ACCC grants authorisation to restrictions within Queensland coal supply agreement

The Australian Competition and Consumer Commission has issued a determination granting authorisation to certain restrictions within a coal supply agreement between Tarong Energy Corporation Limited, New Acland Coal Pty Ltd and New Hope Corporation Limited.

Under the agreement, Tarong has been granted an option to buy 5.7 million tonnes of coal annually from the New Acland mine in Queensland for 25 years, starting in 2011 and concluding in 2035.

If the parties proceed with the agreement, Tarong will use the coal to fuel its two power stations in the Kingaroy/Nanango region of Queensland.

The agreement contains restrictions which limit the quantity of coal that New Acland can sell each year to parties other than Tarong and limit Tarong's ability to on-sell coal to third parties.

The ACCC considers that the public detriments arising from the restrictions are limited. The restrictions are intended to ensure that there will be sufficient coal available to Tarong for the life of the agreement. If Tarong does not take its allocated annual quantity of coal, then New Acland may increase the quantity of coal it sells to third parties. Surplus coal acquired by Tarong also has the potential to be made available to other parties.

"The restrictions within the agreement contribute to the security and efficiency of long-term supply sought by Tarong and on the information available appear to be in the public interest", ACCC Chairman, Mr Graeme Samuel, said today.

Background

The Trade Practices Act 1974 prohibits certain forms of anti-competitive agreements, including agreements between competitors that limit their ability to deal with whom they choose or on the terms they choose (including price). Authorisation provides immunity from court action under the Act arising from such agreements but can only be granted where the ACCC is satisfied that the public benefit flowing from the conduct outweighs any public detriment.