The assembly government money will be for training Corus workers
Steelmaker Corus is being given £1.1m Welsh Assembly Government funds from a scheme designed to avoid redundancies.
First Minister Rhodri Morgan said the firm had been treated in a "flexible" way because of its "unusual situation" and importance to the Welsh economy.
The assistance is the single biggest payout yet from the ProAct fund, although Corus said it was not planning to make any further redundancies.
It will be used to train workers in Port Talbot and Llanwern.
The ProAct scheme is central to ministers' efforts to help companies in Wales cope in the economic downturn.
The funding involves a £2,000 training subsidy and £2,000 wage subsidy per worker.
So far, the scheme has spent £17.3m on helping 129 companies.
The help will be available only to Corus plants in Wales, as the UK government does not have a similar scheme.
Like most other companies operating in the heavy industries sector, Corus has been hit hard by the economic downturn.
However, last month the firm restarted its No 4 furnace in Port Talbot to "take advantage of business opportunities" and said it had not been planning further layoffs.
The assembly government defines ProAct as a scheme which "provides training for employees who are on short time working, and helps businesses to keep skilled staff who may otherwise be made redundant".
Nick Servini, BBC Wales business correspondent
Corus says it hasn't been planning to lay off any more workers.
But it says the ProAct money will help retain jobs in the long term by improving skills.
About £200,000 will go towards wage subsidies but no more because of state subsidy rules for big companies.
The big cutbacks at Corus came earlier in the year when it announced about 1,000 losses in Wales.
The firm has set ambitious cost savings of £250m this year at Port Talbot and Llanwern.
The division which runs the two plants is still losing money. The hope is that it will return to profit by the end of the year.
Ironically, the Welsh steel industry is probably in better shape than at any stage in over a year.
Port Talbot and Llanwern have been picking up export orders thanks to the low value of the pound which makes British exports cheaper.
Mr Morgan was asked by BBC Radio Wales if the funding fitted within the precise wording of the scheme.
He said: "I think we've been quite flexible with Corus because their situation is unusual and I think showing that flexibility to assist a company like Corus, which is so important to the economy, is an indication of not an inflexible bureaucracy but one that is willing to listen to a company putting a special case to them.
"And, undoubtedly, this is in the context of very low demand for steel products at the moment and short time working which might otherwise have led to Corus having to declare people redundant."
Asked if he believed the assistance fitted in with the "spirit" of ProAct, Mr Morgan replied: "Indeed".
Corus, which was taken over by the Indian company Tata in 2007, said the assembly government cash would help it "improve steel employees' working skills".
UK managing director Uday Chaturvedi said: "The impact of the economic downturn has been very severe in our industry. We have been determined to retain valuable skills."
Unions have welcomed the initiative.
Port Talbot multi-unions' spokesman David Ferris said: "Unique to Wales, the ProAct scheme is set to benefit a large number of the workforce - protecting their jobs, and further improving their employability."
Mr Morgan said the scheme was "gaining international recognition".
He said: "This is a positive development for Corus and some of their staff who have faced uncertain futures. Accessing ProAct financial support enables employees to gain additional qualifications."
The restarting of the Port Talbot furnace came after the company had already announced that it was restarting production at the Llanwern strip mill at nearby Newport because of improving business.
One expert said the moves were a sign of growing confidence in manufacturing.
However, neither restarts will reverse any of the job losses at the Llanwern plant announced in January.
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