After years of deliberation, the New South Wales government decided to progress the sale of the coal mining assets owned by Pacific Power subsidiary Powercoal in August last year.
Powercoal operates six underground coal mines in the Newcastle, Central Coast and Lithgow regions of New South Wales, employing around 1,200 miners. The company supplies coal to two of the State’s three electricity generation businesses. One of the stumbling blocks to the sale has been fears of electricity prices in the state rising as a result of the sale. To allay these concerns the government has secured long-term supply contracts for the mines to continue supplying generators, ranging from 6-15 years.
One of the main reasons motivating the sale is the government’s recognition that it was not in the coal mining business. Over the next three to five years it is estimated around $350 million is needed to keep the mines viable and only by introducing new capital investment will this be possible.
Over the last year the Government has continued discussions with unions about employment issues related to the sale. One of the key issues identified was guaranteeing continued employment. Certified agreements have been signed with the Construction, Forestry, Mining and Energy union (CFMEU), which represents over 800 members of the 1,200 strong workforce. These include a job guarantee period of three year under new owners and the protection of current employment entitlements.
The NSW government had hoped to sell the mines as a package but it is believed that none of the bidding parties will be putting in a conforming bid. Those believed to be in the running for the assets include Xstrata, Rio Tinto, Excel Mining and Centennial.
According to press reports, LakeCoal confirmed its interest in buying the Wyee mine near Newcastle. Wyee is close to LakeCoal’s Chain Valley operation and merging the two into a single combined operation could potentially open up nearly 40 million tonnes of marketable reserves.
