Basslink for Sale Chapter Three

 

The Basslink sale process has picked up speed.

We’re likely to see a new owner for Basslink in the next three months.

How the dust settles will affect Tasmania’s plans for the future shape of Tasmania’s electricity industry.

Marinus and the case for more Tasmanian wind farms

 

Project Marinus will unlock the value of Tasmania as a renewable energy powerhouse we are told. The basis for this claim is difficult to find. It is yet to be publicly revealed how consumers and government owned electricity companies, Hydro Tasmania and Tas Networks will benefit.

More wind farms will be needed and it is for that reason this blog takes a close look at Woolnorth Wind Farm Holding P/L (WWF) which has just released its  financials for the calendar year 2021.

WWF produces about 10 per cent of Tasmania’s electricity needs. In 2021 it received an estimated $95 for each MWh of electricity produced, a slight rise from $94 in the 2020 year.

WWF sells its output to Hydro Tasmania pursuant to a power purchase agreement (PPA). Without the PPA, had WWF sold its output into the spot market it would have only earned an estimated $60 per MWh (2020: $74 per MWh).

Hydro therefore subsidised WWF to the tune of $36 per MWh for 2021, an estimated $34 million in total.

The Shenhua Group a Chinese state-owned company owns 75 per cent of WWF acquired from Hydro which still owns the remaining 25 per cent. Shenhua bought its share subject to Hydro agreeing to the PPA.

Over the remaining term of the PPA Hydro is likely to pay subsidies to WWF which will be more than enough to repay WWF’s borrowings which at Dec 2021 stood at $239 million.

Had Hydro not sold its 75 per cent share it would have been able to repay the borrowings used to construct WWF. Instead, it pays subsidies to WWF to do the same thing.

It follows the pattern established by the Basslink deal, rather than the government owned Hydro building and owning the cable, it was decided to pay someone else to do it. The payments that have subsequently been made would have paid for the cable twice over. Apart from the two carbon tax years there’s not a lot to show from the now abandoned Basslink deal except Hydro with more debt and a community that has suffered as a result.

The pattern of privatising benefits and socialising losses is evident from WWF’s latest financials. In the absence of any clear evidence of how benefits and costs of the Marinus Project are to be shared one is left with the forlorn conclusion that past practices are likely to be repeated.

Tasmanian Budget delusions

 

Barely a year ago Treasury’s Fiscal Sustainability Report revealed large icebergs on the horizon which will require Tasmania to chart a different course. Captain Gutwein had a good view from the bridge of what lay ahead. Unfortunately he has since resigned his commission.

New Treasurer Michael Ferguson has not yet fully acquainted himself with the outlook from the bridge if his Mercury Talking Point article on 2nd June (Tassie has the lowest net debt in the nation ) is anything to go by.

“From 2022-23, we will achieve positive net operating cash flows. This means that the Government continues to live within our means”, Mr Ferguson stated.

Most people would assume this means operating receipts will be greater than operating expenses. Government accounting standards however allow net operating cash to include capital grants from the Australian government.

Needless to say, capital outlays on infrastructure for such items as roads and the Bridgewater Bridge for which the grants will be paid to us, aren’t included when calculating net operating cash.

Nor are equity contributions into government businesses such as Tas Rail and Tas Irrigation also sourced from the Australian government as capital grants.

Include all outlays and there are large cash deficits in every year and for at least the next 15 years according to the 2021 Fiscal Sustainability Report. There is no way this can be described as living within our means.