Thursday, 31 March 2016

Is Hydro insolvent?

(Published in The Mercury 31st March 2016)

The Basslink cable outage will have far reaching effects on the finances of the state government.

Working out how to generate enough electricity for our needs is the easy bit. Finding enough dollars to help Hydro Tasmania survive is harder.

Were Hydro a private company a Voluntary Administrator would have been appointed by now as there is no certainty it would have been able to trade its way out of current difficulties.

With borrowings of $850 million plus Basslink liabilities of $860 million at latest reporting date, private lenders would be reluctant to lend assistance.

The reason for the cable fault has not been determined, the repair time is a guess based on experiences with other sub-sea cable problems, and once repaired whether it will meet original design specifications is highly problematical.

In such circumstances the voluntary administrator checks the situation and talks to creditors, lenders and shareholders about the way forward.  In essence that is what Minister Groom is now doing.

The dim light at the end of the electricity supply tunnel gives hope that we might find enough power to continue come what may. Next is the search for the necessary funds to sustain Hydro. We can dispense with talk about profits and returns to government. Neither is likely in the short term. The question is whether Hydro can generate enough cash from operations to cover its annual capex bill of $100 million needed to upgrade dams and generating plant.

Thursday, 24 March 2016

Hydro Tasmania's lynch mob

(An abridged version without the charts was published in The Mercury on 24th March 2016)              

The lynch mob is baying for blood. Running down the dams during the carbon tax years is the accepted reason for our current predicament. It’s all the fault of the bean counters and traders who have hijacked the running of Hydro.

No need to bother checking evidence, Hydro Tasmania’s mismanagement is responsible. Even Energy Minister Groom, tiring of the political pressure, is starting to distance himself from Hydro.

But what if the generally accepted version is wrong? Sure, Hydro’s current board and management have questions to answer, but what if the whole Basslink deal was a dud destined to fail, where once a decision was made in principle to lay the Basslink cable, the need to get the project across the line triumphed over the need for a robust assessment of the business case.

Is Geoff Willis the right person to be heading a taskforce to investigate Tasmania’s energy security, a problem Basslink was designed to fix, when his fingerprints are all over the Basslink business case approval and implementation as CEO and director of Hydro at the time?

Tuesday, 8 March 2016

Basslink under water?

Who exactly is Basslink Pty Ltd (BPL)? Given there’s a distinct possibility that its undersea cable problems will take a lot longer and be more costly to fix, is BPL in a position to weather the storm?

BPL owns and operates the Bass Strait interconnector. It is the main player in the Basslink group which in turn is owned by a Singapore listed infrastructure business.

The Basslink group doesn’t make any money.