A power supply agreement between Australia's last paper mill and Tasmania's state-owned energy retailer has been reached, ending months of stalled negotiations.

Last week, a dispute between the Boyer pulp and paper mill at New Norfolk in southern Tasmania and Aurora Energy boiled over in public over a security deposit to be paid by Boyer to cover its energy costs.

Aurora was seeking a $7 million bank guarantee from Boyer , a figure that owner David Marriner labelled "obscene".

Mr Marriner countered with an offer of $2.5 million, which was knocked back by the energy retailer.

The mill is one of the state's largest users of power and has been in negotiations with Aurora this year about a new electricity supply deal.

The business was sold to Melbourne businessman Mr Marriner earlier th

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