The state-owned power company Eraring Energy is facing damages payments of $20 million under the terms of its "gentrader" contract with Origin Energy after a fire at its power station, The Newcastle Herald reports.
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The huge fire broke out inside a generator at Eraring Power Station near Newcastle early this morning, sparking fears of an oil leak into Lake Macquarie.
The fire was detected inside the station's No. 2 generator about 2.30am.
When firefighters arrived, the generator, which contained about 8000 litres of transformer oil, was fully alight.
More than 50 firefighters from the Rural Fire Service and NSW Fire Brigade attended.
The fire is now out and crews are mopping up.
NSW Energy Minister Chris Hartcher told a budget estimates committee at State Parliament today that the company believed the fire was covered by insurance.
The contract with Origin is for the rights to trade Eraring's power output, and formed part of the former Labor government’s partial privatisation of electricity assets late last year.
Under its terms, Eraring has to pay "availability liquidated damages" to Origin Energy when it fails to generate sufficient electricity.Mr Hartcher said estimates suggested the company would be liable for $20 million as a result of the fire.
Superintendent Paul Bailey from Fire and Rescue NSW said earlier the oil was contained but that the Environmental Protection Agency would be brought in to oversee the clean-up today.
"There will obviously be some clean-up and other issues for the power station in the coming weeks," Superintendent Bailey said.
It is unclear what sparked the blaze. Police and firefighters will conduct an investigation when conditions are safe later today.
AAP reports: Superintendent Bailey said: "The fire was quite an intense fire."
The blaze could flare up again if the oil got above 64 degrees, he said.
"If it touches anything at 64 degrees it will flash and ignite," he said.
"It's a bit like if you have a deep frier, when you turn the power off, you still have heat."
He was confident the oil would not spill into the nearby waterway.
"We've boomed that and there's no chance of oil getting into Lake Macquarie," he said.
The fire took place in one of the station's four generators.
Eraring Energy spokeswoman Rochelle Reynolds said no one was injured in the fire and very few staff were rostered on when the explosion happened.
"We'll conduct an investigation to determine the cause of the incident," she said.
"Following the investigation, we'll have a review of our systems."
The state-owned Eraring Power Station opened in the early 1980s and supplies a quarter of NSW's electricity.
The nearest town of Dora Creek, south of Newcastle, is several kilometres away and no residents were evacuated.
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