Updates with Peabody response in paragraphs 3-4

June 17 (Reuters) - U.S. coal producer Peabody Energy BTU.N has locked out workers at its United Wambo Washery in New South Wales for two weeks, Australia's Mining and Energy Union (MEU) said on Wednesday, escalating a pay dispute.

Workers have been taking protected industrial action since early May after rejecting an offer that included annual wage increases of 2.5% and changes to bonus arrangements, the union said.

Peabody confirmed the lockout in an emailed response to Reuters, saying it applied to employees participating in the industrial action.

"The company's latest offer will continue to place employees among the highest paid in the region," a company spokesperson said, adding that it remained committed to reaching a resolution.

MEU Northern Mining and NSW Energy District President Robin Williams said the parties were close to reaching an agreement and that the company was "prolonging the dispute rather than resolving it."