The West Australian government has pledged to "risk" $4 million in pre-payments for coal to the debt-laden miner Griffin Coal but insists it is not a bailout.
Griffin Coal, WA's oldest and second largest coal supplier, was placed in administration on Monday after missing deadlines for the payment of debt instalments and tax liabilities.
It has total debts of about $700 million.
While the WA government has refused to guarantee the entitlements of the company's 500 workers, it has promised to keep it "afloat" while administrators KordaMentha try to restructure debt or sell assets.
Premier Colin Barnett on Wednesday said the $4 million taxpayer-funded pre-payment would be used to cover costs to deliver two weeks worth of coal to Verve Energy.
This should be sufficient time to enable administrators to decide the company's future.
A meeting of creditors is scheduled in Perth on January 13.
Mr Barnett said administrators had requested the money, and while it was risky, it was "a risk worth taking" to protect jobs.
"No, this is not a bailout. Maybe, it's a semantic difference," Mr Barnett said.
"We are doing what I believe is responsible to allow the company to continue to operate, and hopefully during that period they can find a buyer and return stability to the situation.
"There is a slight risk they won't deliver the coal or the state could lose the money.
"That is why treasury, on behalf of the state government is underwriting this transaction for Verve."
Griffin Coal produces more than five million tonnes of coal annually, most of which is used for domestic power generation.
It is understood the power stations have not been placed in administration but this could occur.
Griffin Coal has $US475 million ($A519.27 million) worth of unsecured debt to US bondholders and missed a December 31 deadline for a $25 million payment.
It has also missed a deadline for a $5 million payment to the Australian Tax Office, the first instalment as part of $25 million settlement reached last year.
Griffin Coal's contract to supply coal to the WA government for power generation runs out in June.
Source: AAP
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