Eraring sells for bargain price

SNAPPED UP: Eraring Power Station has gone for a bargain price to Origin Energy.ERARING power station has sold to Origin Energy for just $50 million in a controversial deal aimed at cleaning up the state’s tangled electricity industry.
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In the other half of yesterday’s announcement, the state government has put the planned Cobbora coalmine on hold, meaning an end, for the time being, to extra coal trains running through Newcastle to and from the Central Coast.

Eraring’s $50 million price tag has been slammed by unions as a bargain basement price for the state’s biggest baseload power station.

Electrical Trades Union state secretary Steve Butler said the government negotiated with a single buyer instead of going to tender.

But Greens MP John Kaye said the government had little choice because the former Labor administration’s “gen-trader” contracts had “ripped all of the value out of the station itself”.

Origin paid a reported $609 million for the rights to Eraring’s electricity back in 2010, meaning it has effectively paid $659 million for the 2880-megawatt station.

Treasurer Mike Baird said the O’Farrell government had “unwound the dud deal of the century . . . executed in Labor’s dying days in office”.

Mr Baird said the government would pay Origin $300 million to terminate its coal supply contract from the Cobbora mine. He said building Cobbora would have cost the state $1.5 billion.

“Overall, at a net cost of around $75 million, taxpayers will avoid liabilities of over $1.75 billion, which were part of Labor’s disastrous legacy,” Mr Baird said.

He said Cobbora contracts with two government-owned agencies, Macquarie Generation and Delta Electricity, would also be terminated, although there was no mention of termination payments. But Cobbora was “nevertheless a large coal resource” and the government would still sell or lease it.

Lake Macquarie independent MP Greg Piper said the $50 million fire sale was “the latest inevitable chapter in a sorry story of bungled privatisation”.

Even if the gen-trader contracts had taken much of the value out of baseload power stations, Eraring still made $137 million profit in the 2011-12 financial year.

“They won’t even recoup the cost of the $200 million upgrade to the station only recently completed,” Mr Piper said.

He said consumers were already reeling from big power bill increases and private interests should not have a monopoly over the power network from the point of generation to the point of sale.

Mr Baird said Eraring workers moving to Origin would do so on terms consistent with other privatisations.

He said negotiations on Delta West’s Mt Piper and Wallerawang power stations were continuing.

POLL: New police commander Jeff Loy

POPULAR CHOICE: New Northern Region commander Jeff Loy has a good reputation with frontline police. Picture: Dean OslandINCOMING commander Jeff Loy has vowed to review the region’s policing and investigate whether sharing resources between commands could improve crime-fighting.
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But Assistant Commissioner Loy promises there will be structural change only if there is a clear benefit to frontline policing, the force’s investigative and intelligence ranks and the community.

Create your free online surveys with SurveyMonkey , the world’s leading questionnaire tool.A week after taking over as Northern Region commander, Mr Loy also told the Newcastle Herald his officers couldn’t “take their eye off the ball” following several successful years in reducing alcohol-related crime.

Well respected with a strong operational background, the 52-year-old has a good reputation with frontline police and was a popular choice to take over from Carlene York, now the head of the force’s human resources department after a successful stint in Newcastle.

Mr Loy is the son of a locomotive driver who started his primary schooling at Jesmond in 1965 when his father was based at Broadmeadow, returned for a stint in the force at Hamilton in 1983 and later at Belmont, and was a homicide detective in Newcastle for three years from 1987.

He described the appointment as the highlight of his career and said he would be careful about tinkering with what he described as a well-working region from the Hawkesbury River to the Queensland border.

“I haven’t come with a full-change agenda. What I have come with is an agenda to look at the business and do an operational review to see where we can do better for the community.

“That is, to how we conduct our first response, how we actually give a proportionate response to our active measures, what is our investigative and our intelligence capability and capacity, how can we actually make an improvement in that and how do we share resources between commands.”

Mr Loy said crime reduction would remain the “main game” and he was keen to discover the real problems within areas.

He said alcohol-related crime remained a major issue throughout the region, especially in large population areas such as Newcastle and tourism spots along the coast.

“We want people to be in party mode, we want people to work hard and then go to a place and enjoy themselves, but again, it doesn’t give an excuse to be a hooligan.”

GREG RAY: King Coal up to old tricks

There is no Newcastle without coal and any attack on the coal industry is an attack on the people of Newcastle. -NSW Resources and Energy Minister Chris Hartcher, June 29, 2013
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WHAT can anybody possibly say to such a simplistic piece of fallacious fluff?

It’s depressing. It’s silly. It’s wrong.

But it’s come from a government minister, so you know it signifies something. And when you put it in its context, it isn’t hard to suggest what might be coming next.

