Monday, 27 March 2017

Hydro Tasmania's Basslink stoush

If force majeure is the reason for the Basslink outage then maybe Hydro Tasmania owes Basslink for the six months when the interconnector was being repaired?

Basslink’s parent company Keppel today released its latest full annual report complete with audited financial statements. It reports on a calendar year basis with the latest year ending on 31st December 2016. We’ve previously seen unaudited figures but the official annual report contains a bit more detail.

On page 22 the report states:

Basslink achieved availability of 99.6% in 2016 assuming the subsea cable fault was a force majeure event.”

That didn’t seem right. The cable wasn’t back in service until 13 June 2016, after almost six months of inaction? How could it have achieved 99.6% availability for the calendar year 2016?

The report continued:

“Basslink’s principal source of revenue is a facility fee paid monthly by HT for the operation of the interconnector. The facility fee is based on the interconnector’s availability and is payable in full if the cumulative availability, based on a calendar year, is equal to or greater than 97% (my emphasis). If the cumulative availability is less than 97%, the facility fee is reduced, with greater deductions as the shortfalls increase and deviate from 97%.”

Could it be that the force majeure event as argued by Basslink means the cable satisfied the availability test as required by the Basslink Service Agreement and Hydro Tasmania owes Basslink for the six months when the cable was being repaired?

Is that what the dispute between Basslink and Hydro is about?

The report comments further on page 123:

“On December 20, 2015, the Interconnector was taken out of service due to a cable fault incident. The cable returned to service on June 13, 2016. The customer, Hydro Tasmania (“HT”), has not paid Basslink facility fees since September 2016 as HT disagrees with Basslink that the outage was a force majeure event.

The independent submarine power cable expert engaged by Basslink completed the investigations in December 2016 and concluded amongst others, that the cause of the cable fault is “cause unknown”. Based on current circumstances and professional advice, Basslink maintains that the outage is a force majeure event.

Basslink has ongoing discussions with HT on matters arising from the outage. While HT has not paid Basslink facility fees since September 2016, Basslink has received good faith payments from HT after the release of the outage investigation report, whilst the outstanding matters are being resolved. Basslink continues to work closely and engage with HT towards achieving a satisfactory outcome.

No legal claims have been received by the Group as at the date of this report.”

The auditor, Deloitte had something to say as well:

 We reviewed the Basslink Services Agreement with HT, the outage investigation report supporting the outage as a ‘force majeure’ event, and also verified the partial payments made by the customer, HT. Based on our procedures, we found the Trustee-Manager’s basis of assessment that the carrying amount of Basslink’s receivables as at December 31, 2016 approximates the recoverable amount to be reasonable.”

Interesting times ahead.

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