has made boosting manufacturing a key part of its legislative agenda, while the plant is a significant contributor to the Victorian economy, with more than $68m in direct salaries, wages and benefits, and $179m in local supply contracts paid in 2022.

Alcoa still needs to source the remainder of its energy needs from 2026.

Mr Reed said Alcoa was pursuing an array of options, but it was hoping to secure offtake agreements from renewable energy generators as it moves to meet its ambition to achieve net zero carbon emissions by 2050.

Alcoa has plenty of time to strike further deals before its existing supply arrangement with AGL, Origin Energy and Alinta expires in 2026.

The Portland smelter has been a key focus for Alinta, with it pushing ahead with plans to develop a 1000 megawatt wind farm called Spinifex, located 10km off the coast of Portland in southwest Victoria.

But the energy giant – Australia’s fourth largest electricity retailer and owned by Hong Kong’s Chow Tai Fook – has been forced back to the drawing board on the project after Energy Minister Chris Bowen unexpectedly removed the region it was looking to develop in from a proposed zone allowed to host the zero-emission energy source.

Alinta now has to choose whether to push its project further off the coast, which would require it to adopt expensive and nascent floating wind turbines, or abandon the project which it has spent months working on and even begun pitching an equity stake sale to investors in.

Shelving an offshore wind project would be a blow to Australia’s ambitions to move heavy users off fossil fuels.

Alcoa’s Portland makes up 10 per cent of Victoria’s energy use each year.

It also provides a critical role in keeping Australia’s power grid stable and its owners said offshore wind farms could help meet a need for the aluminium industry to cut emissions.