Callide Power Station owner CS Energy agrees to pay Batchfire Resources $110m extra for coal

The state government has agreed to an 80 per cent increase in the price it pays for coal at its embattled Callide Power Station — because the alternative was even worse.

Taxpayers will fork out an extra $110 million under a secret state government deal to keep Callide Power Station’s coal mine afloat.

This masthead can reveal government-owned CS Energy will pay privately operated Batchfire Resources $25 a tonne more for an estimated 4.4m tonnes of coal under a new 12-month contract which should prevent the miner’s failure.

It’s unclear if retail electricity prices will rise because of the new deal. Coal-fired generation is the mainstay of Queensland’s power supply.

Over the past three months, 74 per cent of Queensland’s electricity came from the state’s eight coal-fired plants; two are at Callide, named B and C.

Callide C power station. Picture: CS Energy

It’s understood Batchfire went to CS Energy seeking an increase and won a reluctant agreement because the alternatives were less palatable. These included the government taking ownership of the mine, which employs about 500 people. It’s not known whether there was an option to source coal from elsewhere.

Multiple sources said the new deal, which began six weeks ago, sees Batchfire receive $57/t. That’s believed to still be below its cost of production. The current export price for coal is more than $150/t.

Batchfire’s publicly available financial statements show it was $76m in the red in calendar 2023 and on the brink. It needed to raise funds or increase coal revenue “to meet working capital and capital expenditure requirements.”

The company is believed to have lost a similar amount last year, although its accounts are still being audited and are yet to be filed with the corporate regulator.

Batchfire’s only activity is mining coal for neighbouring Callide. Both are just outside Biloela, 120km inland of Gladstone.

A general view of the Callide Power Station in Biloela, Australia. Picture: Brook Mitchell/Getty Images

Callide B is older and was due to shut in 2028. But in April, the LNP put back its closure by three years, infuriating the federal Labor government for jeopardising its prospects of hitting 2030 renewable energy and emissions reduction targets. There is no official end date for Callide C.

The station has been beset by operational problems, including a C plant boiler explosion in April.

Batchfire declined to comment on the new deal. The office of Queensland treasurer David Janetzki and CS Energy both said they don’t comment on confidential agreements.

One Nation leader Pauline Hanson, when told of the deal, said coal miners were being punished by the pursuit of net zero.

“Australian power prices continue to go up regardless of whether we pay more for coal or not,” Ms Hanson said.

“This new price remains a really bad deal for Batchfire Resources who will continue losing money at the expense of net-zero agreements supported by the LNP and Labor.”

Next year another coal-supply agreement will have to be negotiated between Batchfire and CS Energy.

Batchfire is not listed on the share market. Its largest shareholder is Texas company Synthesis Energy Systems. Smaller investors include the Choros family, which has a long history in Queensland’s coal-mining industry.

Another state government-owned power station, Stanwell, recently struck a five-year coal supply deal covering 2027 to 2032.

Originally published as Callide Power Station owner CS Energy agrees to pay Batchfire Resources $110m extra for coal