Alternative coal companies short-listed to receive millions of dollars in government funding to establish demonstration plants in the Latrobe Valley have already secured coal supply and construction location arrangements with power generators, according to a well-placed source.
However the construction of successful projects will not begin until at least mid-2014, according to a contact from a company involved in the joint-government $90 million Advanced Lignite Demonstration Program.
The ALDP funding is designed to assist companies prove the economic viability of their technologies, by funding pre-commercial demonstration scale projects.
The program has in recent months been working through a shortlist of 12 applicants, up to four of which are believed to have become unofficial favourites.
Three companies were identified yesterday in The Age as among the preferred short-listed companies: Shanghai Electric Group, Coal Energy Australia and Ignite Energy Resources.
While The Express' source would not suggest which companies were likely to receive the funding, he said selections were not yet locked in, adding last minute discussions were still taking place with Exergen and Environmental Clean Technologies.
However with a funding negotiation process due to follow selections, the source said an announcement would not "realistically" occur for another three or four months.
He said the negotiation process would allocate funds on a merit and value-for-money basis, and the entire $90 million set aside would not necessarily be allocated.
While power generators would not confirm whether supply and arrangements had been secured, a spokesperson for Yallourn owner EnergyAustralia said the company supported "finding new ways to use the Latrobe Valley's large coal resource".
AGL Loy Yang did not return a call before The Express went to print, while a spokesperson for Hazelwood owner GDF Suez Australian Energy said the company would not comment on "speculative" information.
A spokesperson for Federal Energy and Resources Minister Gary Gray confirmed the announcement of successful projects was currently scheduled for late 2013, following the expected execution of funding agreements between the Victorian Department of State Development, Business and Innovation and successful applicants.
Beyond the government's formal announcement, the source said a subsequent permit and environmental approval process would add another nine months to the pre-construction process.
"Typical project development timelines dictate it will be another eight or nine months before starting to see any site work; on top of approvals, companies will still need to arrange and confirm the prices from their suppliers, so we are looking at site work commencing at the earliest mid-2014, but more likely late 2014," he said.
"(It) is up to the companies in how and where they will manage their projects, but all have an agreement in place about location and supply of coal."
The source said despite working towards an "ambitious" schedule, which had already been significantly delayed, the government's ALDP selection process had progressed "relatively quickly" for a largely bureaucratic process.
Of more than 30 formal applications made, 12 of which were shortlisted earlier this year, the source said the bulk of rejections were made on grounds of underdeveloped case studies.
"I wouldn't say the unsuccessful applications were 'pipe dreams', I would more say they were less developed; a lot of work needs to occur to pull together projects of this complexity, and a lot of the companies hadn't done enough of their development work," he said.
"You need to identify your equipment suppliers, your costings - in terms of putting forward a credible project, it needs to stand up to heavy testing and due diligence, and they hadn't done that at the time they put their application in."
Acknowledging widespread scepticism towards the social licence and economic viability of 'clean coal projects', the source said the ALDP program was an appropriate use of taxpayer money.
"There are some significant hurdles for alternative coal, no one is shying away from that fact, but this funding stream is really going to help that; governments need to support new industries coming into the Valley."