Basslink shock for Hydro Tasmania

THE opening of the Basslink power cable between Tasmania and Victoria this year is expected to cut Hydro Tasmania's annual profit for 2006-07 by $10 million, according to former chief executive Geoff Willis.
Mr Willis, who handed over the reins at Hydro Tasmania to New Zealander Vince Hawksworth last Friday, told The Age the company expected to report a profit of $30-$40 million for the current financial year, compared with an expected $40-$50 million for last financial year and $42 million the previous year. Hydro Tasmania has not released its official results for last financial year.
The drop in profit results from the annual use fee Hydro Tasmania must pay Basslink's owners, National Grid.
That fee will average $90 million a year for the next 25 years and Mr Willis said it would be "in the low $80 million" for 2006-07.
The profit drop reverses the trend of Mr Willis' period as chief executive when they rose steadily every year.
Hydro promoted Basslink as a way of enhancing its operations, by allowing it to import cheap Victorian power during off-peak times and saving its hydro power for high price peaks on the mainland. It was also designed to "drought-proof" Tasmania's hydro system, Mr Willis said.
The economics of Basslink moved against Hydro three years ago when concerns from owners of oil rigs in Bass Strait forced National Grid to install an earth cable on the line, which pushed the price up from $500 million to $780 million.
Hydro is hobbled by debt of $1 billion and Mr Willis recently asked the Tasmanian Government to contribute a further $300 million in equity. He said there had been no decision from the Government.
If the Government made the cash injection, Hydro would be able to move into new areas such as biofuels and servicing the hydrogen economy, Mr Willis said.
He was pessimistic about the likelihood of the states developing their own emissions trading scheme as a way of reducing greenhouse gas emissions.
"It's really a global issue, not even a national issue," he said. "It seems to be difficult for the states to collectively put something like that together."