$220m injection for ailing Hydro

Launceston Examiner
Wednesday 28/5/2008 Page: 7

THE State Government will take $220 million out of Transend to prop up Hydro Tasmania 's $1.13 billion debt. Energy Minister David Llewellyn yesterday released a consultant's report that showed the company required between $185 million and $495 million to repay debt. The Ernst & Young report found that Hydro's financial position had weakened because of several factors including: Low rainfall leading to more generation at the Bell Bay Power Station and imports over Basslink.

A highly contracted position in the Tasmanian market paired with low contracted prices for large customers and high energy prices in the National Electricity Market in 2007. Increasing capital expenditure on ageing core hydroelectric assets. Hydro chairman David Crean said the funds would be used to retire debt and improve Hydro's ability to compete in the National Electricity Market.

"The equity injection will predominantly increase our financial strength and reduce the cost of funding our debt," Dr Crean said. "So we'll be able to direct those funds to both achieving efficiencies in our asset base and developing growth projects." The report showed borrowing capacity for Transend was a maximum of between $220 to $270 million.

Greens energy spokesman Kim Booth said the Basslink gamble had not paid off for the Government. "The Greens predicted that Basslink would be a millstone for the Hydro with its $92 million annual cable rent fee to be covered before any power is even transmitted or paid for," Mr Booth said. Hydro spent an extra $100 million in 2006-07 importing power across Basslink because of lower than average rainfall.

Mr Llewellyn, however, said Basslink and natural gas had saved Tasmania's economy by avoiding power rationing, which might have shut down major industry. Opposition energy spokesman Peter Gutwein said he supported the equity injection in principle but questioned if Tasmania could have avoided energy price rises if the Government had acted earlier.

"Had the Government listened to Hydro and its own former Treasurer Dr David Crean back in 2005 and improved the Hydro's financial position then, would the ordinary men and women of Tasmania be paying the same power increases as today?" Mr Gutwein asked. The equity injection will be debated by the House of Assembly today and, if approved by the Upper House, will occur on June 30.