Fears for WA's energy grid as Griffin Coal slides almost $1 billion further into debt

Australia Broadcast Center

7 hours ago

A key foreign-owned WA coal mine has fallen almost a billion dollars further into debt, even as the government prepares to pour more money into the insolvent company.
Griffin Coal has been propped up by WA taxpayers since 2022 when the company was placed into receivership, amid fears its collapse could place the Perth and South-West electricity system at risk of blackouts and jeopardise hundreds of local jobs.
The company's biggest customer is Bluewaters Power — a coal-fired generator with capacity to supply about seven per cent of the grid's needs.
After initially providing $40 million in support, the following year Premier Roger Cook announced a $220 million lifeline would be extended to Griffin Coal, describing it as payments "we just need to make".
This year's state budget contains provision for up to another $49 million for the company, taking the total bill to $308 million.
"We just want the parties to sort themselves out so that they can get on and mine coal at a commercial rate, and that people can produce power at a commercial rate," Premier Roger Cook told budget estimates on Thursday.
"Quite frankly, the fact that the parties haven't been able to come to an agreement is a disgrace."
Shadow energy minister Steve Thomas didn't take to that argument kindly.
"How dare the premier attack the two companies that have been left to pick up the pieces of years of government mismanagement," he said.
"The government's so-called solution to the problem is a joke because the price that Griffin Coal needs to become viable is the same price that bankrupts Bluewaters Power.
"If there was a commercial solution available, the government has had a decade to deliver it and save that $300 million."
Bluewaters' future is so uncertain as a result of those tensions that when the independent Australian Energy Market Operator (AEMO) published its 10-year outlook last week, it assumed Bluewaters would be unavailable from mid-2027.
It said that was due to the risk of Griffin being unable to supply coal once its government support ends.
AEMO said while energy capacity would be "largely balanced" until mid-2027, "there is a need for further investment" beyond that point, in part because of the issues at Bluewaters.
The depth of Griffin's difficulty was further highlighted in answer to questions asked by Dr Thomas, which show the company's debts have now reached $2.4 billion — some $800 million higher than a liquidator reported in 2022.
Most of that debt — some $1.9 billion — is owed to ICICI Bank, India's biggest private bank.
Other secured creditors are the Export Import Bank of India ($146 million), the Bank of Baroda ($144 million) and India Overseas Bank ($115 million).
"That [money] should have refinanced and put new administration into Griffin Coal so that it could continue to supply Bluewaters, at least for the next 5-10 years.
"That would have been a better investment because it would have left the state with a viable asset at the end, rather than simply throwing a quarter of a billion dollars down a black hole that ultimately still results in the failure of the companies and the power system."
A spokesperson for Griffin said: 'The receivers and managers are actively engaging with customers, government, unions and other stakeholders on a commercial solution for Griffin Coal beyond 30 June 2026.'
Independent corporate analyst Peter Strachan agreed that, in hindsight, it could have been better for the state government to have purchased Griffin when it was sold to its current owners.
"From the state's point of view it was a fraught deal because these are critical assets, critical to the state of Western Australia," he said.
With that option well and truly in the past though, Mr Strachan said pouring in money to keep it running was one of few options.
"The state's got no option but to do that, or they could close it down and just import coal," he said — something the government did in late 2022.
With coal on its way out of the energy grid as the rise of renewables continues, Mr Strachan said time was of the essence.
Dr Thomas's questions also revealed $13.5 million of the government's money had been paid directly to those secured creditors under a 'business continuation agreement'.
"The government's focus is on ensuring the continued operation of the mine to 30 June 2026," Mr Cook said in answer to those questions.
"The government entered into a business continuation agreement with the secured creditors and the receivers and managers to ensure the continued support of the secured creditors for this period.
"The [agreement] provides performance-based payments to the secured creditors, linked to the continued operation of the mine."
Mr Cook said those payments to secured creditors could reach $31.5 million by mid-2026.
He told estimates the current support regime would not continue beyond mid-2026.
"If the parties related reach a commercial decision in relation to the way that the Griffin mine and the Bluewaters power station function, well then we'll consider any proposals from that point," Mr Cook said.
"But we've made it quite clear that we will not be funding the arrangements beyond the June 30, 2026."