By Melanie Burton and Sonali Paul
SYDNEY/MELBOURNE, Jan 9 (Reuters) - The Australian government has offered "substantial" financial support to help repair Alcoa (NYSE:AA) Corp's aluminium smelter in Victoria that was crippled last month by a state-wide blackout, government ministers said on Monday.
The outage, which caused molten aluminium to solidify, disrupted some production at the 300,000-tonnes-per-year Portland smelter and raised questions about the facility's long-term future. ongoing negotiations between Australia's government, energy provider AGL Energy AGL.AX , and Alcoa AA.N suggest the smelter may eventually resume full production.
"The state's substantial support is aimed at keeping the smelter open and sustainable into the future," state minister Philip Dalidakis in a statement.
The government had offered "significant, immediate financial support" as well as the potential for further assistance through Australia's Clean Energy Finance Corporation, a government-owned bank that invests in renewables, to provide longer-term energy security, said a spokesman for federal minister Greg Hunt.
Both ministers declined to comment on the scale of financial support because negotiations were confidential, but Australia's Fairfax Media reported that Alcoa received an offer of A$240 million ($175.63 million), comprised of $200 million in state funds over four years and a $40 million interest-free loan from Canberra.
A spokesman for Alcoa also declined to comment on the negotiations, saying only that the plant continued to operate at a reduced capacity.
To seal the deal, pressure is now on AGL Energy to agree to provide cheaper power to the plant as a result of the government's financial support.
A spokeswoman for the energy firm said discussions with Alcoa were ongoing.
James Purcell, the member of the state parliament for Western Victoria, said an announcement could be made on Friday if a power supply deal can be reached.
"Everyone is working to ensure that the smelter remains open," Dan Tehan, federal member of parliament for the district which includes Portland, told Reuters.
Tehan said federal assistance to Alcoa was justifiable in the wake of the power outage that damaged the smelter.
"In my view, such an event warrants the government looking at ways it can assist the smelter to get back on its feet and continue operations," he said.
"It is critically important to the local economy that we get the smelter back up and running at full production." ($1 = 1.3665 Australian dollars)