Federal and state grants worth $150 million might not be sufficient to get a "clean coal" power station built in Victoria, according to government documents released under freedom of information rules.
Officials in the federal bureaucracy have voiced concerns over financial backing for private company HRL/Dual Gas to build a coal power station in the Latrobe Valley.
The $1.2 billion plant is designed to dry and gassify brown coal so its emissions of greenhouse gases are closer to those of a modern black coal power plant. The federal government has pledged $100 million in support and Victoria $50 million.
A briefing minute sent in January to the secretary of the Federal Department of Resources, Energy and Tourism, Drew Clarke, draws attention to the difficulty of financing the plant.
"The project faces significant funding challenges, even if the request for Australian government funding support can be accommodated," the assistant manager of CCS Major Projects says in the minute, which was released to Greenpeace after a freedom of information request.
Details of those challenges were excised from the document but the project has been dogged by questions about its finances.
Federal Energy and Resources Minister Martin Ferguson granted the company a six-month extension in February to meet key project milestones.
The minute casts doubt over the wisdom of the investment in a national sense, saying Victoria would benefit more than the rest of the country.
Despite the challenges, the minute describes development as "well advanced". A $25 million design study is under way and other aspects are progressing well.
The document reveals that the federal government is yet to provide any of its promised $100 million, while the Victorian government has paid $20 million towards the design study and the company has provided the remaining $5 million.
Victoria's administrative tribunal recently overruled most of the conditions in an Environment Protection Authority permit, including a requirement that the plant be halved in capacity from 600 megawatts to 300 megawatts.
The briefing hints that HRL would try to sell the plant after "one complete maintenance cycle approximately four years after plant commissioning", potentially to the Victorian government.
"The state has also had positive experiences with . . . as a second-generation investor in Victoria's privatised electricity industry," it says.
Greenpeace climate and energy campaigner Julien Vincent said it was astonishing the federal government was persisting with its grant.
"With the government so intent to deliver a budget surplus, here's $100 million that could easily be returned to the public purse and avoid causing pain in other sectors facing the axe," he said.
In a statement, Mr Ferguson said the project's extension was to allow it to seek project finance following the court decision.
HRL did not respond to questions and the Victorian government declined to comment.
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