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$50 million:Price fetched for Eraring power station.

NSW Treasurer Mike Baird announced the sale of Eraring Energy to Origin Energy on Monday,saying it was"above retention value".

Under the deal,which is expected to be completed by August 1,the government has agreed to pay Origin $300 million compensation for the right to break a contract guaranteeing Eraring cheap coal supplied from the Cobbora mine.

The contract was signed as part of the previous government's sale of electricity trading rights,which saw Eraring's electricity output sold to Origin shortly before the 2011 state election.

As part of that sale,Eraring was guaranteed cheap coal supplied by the planned Cobbora mine,which was to be built by the state government,in an attempt to boost the value of its generation rights.

But a recent review of the Cobbora deal by the former Treasury official Kerry Schott found Cobbora would cost"at least"$1.4 billion to develop - money that would never be recovered by the sale of its coal because the contracted supply prices were"well below cost".

Dr Schott is advising the O'Farrell government on its sale of the state-owned generation companies Eraring Energy,Macquarie Generation and Delta Electricity,from which it anticipates proceeds of up to $3 billion.

Mr Baird said the former government's sale - known as the GenTrader transaction - was"a shocker".

He said the sale of Eraring and cancellation of the Cobbora contract was"a fantastic financial result for the state".

"What the state has avoided,effectively for a payment of $75 million,is a $1.75 billion liability,"he said.

"That's what was left behind by the former transaction done in the dying days of the Keneally government".

Mr Baird said the $1.75 billion liability was comprised of the estimated $1.5 billion cost of building the Cobbora mine and $250 million in"liquidated damages"expected to be payable to Origin Energy.

Under the terms of the GenTrader transaction,liquidated damages were payable by the state-owned power stations when they were unable to supply the contracted amount of electricity to the new owners of the trading rights.

Mr Baird said after"residual cash"held by Eraring was retained by the state,taxpayers were out of pocket by $75 million.

The Cobbora coal contracts with Macquarie Generation and Delta Electricity have also been"terminated",Mr Baird said,as the companies have been able to source"alternative supply".

He said falling coal prices and excess supply had allowed the government to source the coal at similar cost to that promised in the Cobbora coal contracts.

Despite this,Mr Baird said the government will proceed with the planning for the Cobbora mine because without the contracts it is"now a commercial entity".

Planning approval was expected by the end of the year. However,the government does not intend to build the mine,but will look at selling the rights to develop it.

"Once[planning approval] is done we will look to either a lease or sale of that coal mine to try and extract some value,"Mr Baird said.

The government remains in negotations with TruEnergy over the sale of Delta West power station,whose generation rights it purchased in the GenTrader transaction,but without a coal supply contract with Cobbora.

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