Increased profit demonstrates business value to State

22 September 2011

Please note: Hydro Tasmania's annual report, including a detailed Financial Report, will be tabled in the Tasmanian Parliament in October.

Hydro Tasmania has completed its most successful year since disaggregation of the HEC in 1998 as it demonstrated its value to the State as Australia’s largest clean energy business.
 

Strong revenue growth on the back of increased operations on mainland Australia saw the business record a 37 per cent increase in profit before fair value to $100 million and net operating cash of $160.8 million. This will see returns to the Tasmanian Government in 2011-12 totalling around $118 million, including a dividend of $49 million.  (See attachment for further details)

Mainland revenue more than doubled in 2010-11. At the same time, Hydro Tasmania’s revenue from non-contestable customers in Tasmania declined by 43 per cent while revenue from Major Industrial customers in Tasmania increased.

Chairman Dr David Crean said the business continued to implement a strategy focused on strengthening its financial position, reducing risk and increasing returns to shareholders.

“This has been a strong performance in another challenging year for a business that is proving how valuable it is to the State and its shareholders,” Dr Crean said.

“While the revenue growth has been mostly on the mainland through our retail business Momentum and our operations in the National Electricity Market, all the benefits are coming back to Tasmania.

“A price on carbon will only increase these benefits and demonstrate the true value of Hydro Tasmania and the State’s investment in renewable energy over the last 100 years.”

Hydro Tasmania continued to reduce costs to remain a low-cost producer. This has improved business profitability and will help build business resilience to any future period of sustained low inflows.

Hydro storages currently stand at 56 per cent, the highest they have been since January 2001. High inflows during the reporting period yielded the equivalent of 10,700 gigawatt hours (GWh) of electricity.

This considerably helped the business in terms of cash flow, profitability and balance sheet strength.

CEO Roy Adair said Hydro Tasmania had made significant progress towards its strategic goals during 2010-11, achieving a number of key milestones along the way.

The strong financial result was reinforced by a concentrated effort to achieve ongoing reductions in Hydro Tasmania’s operational cost base, while at the same time maintaining and improving a strong level of service performance.  

Hydro Tasmania’s overall performance would not have been achieved without Basslink which recorded high exports of 1311 GWh across the link during the year.

Since it began operating in 2006, the link has demonstrated its dual function of security of supply and keeping the lights on in times of drought, and generating significant revenue when average rainfall or better has occurred.

“Basslink provides the State with the capacity to reap the benefits of the community’s investment in renewable energy while providing future security of supply to the State’s economy and reducing the volatility of the impact of climate change,” Mr Adair said.

He said Hydro Tasmania had the lowest carbon intensity of any large generator in the NEM. While the level of the benefit of the carbon price to the business was yet to be confirmed in detail, there was no doubt its introduction would better reflect the value of the clean energy output from the State’s hydropower generation.

“This will lift the value of our whole business and help to generate increased shareholder returns in the long term,” he said.

"Added to this is planned further investment in wind projects in Tasmania and on the mainland and looking at other opportunities to back our retail sales and diversify our revenue streams.

"This strategy puts our business in a strong position to maintain our Tasmanian assets, move forward with projects such as the Musselroe wind farm and pursue new business opportunities to help make the State the nation's renewable energy powerhouse."

Hydro Tasmania's annual report, including a detailed Financial Report, will be tabled in the Tasmanian Parliament in October.

See below fore Hydro Tasmania key results and achievements 2010-11


For media inquiries: contact Pat Garnham on 0439 325 491

Hydro Tasmania Key Results 2010-11

 

 

10-11

09-10

Gross revenue

$812.8m

$726.9m

Profit before fair value

$100m

$72.9m

EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation)

$264.9m

$236m

Cash from operations

$160.8m

$178m

Net debt

$964m*

$863m

Capital expenditure

$64.3m

$95.5m

Returns to Government (dividend, guarantee fee, tax equivalents)**

$51.7m

$13.3m

 

 

 

Total Assets

$5,506m

$5,129m

Total Liabilities

$3,493m

$3,247m

TOTAL EQUITY

$2,013m

$1,882m

 

*Increased as result of the acquisition of $143.7 million of Roaring 40s’ debt following the end of the joint venture with CLP. This figure is expected to decline significantly in 2011-12 as the business pursues a new wind development model, including the divestment of up to 75 per cent ownership of Woolnorth to help finance the Musselroe wind project.
** Expected to more than double to around $118m in 2011-12

Key achievements for the year

  • New brand launched to underpin strategy for growth through sales
  • Strong financial performance; mainland sales increased while Tasmanian sales decreased overall; $13m of annual operational savings achieved
  • Momentum (retail) and Entura (consulting) both profitable entities
  • Agreement with Rio Tinto signed
  • Detailed 10-year Asset Management plan developed
  • Roaring 40s disaggregation
  • One million hours worked without lost-time injury; lowest LTI frequency rate on record
  • Staff engagement in top quartile of Australian businesses
  • Community Initiative established
  • 80 per cent of surveyed stakeholders rated our performance as good or excellent