Hydro Tasmania has delivered a strong financial performance for the year on the back of a welcome return to average rainfall, ongoing cost containment and improved trading opportunities in the National Electricity Market (NEM).
Tabling its annual report in October, the business reported an operating profit of $72.9 million for 2009-10 ($38.6 million in 2008-09), which is calculated before movements in fair value of assets and liabilities are added, and based on a turnover of $727 million.
While revenue from the Tasmanian component declined due to increased competition, there was a significant increase in mainland sales. Hydro Tasmania’s retail business Momentum, which is included in the overall revenue figure, continued its excellent growth from its operations on mainland Australia.
Hydro Tasmania chairman, Dr David Crean said the overall result for 2009-10, when compared to the previous two years, demonstrated the importance of rainfall to Hydro Tasmania’s financial performance and the importance of Basslink to the business and the state.
Overall, net operating cash was $178 million ($43.8 million in 2008-09), while capital expenditure was $95.5 million ($81.2 million in 2008-09). Net debt declined by $41 million (from $904 million in 2008-09). The declared dividend for 2009-10 was $10.2 million.
Dr Crean said the overall result reflected a combination of increased inflows into hydro storages and the strong financial management of a business competing in a highly competitive national market that was providing significant returns to its owners – the people of Tasmania.
“Rainfall substantially determines our financial performance,” Dr Crean said. “This is clearly evident when you compare our results for the year with the years impacted by the drought.
“The past three years have also demonstrated the importance of Basslink to the organisation and to Tasmania. The return to average rainfall this year gave Hydro Tasmania total flexibility in exporting to the mainland when prices were high in the spot market and importing back to Tasmania when prices were low with much improved trading opportunities.
“Having Basslink in place during the years of drought kept the lights on in Tasmania and avoided severe power restrictions and potential blackouts. However, this came at a cost of some $100 million each year due to net revenue foregone, which was totally absorbed by the business at no cost to consumers.”
Dr Crean said that despite the many positives in 2009-10, the past 12 months had been challenging with increased competition and greater scrutiny of Hydro Tasmania’s operations and commercial behaviour, as well as growing community concern over higher power prices, which has been felt in all states and not just Tasmania.
“Hydro Tasmania continues to strive to be more efficient and reduce costs while setting a clear growth strategy to strengthen our financial position, reduce our debt and increase returns to our owners,” he said.
“Our five-year growth strategy encompasses structured financial consolidation and discipline, electricity sales growth interstate, primarily through Momentum, and increasing our innovative capability.
“The aim is to build and maintain a sustainable business for future generations while returning the benefits to the Tasmanian community.”
Under this strategy, Hydro Tasmania forecasts that by 2015 its debt will be further reduced while returns to the Tasmanian Government during that time will total more than $400 million.