About 150 Victorian coal workers will be made redundant and their jobs given to retrenched staff from the nearby Hazelwood coal mine, under a deal between the state government and power company AGL.
AGL will take the Hazelwood workers at its Loy Yang A coal mine and power plant, once voluntary redundancies are taken up by its staff.
Victoria will pay up to $20 million to ensure the redundancies go ahead and workers are hired from Hazelwood, which is due to close on March 31.
"This is a fantastic outcome, it is the first of its kind anywhere in our nation," Premier Daniel Andrews said in Morwell on Friday.
The redundancies will be offered over the next year, and the premier expects AGL workers close to retirement will be most likely to take them up.
"It will take some time to create the vacancies but we've come to an agreement to do just that. No one will be forced to leave their current job," Mr Andrews said.
There are plans to expand the scheme to Energy Australia's Yallourn plant, and Engie's Loy Yang B, potentially opening up positions for more workers and contractors.
Mr Andrews said both companies had given in principle support for the move, but details were being worked out.
AGL executive general manager Doug Jackson said the company was proud to support the Morwell community as Hazelwood closed.
"It's an opportunity that recognises the skills and experience of a very experienced workforce," Mr Jackson told reporters.
French energy giant Engie announced in November it would close the Hazelwood coal mine and power station, putting hundreds of people out of work.
The impending closure has helped drive up power prices around the nation, as retailers prepare to lose one of Australia's largest baseload generators from the National Energy Market.
Watch Insight episode on the closing of the power station:
