The Victorian government hopes a $266 million support package will prevent the Latrobe Valley region from turning into a ghost town, following the closure of the Hazelwood coal-fired power station.

Premier Daniel Andrews announced the $266 million support package in Morwell on Friday.

It comprises of a $174 million Community Infrastructure and Investment Fund for new local projects which could include road, rail, school and health upgrades and a $50 million economic growth zone.

Mr Andrews announced the package on Friday morning. Photo: AAP

The economic growth zone will cover three local government areas within the Latrobe Valley and includes provisions for stamp duty concessions for companies that want to grow or move into the region.

The funds add to an existing $10 million economic facilitation fund to grow businesses and a $22 million support package for workers and businesses affected by the Hazelwood closure.

Some 750 workers, including contractors, will be directly affected by the closure in an area where eight per cent of the population is already unemployed.

“If we look at unemployment over the long term – there are big challenges in the Latrobe Valley. They need our support and we are doing everything we can to attract business in the area,” Mr Andrews told 3AW radio. 

Victoria’s opposition treasury spokesman Michael O’Brien described the funding as “bastardry disguised as charity”.

“In this year’s budget Daniel Andrews ripped $252 million in new taxes out of the Latrobe Valley but now he wants credit for giving some back,” he said in a statement.

Mr O’Brien said the Labor government had tripled the brown coal royalty in new taxes taking effect on January 1, “ripping an extra $252 million out of our generators”.

The premier was forced to water down claims made by federal Energy Minister Josh Frydenberg that Victoria’s ideological approach to energy production had traded away blue collar jobs in regions to win votes in the city.

“It’s very disappointing that Minister Frydenberg is playing politics with this issue … I’m not interested in playing these games,” Mr Andrews told ABC radio.

The French majority owner of the power station, Engie, on Thursday said it was “no longer economic to operate” Hazelwood, which will close by March 31.

The Hazelwood station is more than 50 years old and provides more than 20 per cent of Victoria’s electricity.

-AAP