King Coal’s coin-operated government is rallying to its master’s voice, preparing, I propose, to quash the Land and Environment Court decision that put an obstacle in the way of a coalmine expansion at Bulga.

The King is on a roll, with the government in his pocket, and he doesn’t believe he should have to observe any limits.

King Coal’s problem is that we had a massive resources boom.

That shouldn’t be a problem but it always is, whenever it happens. Because the King gets so excited about the high price of coal that he wants to dig out as much as he can as fast as he can to get the high price while it lasts.

While he’s in his feeding frenzy, he will pay anybody anything to work in his mines. He will throw money at contractors and suppliers. He will pinch workers from every other industry to get that coal out and on a ship.

His costs go up, of course.

Then, when the boom slows down, he’s stuck on a limb, with the high costs he made for himself and an oversupplied market. He’s borrowed money to open new mines and he has to pay his debts.

That has happened in every boom since Adam was a boy and it’s happening now.

And the King always does the same thing. He blames everybody in the world for the problems he helped make for himself and he demands that everybody else pay, one way or another, to get him out of his mess.

Suddenly, his workers are pesky nuisances for demanding the pay that he was throwing at them until a few months ago.

And any coal resource that offers low-cost extraction becomes a gem in his sight because if his price per tonne has fallen, he needs to get his costs per tonne down too.

He will want to mine precious alluvial flats because they are the easiest thing in the world to dig up and the fact that the valuable rivers and soils might be ruined forever is not his problem. That problem belongs to other people in the future, when King Coal has shot his bolt, done his dash and left the district.

If we had a decent government, it would sit down with King Coal and work out some ways to help him through his crisis.

I don’t have a problem with the mining industry asking for help from governments, just as any other industry or lobby group can ask.

But just lying back and telling the King to take what he wants is the wrong way to help.

Because some things are more important than coal. Coal is not rare. It can found in zillions of places.

Clean water and good soil are much rarer, and that’s going to become more noticeable as time passes.

The King says the only things that matter are profits and jobs. But that isn’t strictly true.

I could make profits and generate jobs if I could talk the government into giving me a state licence to bulldoze people’s houses, sell the contents and recycle the building materials. And if I paid a fat percentage of my take to the government as a “royalty”, it would probably bend every law in the book to keep me in business.

When I ran out of houses to bulldoze in one town, I could point to my idle dozer drivers and demand permission to flatten another town and claim that any opponents were threatening jobs. Far-fetched, but still . . .

Let’s support King Coal in his laudable efforts to keep Hunter people employed.

But we are idiots if we don’t draw some lines that he can’t cross.

EDITORIAL: A string of bad deals

SELLING Eraring Energy and dumping plans to develop a new state-owned coalmine near Dunedoo makes good economic sense for the NSW Coalition government.
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The government is facing reduced revenue, but has plenty of spending commitments and is as keen as ever to hold onto its treasured AAA credit rating.

In an interlocked deal, the government has paid a net $75 million in contract penalties to avoid $1.75 billion in other liabilities.

That’s fair enough, but it’s worth keeping in mind that this costly debacle stemmed from a string of short-term decisions, made on the basis of immediate economic concerns, by previous governments.

The saga started in 2002 when the Labor government sold the state-owned coalmining arm, PowerCoal, to Centennial Coal for about $330 million. That probably seemed economically sensible at the time, but when the price of coal skyrocketed a few years later, the deal looked like a dud.

Those coalmines used to feed the state’s publicly owned power stations, and the fact that they didn’t have to make a profit, helped keep power prices low.

Once the mines were sold, the public power stations soon started to find themselves at the mercy of the market. After all, why should a private mine owner sell coal cheaply to an Australian power station when foreign buyers will pay a much higher price?

The government probably thought that, once it privatised the power stations, the prices of coal and electricity would no longer be its problem. But hitches in the privatisation program complicated the picture and the government decided to get back into the coalmining business by developing a new open-cut at Cobbora, near Dunedoo.

Cobbora was to supply at-cost coal to the power stations, and contracts were signed accordingly.

Since then, the price of coal has fallen again, which may be a factor in the Coalition’s decision to dump the mine. Dumping the mine means it has to pay contract penalties to Origin Energy, and that may help explain the apparently bargain-basement price Origin is paying to buy Eraring Energy.

Perhaps the most sobering aspect of the entire sequence of events, beginning with the sale of PowerCoal and ending with the sale of Eraring, is that assets of tremendous value have passed from public hands into private.

And not only has the public seemingly gained little from these transactions, it has actually had to pay – at best – $75 million to avoid a much bigger loss.

It seems like a terrible waste.