Victoria's Yallourn brown coal mine has been inundated as the state is hit by wild weather.
Heavy rain also caused a break in the conveyor tunnel which runs underneath the Morwell River, the Herald Sun reports.
There are fears that the mine's flooding may dramatically reduce power output from the nearby Yallourn Power Station, which has already been forced to operate at a reduced capacity.
The power station supplies nearly a quarter of the state's electricity.
Water first flowed into the mine yesterday, but its rate increased last night, forcing workers to be evacuated and a exclusion put in place.
Three conveyors have been forced to stop operations, however the generator and actual excavation area is not flooded as yet, according to The Age.
No one has been injured in the incident.
"Mine personnel are working to establish alternative means to supply coal to the power station," a spokesman from mine owner TRUenergy said.
This is not the first time the mine has been affected by water.
In late 2008 the mine's northern wall collapsed, which resulted in the nearby Latrobe river flowing into the pit.
Earlier this month Yallourn owner TRUenergy announced that it was planning to build another power station at the site of the mine.
Image: The Age – Photo: Joe Armao