Hunter iF recommends strategic financial solutions to secure Tomago’s future
Hunter iF and its members today issued a strong recommendation to the Federal Department of Industry, Science and Resources and NSW Premier’s Department, urging them to proactively utilise strategic financial mechanisms to establish a commercially viable pathway for the Tomago Aluminium Smelter. This critical engagement is needed before the employee consultation period concludes on November 21st.
The viability challenge facing Tomago, which supports over 3,000 regional jobs and a vital $6 billion sovereign industry, to provide essential manufacturing capability, highlights a critical intersection between energy transition timing and industrial competitiveness.
A Path Forward: Strategic Financial Mechanisms
Hunter iF encourages government consideration of a creative, public-private partnership approach, such as the Special Finance Vehicle (SFV) model championed by innovation and industrial policy expert, Professor Roy Green and Founding CEO of the Clean Energy & Finance Corporation (CEFC) and Climate Finance Leader, Oliver Yates. This mechanism is designed to address energy price volatility, which currently accounts for over 40% of Tomago’s operating costs.
Professor Roy Green states: “The fundamental challenge for Tomago Aluminium is its power price, which is around 40 per cent of its cost. The advantage of the Special Finance Vehicle (SFV) is that it uses government-backed finance to significantly lower the cost of capital for new renewable energy projects, thereby allowing us to guarantee Tomago a stable, long-term power price. This is not a temporary subsidy; it is a smart, structural investment to drive industrial decarbonisation and economic resilience. Furthermore, this is not a new idea. It’s a proven financial structure, effectively used by Neville Wran in the 1980s to secure coal-fired power for industry, and it can be applied just as effectively today for the new era of clean energy transition.”
“The situation at Tomago is one that extends well beyond the Hunter region; it reflects the national challenge of ensuring our heavy industry remains competitive during the energy transition. With the imminent closure of another major employer at BHP's Mount Arthur in 2030, it is critical that we come together to ensure Tomago Aluminium continues to play an important role in the national economy" said Hunter iF Chair, Alex Brennan. "The SFV model is a proven strategic tool to de-risk and accelerate the deployment of large-scale renewable energy infrastructure, directly linking Tomago's need for a stable, long-term power supply through a Power Purchase Agreement (PPA).”
Leveraging Proven Models for Success
Implementing such a solution would draw upon successful precedents, both local and international:
Local Example (PPA): The Hunter Joint Organisation (JO) has successfully coordinated a collective PPA for numerous regional councils, demonstrating how grouping demand can lock in competitive rates and provide budget certainty—the precise function Tomago requires at scale.
National Funding Potential (SFV): The National Reconstruction Fund (NRF) and the Clean Energy Finance Corporation (CEFC) are ideally positioned to act as cornerstone investors in the SFV, aligning their mandates to support strategic manufacturing and the clean energy transition.
European Example (SFV): The German-Australian H2Global Initiative offers a compelling international model where a government-backed SFV uses competitive off-take agreements to bridge market risk, effectively ensuring commercial certainty for both clean energy producers and industrial consumers.
An Opportunity for Collaborative Leadership
The urgency presented by the November 21st consultation deadline underscores the need for swift, coordinated action. Tomago is not only a major employer but also functions as a vital synchronous condenser for grid stability in NSW. A successful resolution would:
Preserve over 3,000 jobs and highly specialised skills in the Hunter.
Enhance grid security through the smelter’s unique operational role.
Provide a model for decarbonising other energy-intensive national assets.
We urge the Federal and State Governments to consider innovative financial structures like the SFV/PPA model as central to securing a commercially sustainable future for Tomago Aluminium, the Hunter and Australia.
