Wednesday, 10 February 2016

Hydro's Basslink problems: Part 3

This is the third blog in a series on Basslink and includes further detail on the Basslink agreements, how Basslink fees payable by Hydro are calculated, and other comments on Basslink’s performance during the first six years by the Electricity Supply Industry Expert Panel in its March 2012 report (available from the dpac site).

The Report is 800 pages long and covers the entire Tasmanian electricity industry. The following is a cut and paste from Part A of Volume 2 covering Basslink.

The operation of Basslink is governed by two main contracts, the Basslink Operations Agreement (BOA) and the Basslink Service Agreement (BSA). The two agreements are, however, independent of each other and the performance obligations in both are different.

Hydro's Basslink problems : Part 2

The previous post about Basslink was written with a short tabloid op ed in mind, hence some of the detail was missing.  

Finding and fixing the Basslink fault will be the easy bit.

Life after Basslink will probably be a little different when one looks at Basslink in the context of Hydro’s current financial position.

The following contains most of the numbers and detail omitted from the previous blog.

Hydro's Basslink problems

Hydro Tasmania doesn’t own Basslink, but is burdened with most of the costs.

Given what Hydro has outlaid for Basslink fees and associated finance since it became operational 10 years ago it could own it outright had it chosen to develop it from the very beginning.

Instead, at last balance date it still owed $864 million.

That Basslink Pty Ltd will have to fund the costs to repair the broken cable is about the only saving grace in the whole episode.

Sunday, 31 January 2016

Ta Ann dossier

This is a background note on the financial aspects of  Forestry Tasmania’s (FT’s) major customer Ta Ann Tasmania, as the new FT Board contemplates its future.

With a lack of continuity on the Board and uncertainty whether FT management will relapse back to the unfortunates ways of the Kloeden/Gordon era, this is a quick summary for new Directors of tawdry Ta Ann, its profit shifting activities and how it operates as part of a group which dwarfs FT in size and profitability yet is funded by the Australian taxpayer and partly underwritten by an insolvent FT.

Are Forestry Tasmania's losses even greater?

Assumptions of 80 to 90 year rotations in native forests formed the basis for estimating the future sustainable volumes that could be extracted from our public forests as part of the forest peace process.

It would be a pure coincidence if the sustainable rotations led to a sustainable FT.

If timber is sold with inadequate margins as FT does then it won’t be financially sustainable regardless of whether the forests are sustainable.

Yet FT claims logging a small poorly managed production forests like Lapoinya after 60 years of regrowth yielding only 245 tonnes of timber per hectare is a profitable exercise.

It’s only profitable if a lot of costs are ignored.

When FT personnel talk about a coupe being profitable they are usually oblivious to the fact that from a strict accounting viewpoint, profits now accrue each year with changes in the value of trees brought to account

Harvesting a coupe is a cash realisation exercise not a profit making event. This is a crucial distinction which most fail to grasp.

The following is a discussion about the subjective assumptions that underpin the way FT values its forest estate which is the crucial determinant of whether FT is profitable.

Perhaps losses are even greater?

A slightly different set of assumptions would make FT irrevocably unsustainable as it currently operates.

Sunday, 24 January 2016

Forestry profitability

Forestry Tasmania’s revenue from timber sales barely covers the costs of harvest and cartage let alone other costs.

The following short film discusses FT’s assertion that the Lapoinya coupe due to be logged now will be profitable.

What constitutes profitability?

The link is HERE .

Wednesday, 20 January 2016

FT directors quit

They’ve all gone.

All Forestry Tasmania’s independent directors including chairman Bob Annells are heading for the exits.