TRUenergy, owners of the Yallourn power station in Victoria’s Latrobe Valley, may seek compensation from the State Government for damage caused in June when the Morwell River burst its banks and flooded the station’s coal mine.

The flood occurred in a section of the Morwell River that was diverted by TRUenergy between 2001 and 2005 to provide access to fresh coal deposits.

The open-cut mine was inundated with 60 billion litres of water, forcing the power station to close two of its generators while another was out for maintenance, cutting output to 25%.

The cost to TRUenergy in lost production is thought to be about $300 million. There has been speculation that a $3 billion partial float of the company scheduled for November could be delayed as a result.

A spokesman for TRUenergy told insuranceNEWS.com.au that “insurance issues are still being worked through”.

“The damage and repair costs are being assessed and once finalised our parent company [Hong Kong-based CLP Group] will announce details to the stock exchange,” she said.

The insurance position around TRUenergy is not clear, with industry sources believing the company now self-insures after its insurers would not provide adequate cover following a landslip and flood in the coal mine in 2007.

The company’s admission that it is reviewing its insurance situation therefore raises the possibility of a claim against the state.

Liability for flood damage originating in coal mines and related infrastructure works has been contentious in the Latrobe Valley in recent times.

In February last year heavy rain led to the Morwell bypass being closed for six months after cracks appeared as a result of subsidence in the Hazelwood mine and leaks from a large underground drain.

The State Government is still in dispute with Hazelwood’s owners, French multinational IPR-GDF Suez, over who should pay the $6 million bill for repairs.

The Victorian Department of Primary Industries is enquiring into the collapse of the riverbank, and Energy and Resources Minister Michael O’Brien has appointed an independent expert to work with the investigation.

The 2007 slip at Yallourn saw a coal face move across the mine floor on a 500-metre front. It resulted in the Latrobe River flowing into the mine, halving Yallourn’s power output.

The Morwell River has been diverted a number of times to allow the Yallourn and Hazelwood power stations to access coal.

TRUenergy has now managed to resume power production from three of its four generators and the fourth will be recommissioned when adequate coal supplies resume.

A partial diversion of the Morwell River has been completed, pumping water through to the nearby Latrobe River. The mine’s management says it is now pumping more water out of the mine than is coming in.

Full coal production will not be possible until the temporary river diversion is complete. The company says it is working on designs for a permanent repair of the riverbank.