Yancoal plea for price relief
The Chinese owners of one of Collie's two coal mines are trying to negotiate higher prices with State-controlled generator Verve as part of a desperate bid to keep their heads above water.
In a move that could erode the State Government's already shaky financial position, Yancoal is in contract talks with Verve as it struggles with low prices, poor coal quality and big interest payments.
Although all sides declined to reveal the value of Yancoal's request, it is understood the company is seeking an increase of up to 18 per cent on current prices. It is understood that Yancoal currently gets paid about $38 for every tonne Verve buys.
Any increase would have to be passed on in the form of higher electricity prices for consumers or, more likely, as lower dividends and tax equivalents from Verve to the Government.
The troubles at Yancoal, which bought Premier Coal from Wesfarmers in 2011 for $297 million, are the latest signs of stress in the Collie coal region, where Premier and rival Griffin have been struggling financially.
Energy Minister Mike Nahan conceded the plight of the two miners was a concern given the importance of Collie's coal supplies to WA's energy system.
Between them, Premier and Indian-owned Griffin are responsible for fuelling about 50 per cent of the electricity generated in Perth and the South West.
Dr Nahan said he would not directly intervene in the talks.
"Premier Coal is well run - it's not the management or the asset holder," Dr Nahan said. "It's just that they can't make a quid.
"Premier is in negotiations or discussions with Verve right now. I don't get close to those negotiations but they're asking for an up-lift in coal prices.
"It will probably have to come up - how much I can't answer, I just don't know."
Shadow energy minister Bill Johnston said in principle businesses should be paid an "appropriate" price for their products but stopped short of backing Premier's bid. However, he used the episode to lash the Government's bungled refurbishment of Collie's Muja AB coal-fired power station, saying the $330 million it spent could have helped break the current impasse.
"As I understand it Verve has step-in rights to continue to operate the (Premier) mine and obviously we would be very concerned about job security of workers on site," Mr Johnston said.Verve and Premier Coal would not comment.
