Origin strikes short-term supply deal with Centennial Coal for Eraring extension

The short-term deal safeguards the jobs of around 1000 miners after NSW and Origin Energy struck an agreement to prolong the lifespan of the state’s largest power station.

Origin Energy's Eraring power station. SUPPLIED

Origin Energy has struck a new six-month supply agreement with Centennial Coal after inking an extension for its Eraring power station, a deal that safeguards around 1000 jobs in the short term.

Origin had been under pressure from unions to strike an extension to the deal with Centennial, but talks had dragged. The Australian understands Centennial sought terms that Origin found to be too high. Eventually a compromise deal for six months – allowing Centennial to lower its bid – was agreed.

An Origin spokeswoman confirmed the deal to supply Eraring from the Myuna and Mandalong collieries had been done.

“Origin is pleased to have secured this coal on competitive terms, which helps underpin secure and affordable electricity supply for NSW. We intend to maintain an ongoing dialogue with Centennial Coal regarding a possible extension to this agreement in future,” the spokeswoman said.

The deal safeguards the jobs of 1000 workers, providing comfort for those who were on course to be out of work when the current contract expired at the end of the month.

Belinda Giblin, lead organiser at the Collieries’ Staff and Officials Association, said the deal would maintain the goodwill of the local community.

“A supply agreement with both mines for the life of the power station maintains a 40-year status quo and is in the interests of the local communities,” said Ms Giblin. “This would bolster Origin Energy’s social licence and line up with its rhetoric on a just transition.”

The entrance to Centennial Coal’s Mandalong mine. Picture: David Swift

Talks between Origin and Centennial will continue to see whether an extension can be agreed. Origin needs to supply Eraring until at least 2027, but sources close to the company insist it has plenty of options.

Centennial was previously the dominant supplier of coal to Eraring but Origin has diversified its supply agreements in recent years.

Eraring will remain open until 2027 but could run until 2029 after Origin and the NSW government struck a deal to extend the lifespan of the state’s largest coal power station. NSW was facing the prospect of having insufficient reserve electricity generation capacity had Eraring closed as scheduled next year.

NSW now has two years to rush through the development of new renewable energy generation to compensate for the retirement of a facility that provides a quarter of the state’s electricity. However, the deal is set to inflame environmental furore as taxpayers provide a financial backstop to Origin for any losses incurred.

If Eraring makes a loss NSW taxpayers will compensate Origin for 80 per cent of the shortfall, capped at $225m.

If Eraring makes a profit, Origin will pay the state government up to $40m.

Originally published as Origin strikes short-term supply deal with Centennial Coal for Eraring extension