Hydro Tasmania is on a path of renewal as we shape our strategic direction in a carbon-constrained world to address the competitive environment, better understand our customers, take advantage of our core business strengths and build stronger relationships with our stakeholders.
The past 12 months have seen progress on the development of a focused plan to provide our customers with products and services they need and that no one else does as well as Hydro Tasmania. The strong bond developed with the West Coast community over the Lake Margaret redevelopment is symbolic of how we want to work with our stakeholders into the future.
Two strategic events during the year - the purchase of a majority share in Momentum Energy and the sale of Roaring 40s’ Asian assets - will help us work more directly with our customers and signal the changing nature of our business and the opportunities offered by targeted and sustainable growth in Australia.
The business environment during the year was dominated by the significant upheaval in the global financial environment. We closely monitored developments and the challenges faced by our customers. While the impact on our business was minimal, we will continue to monitor the situation. Any decline in energy sales and access to funding is likely to impact on our future operations and we have already taken steps to minimise risk, improve our resilience and look for further commercial opportunities.
With the improvement in the hydrological situation, the business was able to focus on rebuilding storages, building its financial strength, improving cash flow and reducing borrowings to turn around its performance after three drought-affected years.
Improved trading opportunities, the reduced use of gas and other positive commercial outcomes limited the adverse financial impact of ongoing below average inflows. Hydro Tasmania’s generation from hydro assets represented approximately 67 per cent of Tasmanian electricity consumption. The remaining electricity consumed in Tasmania came from Basslink imports, gas generation from Bell Bay and the Aurora Energy Tamar Valley power stations, wind and other minor sources.
The $220 million equity injection received last year has strengthened our capital structure and we are now preparing for the follow-up review in 2009/2010.
We have continued to renew and strengthen our relationships with customers and key stakeholders as a strategic imperative. It is our goal to deliver integrated energy products that are valued by customers in a variety of markets. We also want to improve our understanding of issues of high importance to our stakeholders and to include these in the decision-making process of our business.
During the year a project completed on our behalf identified the issues that matter most to our stakeholders and the data collected will enable the business to shape its future interaction and communications.
The improvement in our relationship with the communities in which we operate continues to be rewarding. Highlights during the year included the partnership formed with the Lake River and Macquarie River users to improve irrigation in the region and the development of memoranda of understanding with the Cradle Coast Authority and NRM North.
Environment and Heritage
Our environmental impact and how we manage our activities are of high importance to our stakeholders. Hydro Tasmania recorded no major environmental breaches for the year. However, there were a number of environmental issues as a result of operational and hydrological events that required attention.
Low lake levels continued to be a concern for the business with key water quality issues monitored at Arthurs, Woods, Echo, King William and Great lakes. A research project into threatened species in highland lakes was also initiated.
This year we began a review of the environmental values of the Cataract Gorge in Launceston, including the minimum flow. This work will contribute to a wider study of the Tamar estuary.
Assets and Resources
Our generation assets underpin our trading capability and require significant resources to ensure they are maintained and upgraded. This year Hydro Tasmania spent $69.6 million on ensuring the safety, reliability and renewal of our assets.
Major projects included the $38 million Catagunya project to ensure the future stability of the dam, the modernisation of Poatina and redeveloping the Lake Margaret Power Station.
The closure of the Bell Bay gas-fired power station in April 2009 was a major change to our asset portfolio.
A key focus during the year was to continue to identify new opportunities in the existing hydropower system through the 1000 GWh project, begun in 2007. 425 GWh of opportunity by 2015 has been identified and over the past year an additional 30 GWh of capacity was created. The expected commissioning of Lake Margaret station in October 2009 will add a further 50 GWh.
Hydro Tasmania joined with the Tasmanian Irrigation Development Board to develop an integrated approach to address long-standing management issues in the Ouse, Shannon and Clyde river districts.
Improving safety performance remains a key challenge for the business. While there was a slight improvement in the key measure - the lost time injury frequency rate - which dropped from 3.6 to 2.8, but remained higher than our target for the year of 2.
This highlighted the gulf between our results and our goal of ‘no harm to anyone at any time’. Improving the understanding of safety procedures across the business is our top priority for the coming year.
A highlight during the year was our health and wellbeing program - Healthy Hydro - winning the 2008 Tasmanian WorkCover Safety Award.
During the year we sought to develop a culture across the business that reflects our strategic focus. In particular, we focused on building the capability of our people through increased opportunities to encourage leadership and facilitate change.
The response from staff was extremely positive with the annual engagement survey carried out in June reporting a significant increase across the business for the third successive year, putting Hydro Tasmania in the top 25 per cent of the national benchmark.
Our people once again displayed their support for national crises, raising $26 342 towards the Red Cross Victorian Bushfire Appeal while the business donated an additional $36 342. Staff also raised funds for the Leukaemia Foundation, supported men’s health issues through the Movember Foundation and participated in the Cancer Council Relay for Life.
The past 12 months have seen a significant improvement in our financial position and a strengthening of our strategic direction. We recognise the many challenges that lie ahead and our focus is on gaining a better understanding of the markets in which we operate and the customers with whom we do business.
This is a time of great change in the Tasmanian electricity market and for Hydro Tasmania itself. The environment in which we operate both locally and nationally will continue to evolve and I am confident that we are laying the groundwork for Hydro Tasmania to grow, adapt to changing circumstances and continue to be a profitable business.