Western Australia's only privately owned coal-fired power station will close before the end of the decade, according to plans that would bring the curtain down on the fuel's use in the state's economy. 

Bluewaters power station is Australia's newest coal-fired generator but the Australia Energy Market Operator has suggested the 440MW plant near Collie, 180km south of Perth, will retire by 2029.

The shock suggestion follows last year's announcement by the WA government that it will close the two remaining state-owned coal plants at the same time. 

It also comes amid assurances by the government that a taxpayer-funded bailout of the broke coal mine supplying Bluewaters would not be used to repay the debts owed to foreign lenders.

In its latest assessment of WA's domestic gas needs for the next 10 years, AEMO forecast a major bump in demand for gas-fired power generation from 2030 as coal retirements took effect.

WA coal gone by 2029: AEMO

The market operator noted that under the Government's plans, state-owned power utility Synergy would shutter the 340MW Collie A coal plant in 2027 followed by the bigger Muja plant in 2029.

However, AEMO said it had also "assumed that Bluewaters power station retires at the same time as the Muja units".

What's more, the agency reckoned miner South32 would replace coal with gas as part of the industrial process at its Worsley Alumina refinery near Collie.

Bluewaters was contacted for comment.

Built by fallen WA magnate Ric Stowe, Bluewaters began operating in 2009 but has been wracked with problems ever since.

Key among those has been the relationship with its coal supplier, the trouble-plagued Griffin mine owned by a group of Indian banks.

Griffin was last year tipped into receivership under the weight of mounting losses and debts adding up to $1.44 billion, almost all of which was owed to secured creditors.

By far the largest among those was India's largest private bank ICICI, which is believed to be owed about $1.1 billion.

The descent of Griffin into receivership helped precipitate a crisis in WA's domestic coal industry, which is still responsible for providing about a third of the power in the state's biggest electricity system.

Broke mine thrown lifeline

Problems at Griffin and its neighbouring rival, Premier Coal, forced state-owned power provider Synergy and South32 to take the extraordinary decision of importing coal from abroad to prop up local supplies.

They also prompted the Government in December to throw Griffin a multimillion-dollar lifeline in a bid to keep the mine operating and safeguard power supplies over summer.

WA Premier Mark McGowan and the State's Energy Minister, Bill Johnston, have refused to say how much money was handed over by the government, citing commercial confidentiality.

But, announcing the bailout, Mr McGowan acknowledged that little – if any – would ever be recovered.

"I suspect that these payments are payments we just need to make," Mr McGowan said at the time.

"Griffin Coal is not in a good financial position but we need to ensure that our electricity system continues to operate.

"And so, we will do that."

In answer to a query this week, a government spokesman suggested receivers Deloitte would not be allowed to use any of the funding to repay the huge debts owed to Griffin's creditors.

'Strings attached to funding'

Along with ICICI, these are believed to include a number of state-owned Indian lenders such as Bank of Baroda, Indian Overseas Bank and Exim Bank.

"The grant funding is designed to help stabilise Griffin's Collie operations and provide certainty to the local workforce," the spokesman said.

"The state government is working proactively with all parties to ensure a stable and sustainable Griffin that produces coal during the transition to 2030."

Suggestions that WA could close all its remaining coal-fired generation by 2029 have led to questions about whether the state can build enough clean energy capacity in time to replace it.

Bluewaters power station is notionally owned by Japanese trading houses Sumitomo and Kansai Electric, which paid $1.2 billion for the asset in 2010 when Mr Stowe's business empire collapsed.

However, in 2020 Sumitomo and Kansai wrote down the value of their investment in Bluewaters to zero as Griffin's woes and rising competition from renewable energy took a toll.

Since then, the power plant has effectively been controlled by a group of US hedge funds including giants Oaktree Capital and Elliott Management.