As part of the funding the company is planning to build a $119 million coal briquette demonstration plant by 2017 with an initial 580,000 tonnes per annum of processing capacity.

However, Shanghai Electric Australia Power & Energy Development director Allan Farrar has told The Age that it could take six months to decide whether local or Chinese markets should be targeted for the upgraded coal.

“It depends on the economics at the end of the day,” he told the newspaper.

“If we have got people wanting the product here, then we won’t have the transport costs.”

With Energy Brix recently mothballing its briquette plant in the region that supplied the Hazelwood and Loy Yang A coal-fired power stations, Farrar reportedly said “very preliminary” discussions had been held with existing power stations.

“The big question with it all is whether the transport costs make it viable,” he reportedly said.

He further said SEP’s coal upgrading process had been tested at a pilot plant in Shanghai since 2011.