14/10/2014 - 15:53

State to pay more for coal

14/10/2014 - 15:53

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The state government has agreed to increase the price it pays Premier Coal for its coal supplies, as uncertainty continues over the fate of fellow Collie producer Griffin Coal.

State to pay more for coal
Energy Minister Mike Nahan.

The state government has agreed to increase the price it pays Premier Coal for its coal supplies, as uncertainty continues over the fate of fellow Collie producer Griffin Coal.

Energy Minister Mike Nahan said government utility Synergy would pay more for its coal supplies, but with the terms of the agreement to remain confidential between the parties.

“Electricity prices will not increase as a result of this decision today,” he said.

The minister said any increase in the annual subsidy paid to Synergy would be offset by the benefits of the re-merger of the state’s electricity generation and retail utilities, to form Synergy, and not through an immediate increase in regulated electricity prices. 

Dr Nahan said that while other energy sources were available, including renewables, coal was significantly cheaper than the alternatives.

The new prices follow an agreement struck in 2005, which resulted in Premier becoming the sole coal supplier to the government.

Premier, which has been owned by China-backed Yancoal Australia since 2011, employs about 300 people and produces about 4 million tonnes per year.

Premier said the new agreement included greater contractual rights for Synergy, its major customer.

“The revised coal supply agreement enables Premier to continue to develop its future mine plans and invest in required operational improvements, while providing certainty of supply for Synergy in the long-term,” Yancoal regional general manager (Qld & WA) Paul Stringer said.

Meanwhile, there is growing speculation Indian company Lanco Infratech will sell Griffin Coal, which it bought just three years ago for $760 million.

(By contrast, Yancoal paid $297 million when it bought Premier Coal from Wesfarmers.)

Griffin Coal president Raj Kumar Roy is due to arrive in Perth tomorrow, and will be followed the next day by Lanco Infratech chairman L Madhusudhan Rao.

Mr Rao told India’s Economic Times last week that Griffin was no longer part of his group’s long-term plans.

“Griffin does not fit into my strategic plans today,” Mr Rao said last week.

“We couldn’t sink in dollars that we need to set things right.

“Our approach now is to ensure that we make this asset ready in terms of showing its value so that there is interest from the strategic partners.”

Lanco had been pursuing an ambitious expansion project that involved the export of Collie coal through the port of Bunbury.

However, Lanco itself is burdened with high debts and looking to cut spending.

Griffin currently employs 380 people and produces 3.2mt per year, with its largest customer being the Bluewaters power station.

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