Alcoa power deal abandoned

A CONTENTIOUS state subsidy arrangement with aluminium manufacturer Alcoa would have been redirected by Spring Street to help finance an overhaul of Hazelwood power station, a former minister has revealed.

Former industry minister Theo Theophanous has claimed a three-party deal between the Brumby government, Alcoa and Hazelwood’s owner International Power would have been more financially expedient and provided greater investment in renewable energy.

However, the talks between the three parties fell through some time in 2007 due to political sensitivities.

Mr Theophanous revealed in The Age yesterday that the Brumby government almost clinched a three-party deal with the power provider and Alcoa, which would have resulted in the state’s annual commitment to subsidise power at the smelter until 2016 being paid as a lump sum.

In exchange, Alcoa would help pay to refurbish the ageing Hazelwood plant located in the Latrobe Valley.

“As part of the deal, Hazelwood was to refurbish or rebuild up to six of its eight units to include state-of-the-art super-critical burners and coal-drying technology,” Mr Theophanous wrote.

“This could potentially cut carbon emissions from 1.6 tonnes a megawatt hour to 900 kilograms.”

Mr Theophanous claimed Alcoa would have either increased its workforce or production from its Portland and Point Henry smelters as a result of the deal.

A long-running arrangement by the state government to subsidise power supplied to Alcoa was brokered by former premier John Cain in the mid 1980s.

The deal was due to expire in 2016. However, the Brumby government secured a new deal in March 2010 to redirect Alcoa’s power supply from Hazelwood to Loy Yang power station.

Regional Cities Minister Denis Napthine said the original deal outline by Mr Theophanous would have provided a “triple-win situation” for Victorian taxpayers, electricity providers and environmental interests.

He said the decision by former premiers Steve Bracks and John Brumby to call off the deal was a move to appease the Australian Greens.

“It was an extraordinarily frank article from Mr Theophanous which has highlighted that the Bracks/Brumby government sold out the interests of Victorian taxpayers,” Dr Napthine said.

“This could have been a win-win-win situation for Victorian taxpayers, for workers at Portland Aluminium and for green energy.

“It sounds like there was a very positive prospect on the table which would have been a great outcome for Victoria.

"This deal was called off because political interests and a motivation by Labor to appease the Greens.”