ENERGY company AGL has controversially flagged the potential closure of the Tomago Aluminium smelter in a statement to the stock exchange on its purchase of Macquarie Generation and its Liddell and Bayswater power stations.
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The statement also flags the potential closure of Liddell.
Since announcing an industrial subdivision in its smelter buffer zone, Tomago Aluminium has dismissed any talk of closure despite a sustained downturn in the aluminium industry that claimed the older Kurri Kurri smelter.
The smelter – owned by Rio Tinto, CSR and Hydro – is one of MacGen’s biggest customers, and AGL says it has a contract to supply electricity to the smelter to 2028.
In a statement to the exchange that coincided with its annual results, AGL said it had bought MacGen on the assumption that Tomago Aluminium would close in 2017, meaning the Liddell power station would no longer be needed to produce electricity.
The statement is surprising because it is highly unusual for one large company to talk about the activities of another, especially in circumstances that imply the closure of a major business and the loss of at least 900 jobs.
Comment is being sought from Tomago Aluminium.
AGL’s statements to the stock exchange say that MacGen has three contracts with Tomago supplying about 900 megawatts of electricity.
Bayswater has four generators each capable of producing 500 megawatts but is an older station than the larger Bayswater and has been running at half capacity or less for some time.
AGL said MacGen employees have a four-year guarantee of employment and job conditions, which would take their job security to 2018.
Comment is being sought from the Australian Workers Union, which represents most of the smelter workers and from the Electrical Trades Union, which represents most power station workers.
In an interview with the ABC, AGL chief executive Michael Fraser said the conservative assumption about Tomago was a worst-case scenario, and he hoped the smelter would stay open.
‘‘That’s only an assumption,’’ Mr Fraser said.
‘‘In fact when we look at where they sit in the global aluminium cost stack, we think it’s more likely to stay open than close.
‘‘But to be conservative in how we valued the asset and negotiated the price, we just assumed that it would close.’’
