The Gentrader agreement between Cobbora and the power companies – a legacy of a deal hatched by previous treasurer Eric Roozendaal at the 11th hour of the former NSW Labor government – will now be voided.
“It is not the government’s role to develop and operate a coal mine. This is best done by the private mining industry,” Baird said.
Cobbora will pay $300 million in compensation to Origin, which along with Macquarie Energy and Delta Energy would have bought coal from Cobbora under the Labor party agreement.
Origin announced yesterday it had entered into a coal supply agreement with Centennial Coal for the provision of 24.5 million tonnes over an eight-year period from FY 2015 for use at Eraring.
Origin executive director of finance and strategy Karen Moses said: “Origin and Cobbora coal mine entered into the Cobbora Coal Supply Agreement in 2011 to provide a future fuel source for Eraring Power Station.
“It subsequently became clear that there were sufficient alternative coal supply arrangements which would deliver a better outcome for NSW and Origin.
“The state has agreed to pay Origin $300 million for the Cobbora arrangements to be cancelled.”
After residual cash held by Eraring was kept by NSW, the state was out of pocket by $75 million, according to Baird.
The state’s liability would have been $1.5 billion to develop Cobbora and $250 million in liquidated damages to be paid to Origin, he said.
“What the state has avoided, effectively for payment of $75 million, is a $1.75 billion liability,” he said.
“That’s what was left behind by the former transaction done in the dying days of the Keneally government.”
A review by the NSW treasury found that it would cost at least $1.4 billion to develop Cobbora, which would have left the government out of pocket because the contracted coal price was too low to cover development costs.
Now that the supply agreements no longer exist, the state government has a free hand to negotiate a commercial agreement to develop or sell the mine through a third party.
The state government is intending to pursue the planning approvals for Cobbora, which is estimated to have a capacity of about 9Mtpa.
