The federal government is considering entering into a power-purchase agreement with Snowy Hydro to ensure that Tomago Aluminium can obtain a financially sustainable supply of electricity.

The smelter's current coal-fired power contract with AGL expires at the end of 2028.

Based on market proposals received to date, the cost of both coal-fired and renewable energy options from January 2029 would increase significantly, fundamentally changing operating economics and leaving the smelter unviable.

Tomago's major shareholder Rio Tinto said last month that it had reached a point where it must contemplate ceasing operations at the end of its current electricity supply contract.

While a final decision has not been made about the smelter's future, it has commenced consultations with its workfo

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