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Smokestack emitting steam
Photograph: Jeff Zehnder/Alamy

The Morrison government has made it known to the owners of the Vales Point coal-fired power plant that they are likely to get an $11m grant to upgrade the facility in the May budget.

Canberra buried the probable commitment to the coal project on page 12 of a 13-page $2bn agreement with the Berejiklian government to increase gas supply and reduce greenhouse gas emissions from the electricity sector.

The agreement says the commonwealth will fund three state projects that have applied for support through the Morrison government’s underwriting program. The Vales Point upgrade, pursued by energy baron and LNP donor Trevor St Baker, was shortlisted by the energy minister, Angus Taylor, last year.

Scott Morrison characterised the Vales Point upgrade at the time it was shortlisted as “one very small” coal project. At the time, Morrison was battling tensions between Liberals opposed to taxpayer support for coal and Queensland Nationals championing it, with the federal election in sight.

Those tensions have reignited with the resumption of federal parliament this year, with some Liberals arguing the government should pursue more ambitious climate action while Nationals demand new taxpayer support for coal.

In-principle support for the Vales Point project has not been announced, but the company has been told it is one of the three projects referenced in the recent agreement between Morrison and Berejiklian.

Delta Electricity is pursuing a grant, not a loan, of $9.84m to upgrade turbines and another $1.2m grant to fund high pressure heaters. It says those upgrades will increase efficiency at the plant and lower emissions.

The advice from Canberra is that pitch has moved up in the queue, with the dollar commitment to be finalised in the May budget.