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Category: Electricity Energy and Utilities

Basslink financial future under scrutiny

Tuesday, 18 Oct 2016 15:27:11 | Richard Baines

A rupture "the size of a human thumb" caused the shut-down of the cable. (Supplied: Basslink)

The owner of the Basslink undersea power cable is in talks with banks to keep operating, after its only customer Hydro Tasmania stopped paying the cable's facility fee.

Key points:

  • Thumb-sized tear disables cable for six months
  • Basslink, Hydro Tasmania disagree over cause of fault
  • Hydro Tas withholding fee due to disagreement

The undersea electricity cable — known as the Basslink Interconnector — connects Tasmania to Victoria, "protecting Tasmania against the risk of drought-constrained energy shortages while providing Victoria and southern states with secure renewable energy during times of peak demand," the company states.

But in December 2015, a rupture "the size of a human thumb" caused the shut-down of the cable for more than three months.

The shutdown coincided with record low dam levels servicing Tasmania's hydro-electric generators, plunging the state into an energy crisis.

The repair which cost hundreds of thousands of dollars a day was exacerbated by the difficulty in finding the location of the fault.

Now, in its quarterly report to the Singapore stock exchange delivered on Monday, Basslink's parent company Keppel Infrastructure has revealed the cable-owner's depth of financial trouble.

Basslink looks to insurance payout to keep operating

A worker helps lay a cable for the Basslink power project in 2006 Photo: The Basslink cable, connecting Tasmania to Victoria, began operating in 2006. (ABC News)

The cable's only customer, the state-owned Hydro Tasmania, is still at loggerheads with Singaporean-owned Basslink over the cause of the fault, with the cable owner claiming a "force majeure" event, or unavoidable catastrophe.

Basslink's report said Hydro had stopped paying its cable fees as a result of the disagreement, with the cable owner now "in discussions with the banking syndicate" for release of part of the $40 million insurance payout to continue operating.

"Hydro Tasmania has not paid Basslink facility fees since September 2016 (for which Basslink did not receive prior notification) as Hydro Tasmania disagrees that the outage is a force majeure event," the report said.

Eleven-million dollars of the insurance payout had already been spent on the cable's repair.

The Basslink cable being cut as repairs begin. Photo: The cable is cut as part of the repair in 2016. (Supplied: Basslink)

Independent economist John Lawrence, who was called to give evidence at a Senate inquiry into the energy crisis, said it put Basslink in a difficult position.

"If there's no money coming in and what cash reserve they had from the insurance has also been withheld by the banks, it appears as if temporarily there's no cash in the bank to pay their way," Mr Lawrence said.

"It's a big problem, while they are a member of a much larger group the whole thing is set up so that they pay their own way and at this stage they're unable to."

He said Basslink had two options.

"They'll either have to tidy things up with Hydro and resume paying the facility fee, or they'll need a bailout from their parent company Keppel."

Fears Basslink could 'fall over'

Greens Energy spokeswoman Rosalie Woodruff is concerned about what could happen if those options are unsuccessful.

"The real risk is that Keppel ... could walk away. If they walk away then Basslink is at risk of going into liquidation," she said.

"If Basslink falls over, then somebody will have to come in and resurrect it. Who would that be?"

Hydro Tasmania has said the matter with Basslink should be resolved through legal process.

"They have no bearing on Tasmania's energy security or Hydro Tasmania's day-to-day operations," a spokesman said.

"Like any business, Hydro Tasmania needs to be able to protect its commercial and contractual interests by legal means, if necessary."

In a statement, a Tasmanian Government spokesperson said the Energy Minister Matthew Groom was being "kept abreast of developments as appropriate" and that "Hydro's dealings with Basslink are a matter for Hydro".

A Basslink spokesperson described discussions with Hydro Tasmania and the banking syndicate as "ongoing".

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