NSW dumps ‘dud’ Cobbora coal mine

New South Wales Treasurer Mike Baird said he has avoided the ‘dud deal of the century’ by dumping the government’s obligation to develop and operate the Cobbora coal mine.

The development and operation of Cobbora mine, near Duneedo in the state’s central west was agreed to by the previous government under the GenTrader deal with Origin Energy.

The Keneally Government decided to operate the project, to provide coal for state-owned power stations, after negotiations with a company fell through during the tender process.

However Baird said the mine would have cost more than $1.5 billion to establish, with the state also liable for up to $250 million if it failed to meet contracted supplies, ABC reported.

Instead, the government will sell Eraring Energy's assets – the Eraring power station and Shoalhaven Hydro power station – to Origin for $50 million.

Origin has agreed to terminate the Cobbora mine coal supply contract for a $300 million payment.

Baird says the net cost to the state overall will be $75 million.

"But we avoid $1.75 billion in liabilities," he said.

Baird said coal contracts with Macquarie Generation and Delta will be also be cut.

The move to terminate the Cobbora supply contracts has been welcomed by environmentalists.

"The Cobbora coal mine was a bad deal for the state and a bad deal for the environment," CEO of the Nature Conservation Council of NSW Pepe Clarke said in a statement.

"The coal supply agreements entered into by the previous government committed the state to massive liabilities, and would have undermined investment in clean energy by providing highly subsidised coal to polluting coal fired power stations.

"Treasurer Mike Baird has done the right thing by terminating these irresponsible supply contracts."

Greens MP John Kaye said he is disappointed with the plan to offload the mine to private operators.

"The only way it will ever go ahead is if it is heavily subsidised," he said.

"Which means the taxpayers, you and I, end up paying for something which is bad for the environment and bad for the economy."

Baird said the government will go ahead with the planning for the mine because without the contracts it is "now a commercial entity".

"Once [planning approval] is done we will look to either a lease or sale of that coal mine to try and extract some value," Baird said.

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