Media release – Guy Barnett, Minister for Energy and Emissions Reduction, 27 October 2021
Acting in the best interests of Tasmanians on Basslink
The Tasmanian Government will always act in the best interests of Tasmanians and to ensure our State’s energy supply remains secure
Yesterday I wrote to the owner of Basslink, Keppel Infrastructure Trust, to advise the Tasmanian Government and Hydro Tasmania will not be extending the Standstill Agreement.
Following the Arbitration outcome in December 2020, the Standstill Agreement was put in place between Basslink Pty Ltd (BPL), and the State of Tasmania and Hydro Tasmania in relation to the failure of the Basslink cable in 2015.
As part of that outcome which found in the State and Hydro’s favour, the Arbitrator, former High Court Chief Justice Mr Robert French AC, found a force majeure event had not occurred, and awarded the State and Hydro Tasmania in excess of $70 million, including costs related to the cable failure.
In December 2020, the State and Hydro Tasmania agreed in good faith to enter into a Standstill Agreement, preserving the rights of the parties and allowing negotiations to take place to satisfy BPL’s obligations under the Arbitration outcomes, while BPL attempted to refinance its debt.
BPL’s obligations included actions to improve the operational performance and reliability of the cable.
For nearly 11 months, Tasmania has acted in good faith in the hope that a resolution could be found, including extending the Standstill Agreement in May this year to allow BPL more time.
However, the Award payments to the State and Hydro Tasmania remain outstanding and BPL has not adequately progressed the commercial and engineering requirements. It has also failed to secure refinancing.
The Government believes that further negotiations are unlikely to lead to a satisfactory resolution and the current situation cannot be allowed to continue indefinitely.
As the Standstill Agreement expires today, the State and Hydro Tasmania will now pursue their legal rights.
The Government is taking this action to protect the interests of Tasmanians as money owed to the State and Hydro Tasmania is ultimately owed to the people of Tasmania.
We are also confident this legal dispute will not impact the State’s energy security. Importantly, Basslink will continue operating, transferring energy between Tasmania and Victoria.
Tasmania’s energy supply is very secure, with storage levels above the prudent storage levels. In fact, they are sitting at a healthy 51.4 per cent – the highest levels since 2014.
The Energy Security Risk Response Framework put in place by this Government following the Basslink outage is working well, delivering us confidence and protecting our energy supply.
Our energy security has been further strengthened through our achievement of 100 per cent self-sufficiency in renewable electricity. Backed by our 200 per cent Tasmanian Renewable Energy Target and increasing wind generation, the case for further interconnection across Bass Strait through Marinus Link remains strong.
BPL will now need to work with its owner and financiers on how it will meet the Arbitration outcomes.
The Tasmanian Government will continue implementing its strong plan to deliver energy security in this State, while also protecting the interests of Tasmanians.
Media release – Hydro Tasmania, 27 October 2021
Update on Basslink arbitration outcome
Hydro Tasmania notes the announcement made today by the Tasmanian Government that the Standstill Agreement put in place in December last year following the Arbitration outcome between Basslink Pty Ltd (BPL), the State of Tasmania and Hydro Tasmania will expire today.
In December 2020 the Arbitrator, Mr Robert French AC, awarded the State and Hydro Tasmania in excess of $70 million relating to the failure of the Basslink cable in 2015 and costs related to the Arbitrations.
As part of that Arbitration outcome, Mr French agreed with Hydro Tasmania’s position that the 2015 subsea cable failure was not a force majeure event and that it was instead caused by thermal overstressing arising from BPL’s operation of Basslink.
Mr French found that BPL was in breach of the Basslink Services Agreement. Additionally, BPL was required to undertake a number of actions to improve the operational performance of the cable.
In December 2020, the State and Hydro Tasmania agreed in good faith to enter into a Standstill Agreement that preserved the rights of the parties and created a framework for negotiations to take place on commercial and engineering matters, while BPL attempted to refinance its debt and meet its commitments arising from the Arbitrations.
In May 2021, the State and Hydro Tasmania agreed to extend the Standstill Agreement until Wednesday 27 October 2021 to allow BPL more time.
Hydro Tasmania has acted in good faith in the hope that a resolution could be found.
Unfortunately, Hydro Tasmania and BPL have been unsuccessful in reaching agreement on a resolution with respect to certain outstanding matters related to the arbitrations. In addition, BPL has not satisfactorily progressed the actions required to improve the cable’s operational performance and BPL has failed to pay Hydro Tasmania the costs awarded by the Arbitrator.
With the expiry of the Standstill Agreement, Hydro Tasmania will now progress its legal rights.
Dean Winter MP, Shadow Minister for Energy, 27 October 2021
Energy security in full, dangerous meltdown under Barnett
The management of Tasmania’s energy security is, under the Liberals, once again under threat.
Minister Guy Barnett announced that negotiations and mediation attempts have failed and Hydro Tasmania will take further legal action against a financially troubled holder of a critical piece of Tasmania’s energy security framework.
“In 2016, we saw the risks to our state exposed by not having the cable available, plunging the state into an energy crisis under the Liberals,” Mr Winter said.
“The risk created by the financial position of the Basslink operator are obvious and so the decision to recommence legal action against Keppel needs to be further explained.
“Labor will be seeking a thorough explanation through the Parliament and upcoming Hydro Tasmania scrutiny hearing.”
Mr Winter said energy security concerns do not end there.
“The operator of Tasmania’s gas pipeline has raised concern about the threat to Tasmania’s energy security, resulting from the position Hydro Tasmania is taking to replace the current Gas Transportation Agreement on the Tasmanian Gas Pipeline that expires on 31 December this year,” Mr Winter said.
“It has genuine concerns that Liberal Government will effectively decommission the Tamar Valley Power Station Combined Cycle Gas Turbine.
“We have been here before under the Liberals and it ended in an energy crisis.
“Why would the government choose to mothball a critical piece of Tasmania’s energy security when there is uncertainty about Basslink’s future?”
The ongoing availability of the CCGT was identified as critical to Tamania’s energy security by the Government’s own expert taskforce in 2016, when it said:
“…the Taskforce considers that its Interim Report recommendation that “the TVPS, particularly the combined cycle gas turbine (CCGT), should be retained at least until there is a reliable alternative in place to mitigate against hydrological and Basslink failure risk” (recommendation 24) remains appropriate.”
