Centennial Coal to axe mine workers after failing to secure a new Eraring supply deal

NSW producer Centennial Coal is axing 200 jobs at its Mandalong mine after failing to win a new supply deal with Origin for its Eraring coal-fired power station.

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

NSW producer Centennial Coal will cut 200 jobs from its Mandalong mine after failing to win a new supply deal with Origin Energy for its Eraring coal power station, blaming the state coal caps and high costs for its decision.

Centennial has supplied coal from the mine for Eraring, which itself could close as soon as 2027, but the energy giant decided not to renew a deal beyond the end of 2024 given a range of ongoing supply options from other producers in the market.

Centennial, owned by Thailand’s Banpu, will instead pivot to shipping its thermal coal for the export market, triggering the loss of 200 roles.

It blamed the introduction of the cap of $125 a tonne of coal in part for its struggles to find buyers for its coal.

“There have been a range of factors that have impacted our operations at Mandalong including higher production costs, which have been compounded by the ongoing uncertainty and changes in the domestic market landscape brought about by the introduction of coal price cap legislation,” Centennial said in a statement.

“These factors have made it difficult to secure ongoing domestic coal supply contracts.”

Royalties and high costs were also to blame, Centennial said.

“These issues coupled with higher royalties, increased labour expenses and costs associated with the introduction of the federal government’s safeguard mechanism, that mandates emission caps, has forced Centennial to make this difficult decision to secure the future of the mine,” the company said.

The Collieries Staff and Officials Association said it was now concerned about further job losses for Centennial’s Myuna coal mine, which also supplies Eraring.

“However, let us be clear. If Centennial, Origin Energy and the NSW government do not come together to forge a deal to resolve this matter, the potential for further job losses at the Myuna coal mine is significant, and more workers will be affected,” the CSOA said.

“Now, more than ever, it is crucial that Centennial, Origin Energy and the NSW government come together to resolve this situation, to ensure that further job losses are not incurred at the Myuna coal mine, in the best interests of workers, their families and the community.”

Origin said it continued to receive coal from Centennial mines and remained in negotiations regarding future supply from Myuna beyond December 2024.

“We are hopeful of reaching an outcome that delivers fair and competitively priced coal to Eraring, so we can avoid higher coal costs that would inevitably flow through to energy prices ...” an Origin spokeswoman said.

“We understand the complexities of workforce transition having spent several years planning how we can best support Eraring employees through to the plant’s retirement. We have offered to share our workforce transition plans with suppliers. We hope to see tangible steps taken by suppliers to support their workers through this period ahead, recognising the inevitable retirement of Eraring power station.”

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

Still, even that short-term deal was hard fought. 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.

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 next year.

Originally published as Centennial Coal to axe mine workers after failing to secure a new Eraring supply deal