The foreign ownership of Western Australia's two coal miners raises concerns about the long-term security of the state's power supplies, Premier Colin Barnett says.
Wesfarmers announced today it would receive $296.8 million for the sale of its Premier Coal mine in Collie, south of Perth, to Chinese-owned Yancoal Australia.
Premier Coal is the major supplier to WA's state-owned power generator Verve Energy, which produces about 60 per cent of the electricity for the southwest grid.
Mr Barnett says if the deal goes ahead, he expects Yancoal to honour the current contract between Wesfarmers and Verve, but he's concerned about the long-term security and supply.
"Indeed while these are private companies, the coal does belong to the state and there are provisions in the state agreement that ensure the coal is reserved for state domestic use," he told ABC Radio.
"There's also provisions that ensure they're not exported without the approval of the state government."
Mr Barnett said a group of people within government began working on the implications of the deal soon after they were informed of the news on Tuesday night.
"I'm not jumping up and down celebrating, this is a problem for the state, no doubt about it," he said.
"We were caught on the hop last night by the announcement - we didn't expect that."
Indian power giant Lanco Infratech paid $750 million in December last year for Griffin Coal's debt-laden thermal coal mine near Collie.
However in June, Lanco threatened to halt coal supply to the Bluewaters Power Station, which generates about 10 per cent of the state's electricity, prompting Mr Barnett to warn them to honour the existing contract.
Mr Barnett said the government was concerned that during the past 12 months, the state's major coal fields had "moved into foreign hands".
The sale of Premier Coal remains subject to approval from the Foreign Investment Review board.
Mr Barnett said he doubted the state government would oppose it but would raise its concerns about long-term electricity supply.
Yancoal already operates five mines in NSW and Queensland, which produce about 11 million tonnes of therm and metallurgical coal each year.