The purchase will make Centennial the largest independent supper of coal for power generation in NSW, fuelling about 30% of the state's electricity consumption.
Almost 80% of Centennial's production will be sold under long-term Australian dollar indexed-priced contracts, with contracted production projected to generate in excess of $5 billion.
Total production will exceed 13 million tonnes a year, with reserves of more than 490Mt.
Centennial managing director Bob Cameron said the purchase was a significant milestone for the company, offering "a strong platform of reliable cashflow through its long-term contracts, while providing substantial growth opportunities".
Powercoal owns and operates seven underground collieries in the Lake Macquarie, Central Coal and Western regions of NSW, suppling about 8.4Mt of coal a year under long-term contracts to NSW state-owned power stations, which are located in close proximity to the mines. It also has five new coal projects for future development.
Centennial said it would fund the acquisition through a $100 million capital raising and a debt facility being arranged with a syndicate of banks.
Macquarie Bank acted as financial advisor and will underwrite the equity raising.
Meanwhile, Centennial also announced today its full-year net profit tripled to $28.96 million from $9.7 million a year earlier, with revenue rising to $142.04 million for the year to June 30 from $103.3 million.