The Commonwealth and New South Wales governments will put $2.5 billion into the Tomago aluminium smelter near Newcastle, under an agreement announced on Thursday that keeps Australia's single largest electricity user running past the expiry of its power contract at the end of 2028.

Tomago is a joint venture. Rio Tinto holds 51.55 per cent, Gove Aluminium Finance holds 36.05 per cent and Norsk Hydro holds 12.4 per cent. The plant sits about 13 kilometres west of Newcastle and produces up to 590,000 tonnes of aluminium a year, close to 40 per cent of Australian capacity. It employs about 1,000 people directly.

The NSW share is capped at $1.225 billion, paid across ten years from 2029. The Commonwealth covers the balance. Neither government published a year by year federal figure on Thursday.

Against that, Tomago has committed to spend at least $1.1 billion on the plant itself. Of that, $100 million goes to emissions reduction and to a demand response program that lets the smelter cut its draw when the grid is tight. The two governments say the arrangement will bring on close to three gigawatts of new renewable generation and firming capacity.

Electricity is the reason the deal exists. Power is close to half of Tomago's operating cost, the existing supply contract runs out on 31 December 2028, and the smelter takes more than 10 per cent of everything the NSW grid produces. Under the new arrangement Tomago moves to a ten year power purchase agreement running through to 2038, supplied entirely by renewable generation from 2033.

Public money does not come back on a fixed schedule. The agreement has a revenue sharing clause that returns money to the two governments when aluminium prices are high. Neither government released the price at which that clause starts to operate, or the total the taxpayer could expect to recover.

Rio Tinto reported its 2026 half year results in late July. Underlying earnings rose 43 per cent to US$6.9 billion and underlying EBITDA rose 28 per cent to US$14.8 billion. The aluminium and lithium division lifted EBITDA 38 per cent to US$3.3 billion, about a fifth of the group total, on the back of higher metal prices.

Prime Minister Anthony Albanese framed the announcement as a promise kept. "In December last year I stood in the rain at Tomago and told the workers 'we have your back'," he said. "Today, alongside the NSW Government, we deliver on that promise." He called the site "a critical asset for the country and our manufacturing future".

NSW Premier Chris Minns said the agreement "secures more than 1,000 jobs at Tomago and thousands more that rely on the smelter, and gives the region certainty about its future".

Climate Change and Energy Minister Chris Bowen put the commercial position plainly. "Tomago Aluminium has made it clear: to remain competitive and secure its future the smelter needs a reliable and affordable supply of renewable energy, with ageing coal-fired power options being prohibitively expensive," he said.

Hunter Jobs Alliance coordinator Justin Page, whose organisation represents workers and community groups across the region, went to the question the numbers raise. "Public money should never be a blank cheque to a multinational company," he said. "But this isn't a blank cheque. The return on this investment is significant, 6,000 Hunter jobs, at least $1.1 billion of investment back into Tomago, nearly three gigawatts of new renewable generation and firming, and revenue returning to taxpayers when aluminium prices are high."

The first NSW payment is still three years away and the federal profile has not been published. The tests before then are whether the three gigawatts of new generation gets built, and whether the revenue sharing clause pays anything back at the aluminium price that actually prevails in 2029.