Basslink for sale?

 

By any measure 2020 was annus horribilis for Basslink P/L, the owner of the existing Bass Strait interconnector, currently operated by Hydro Tasmania.

Basslink’s recently released annual financial report for the calendar year 2020 revealed its battle-scarred balance sheet after unsuccessful legal battles arising from the 2015/16 cable outage.

In December 2020 Basslink was forced to write off $30.8m which it claimed Hydro owed. The debt write-off related to whether the cable outage was a force majeure event. After taking six months to repair the cable, Hydro maintained because it was unavailable for half the year, the agreed monthly fee upon resumption should be reduced by the availability adjustment factor. Basslink argued the cable fault was an Act of God, a force majeure event, and hence the adjustment factor didn’t apply, and the full fee was payable. The arbitrator didn’t accept God was involved and found in Hydro’s favour. 

The arbitrator was also needed to resolve other disputes between Basslink and Hydro and between Basslink and the State government in respect of the cable failure. In the latter case the arbitrator awarded the State government $46.7 m including costs and interest. In the former case Hydro was awarded $26m, with costs yet to be decided. Basslink has raised a provision account which suggest another $30.9m may become payable. That’s a total of $103.6m Basslink will have to pay Hydro and the government.

Gutwein's grand delusion

 

The Budget papers elicited a memory of an Irish joke which I’m sure you’ve all heard. In answer to a tourist seeking directions to Dublin, the local responded: ”Well Sir, if I were you, I wouldn’t start from here”.

If we are to move to a better place, we shouldn’t be starting with the latest budget delivered by Premier Gutwein. The narrative is awfully misleading. “Last year we leveraged our strong balance sheet to support our community and underpin our economy”, the Premier said. ‘Leveraged’ is right, we borrowed more. ‘Strong balance sheet’ is wrong ‘cos it’s not. The State government’s net assets are no greater than the combined net assets of local governments. Because government businesses are inextricably entwined with the rest of the government sector, one needs to look at total State sector when passing judgement on our supposed strength.  The State’s total assets, including those of government businesses will be $37 billion by 2025. There will be $9 billion of cash and investments (mainly Tascorp and MAIB) and $28 billion worth of land, buildings, infrastructure etc. But there will be $28 billion of liabilities including borrowings of $11 billion and unfunded superannuation of $10 billion Net financial liabilities therefore will be $19 billion. As Saul Eslake recently observed, relative to our size this is larger than all other States and territories except for Northern Territory. Premier Gutwein always likes to draw attention to our low borrowings, our net debt, compared to other states. This is deliberately misleading. It’s our total financial liabilities that’s the relevant metric.