NSW taxpayers to pick up Cobbora tab

CONTRACTS to supply thermal coal from the New South Wales government-owned Cobbora mine would cost the state’s taxpayers about $300 million because the sale price of the coal is below the cost of production, according to a report prepared for the government by Ernst & Young.
NSW taxpayers to pick up Cobbora tab NSW taxpayers to pick up Cobbora tab NSW taxpayers to pick up Cobbora tab NSW taxpayers to pick up Cobbora tab NSW taxpayers to pick up Cobbora tab

NSW Resources and Energy Minister Chris Hartcher.

Lou Caruana

The state’s controversial decision to mine Cobbora, which was made in an eleventh-hour deal to sell NSW’s electricity assets by former treasurer Eric Roozendaal before the Labor government was ejected from office, would not necessarily be taken up by the newly elected O’Farrell government, Minister for Resources Chris Hartcher said.

“We don't know what the final outcome for Cobbora will be,” he told ABC.

“We know it's there, we know it's a great coal resource, we know it's important for NSW; but how it will be developed, in what framework it will be developed, who will develop it are all decisions to be made further down the track.”

Under the arrangement as part of the sale of the electricity assets, the state has guaranteed a price of $31 per tonne to the electricity generators from Cobbora, at a time when analysts are predicting that the world’s leading buyer of thermal coal, Japan, will increasingly switch out of nuclear energy to coal and drive the price beyond $US130/t.

In a revised plan for Cobbora, its management has downsized the operation from 30 million tonnes per year to 22Mtpa, reduced the size of its footprint from 4000 hectares to 3000 ha and lowered the number of employees needed to get the mine up and running by 2015, from 625 during construction to 300.

Cobbora Holding Company acting chief executive Steve Ireland said a drop in customer demand, the delay in starting construction and market events all contributed to the downsize.

Hartcher told the ABC it was still to be decided how the Cobbora resource would be developed.

"The government through the Premier has indicated that it's not ruling anything in and it's not ruling anything out," he said.

"This is the most comprehensive study and we want governments, just like we want the mining industry and the agricultural industry, to make decisions on the basis of research, upon data, and upon proper process rather than upon ministerial whim."

NSW Treasurer Mike Baird said since taking government, the treasury had discovered that the cost of running the state-owned electricity distribution networks after the sale has blown out by more than $400 million.

''This was a dreadful transaction, not in the interests of the state,'' he told the Sydney Morning Herald.

''It's likely we are going to pay for this for the next decade, let alone the next year.''

NSW is expected to miss out on more than $6 billion in thermal coal exports in the wake of the Japanese nuclear disaster because of its deal to provide subsidised coal from the Cobbora mine.