A major Chinese power company is in line to win millions of dollars in federal and state government grant money to develop Victorian brown coal.
It is understood the Shanghai Electric Group is among a handful of firms that have risen in the pecking order for grants under the $90 million joint program to help fund ''pre-commercial'' demonstration projects using technology to upgrade brown coal in the Latrobe Valley to a higher standard, such as black coal, or convert it into oil or fertilisers.
To date the selection process has been shrouded in secrecy.
Applicants are yet to be notified whether they have been successful or not. But sources said it was widely believed in the industry that three projects had progressed.
The most prominent is state-owned Shanghai Electric Power through its local subsidiary, Shanghai Electric Australia Power & Energy Development. Shanghai Electric is listed on the Shanghai Stock Exchange and has a company value of $1.5 billion.
It is understood the firm is proposing a demonstration plant in the valley to process 3 million tonnes of brown coal a year using technology it claims improves its quality and also makes briquettes.
There are suggestions the coal could then be exported to China, initially out of Geelong. A government summary of the project, seen by Fairfax Media, says the $250 million demonstration plant is ''expected'' to be partially funded by the program (known as the Advanced Lignite Demonstration Program). Representatives of Shanghai Electric's Australian subsidiary did not return calls on Tuesday.
Green groups have questioned government spending on brown coal given its significant greenhouse gas emissions. Environment Victoria's Mark Wakeham said: ''You can keep throwing money at it, but at the end of the day it's brown coal, a polluting, low-quality fuel that is being left behind in the race for clean energy.''