Something is not right in the state of Hydro

Tasmanian Times

There’s a huge story here … but it’s complex and requires enormous concentration. Thus it’s skipping beneath the radar of all but a tiny few in the public sphere. Basslink may turn out to be the sleeping giant millstone around beleaguered Tasmanians’ neck. But how could anyone find out as “accounting procedures” hide the awful truth …
Simon Bevilacqua, The Sunday Tasmanian

HYDRO Tasmania sustained “losses” between $50 million and $100 million on Basslink — four years before the project was even commissioned. That is the view — vehemently denied by the Hydro — of investment banker Kevin Fraser. Dr Fraser says the losses resulted from poor performing interest rate futures contracts entered into by the Hydro after it announced National Grid as the winning tenderer for Basslink in 2000. He suspects the poor performance of the contracts did not appear on the Hydro’s balance sheet as losses because they were rolled over into a 25 year interest rate swap with Macquarie Bank.

Read more here
The Greens

MEDIA RELEASE

Kim BoothTuesday, 25 JULY 2006

MUM AND DAD ELECTRICTY CONSUMERS WILL BE LOSERS

As Minister Refuses To Rule Out Hydro Debt Shifting

The Tasmanian Greens today expressed alarm at Minister Llewellyn’s refusal to rule out debt shifting of Hydro’s debts to Transend and Aurora during today’s Government Business Enterprise Committee hearing into Hydro Tasmania. Hydro documents that were leaked recently reveal that Hydro have recently requested a $300 million equity injection from the government, curiously to enable it to trade more aggressively on the N.E.M. (National Electricity Market.)

Greens Member for Bass, Kim Booth MHA and Energy shadow spokesperson said today that Minister Llewellyn’s refusal to rule out debt shifting from Hydro to Aurora or Transend was a clear signal that the public purse would suffer to pay for the Basslink adventure.

“Minister Llewellyn appears to be intent on shifting Hydro’s debts to the Mum and Dad electricity consumer by his refusal to rule out saddling Aurora and Transend with Hydro’s debts during today’s GBE hearings,” Mr Booth said.

“The government have rejected at this stage the request for $300 million from the public purse and it now appears that Minister Llewellyn is considering transferring the debt from Hydro to Transend and Aurora.”

“If Aurora and Transend are saddled with hydro debt then they will have no choice but to directly increase charges and the Mum and Dad consumers are the ones who will suffer.”

“The government has already admitted that the ordinary Mum and Dad will be the only ones who will not benefit from competition on the NEM and now Minister Llewellyn appears set to gouge their wallets by shifting Hydro’s debts to pay for the Labor government’s Basslink gamble.”

“Minister Llewellyn must now explain the purpose of his debt shifting proposal and rule out an increased burden to small consumers,” Mr Booth said.

The Libs, Thursday

Media Release

Tasmanian Liberal Leader

WILL HODGMAN, MHA

Thursday July 27, 2006

Tasmanians losers in Hydro debt strategy

A government plan to help solve the Hydro’s financial crisis could lead to higher power prices and create new problems for the other energy Government Business Enterprises.

Following the government’s rejection of a $300 million equity injection for the Hydro, Energy Minister, David Llewellyn, said this week he was considering transferring some of the Hydro’s $1 billion-plus debt to Aurora Energy and/or Transend.

In an alarming insight into the government’s management of the energy sector Mr Llewellyn revealed today hadn’t discussed this notion with Aurora Energy and he refused to say whether or not he had even sought advice on it.

Aurora CEO Peter Davis confirmed the company does not want to be saddled with any new debt that hasn’t arisen from crucial infrastructure investments.

Shadow Energy Minister, Will Hodgman, said Mr Llewellyn had revealed an off the top of his head approach to managing the energy sector, when it needs a strategic approach to cope with current challenges such as the NEM environment, the costs of Basslink and historically low water storage levels.

“As the Minister stated, a debt transfer to Aurora would “undoubtedly impose a burden”, yet he’s not even discussed the idea with the company yet, and if he’s sought advice on it, he’s not saying,” Mr Hodgman said.

“That’s an alarming way to manage GBEs that provide such a critical public service and are now in a highly volatile market situation due to entry to the National Electricity Market.”

Mr Hodgman said any debt shifts to Aurora could lead to higher power prices and a reduction in capital expenditure projects, which could affect service delivery, at a time when the Tasmanian electricity market has just opened to competition and the company’s already bracing for loss of customers.