It brings the total estimated cost of rehabilitating the mine, demolishing the plant and restoring the surrounding area to an unprecedented $743 million. Hazelwood coal mine and power station. Credit:Jason South In a statement provided to Fairfax Media, Engie said the total included $439 million to rehabilitate the mine, and $304 million to demolish the plant and restore the surrounding area. "The provision represents our best estimate of the present value of the future costs of the required work," the statement said. "As Hazelwood is the first mine in Australia of this type and size to be rehabilitated, specialist external consultants will continue to be required to advise on geotechnical, environmental and hydrogeological matters to allow for ... a safe, stable and sustainable site after closure."

The $743 million rehabilitation cost estimate comes in addition to a $324 million bill faced by the owners for redundancy and leave entitlements over the next two years. That brings to the total cost of closing the plant, which has capacity to produce about one-quarter of the state's electricity, to almost $1.1 billion. In December, Fairfax Media reported that the Morwell River could be diverted for at least seven years to create a "pit lake" in the disused mine containing more water than Sydney Harbour. That followed revelations that the plant was set to be closed in late March, far earlier than previously anticipated. Previously, Engie had claimed the cost of rehabilitating the mine was just $73 million, a fraction of the amount market analysts, government insiders and environment groups said would be needed. It also followed a decision in the wake of the Hazelwood mine fire inquiry to lift the rehabilitation bond held by the state government from 50 per cent to 100 per cent of Engie's self-assessed liability.

The government is undertaking its own estimate of the rehabilitation costs, which will be finalised by March 31. The ramifications for the state's other brown coal power producers are likely to be significant. On Thursday night, Resources Minister Wade Noonan said: "This is about protecting Victoria's interests. It's our expectation that the full cost of rehabilitating Hazelwood will be borne by Engie, and not the state. "We have engaged experts to complete an independent assessment of each of the Latrobe Valley coal mines, due to be completed by the end of March this year, which will inform the need to implement further rehabilitation bonds." Engie has already committed to restore the mine site, with sources suggesting there was a low risk it would "skip the state" and leave taxpayers to foot the clean-up bill. The company recently released an artist's impression of a proposed lake, including picnic facilities, bird watching areas, walking tracks and even an "artesian health spa". The questions about where the 740 gigalitres of water needed to create the lake will come from remain unanswered. Environment Victoria campaigns manager Nicholas Aberle said the revelations about the rehabilitation costs would have profound implications for coal power stations and mines across the country.

"It dispels once and for all the idea that coal is a cheap source of energy," Dr Aberle said. Loading "It is very likely that other mines and power stations are grossly underestimating their clean-up costs. Governments should hold bonds to protect taxpayers from being forced to foot the bill." With Sarah Danckert