News: AGL UPDATE 1-AGL, Alcoa reach supply deal as part of smelter rescue package

(Adds contract details, smelter background)

SYDNEY, Jan 20 (Reuters) - An Australian smelter owned by Alcoa Corp will restart lost production after a major blackout with electricity supplied by AGL Energy Ltd (AGL) under a government-sponsored rescue package announced on Friday.

The Portland aluminum smelter in Victoria state has been running at only a third of its 300,000-tonnes-per-year capacity since a statewide blackout in December.

Alcoa said it will immediately begin work to restart production of the lost capacity, a process that would take around six months.

The four-year AGL supply agreement, which will begin in August 2017 when the smelter's existing contract ends, is for 510 megawatts, or around 10 percent of Victoria's total electricity load.

AGL's diverse portfolio of energy generation means the contract will be supplied by a mix of both thermal and renewable generation, the company said.

Alcoa's Portland smelter was crippled in December 2016 after a state-wide blackout caused molten aluminium to solidify.

A recent rise in electricity prices had added to pressure on the smelter, which has also been battling a years-long glut in the global aluminium market.