Carbon tax, higher output deliver record $238m for Hydro
The new Coalition government has vowed to remove the carbon tax, although the timing is still uncertain with the necessary legislation yet to be finalised.
In the year to June, Hydro Tasmania more than doubled its pre-tax profit to a record $238 million, as it benefited from the carbon tax and higher output, with a rise in the volume of electricity sold on the mainland.
Hydro Tasmania benefited from the increase in the wholesale electricity price after the introduction of the carbon tax, which contributed $70 million to its bottom line.
Its Momentum sales arm, which has carved out a large position in the mainland retail electricity market, boasted revenue of $800 million and contributed $17 million to group profits in the year.
Chairman David Crean said the company would generate returns of more than $450 million to the state over the next two years.
In the present financial year, the business will return an estimated $263 million to the Tasmanian government, which includes a dividend of $116 million. This is up from $125 million, including a $51 million dividend.
The outlook for the year ahead is more uncertain due to lower electricity demand, and the question over carbon pricing, it said.
On June 1, Hydro Tasmania took control of the Tamar Valley gas-fired power station and is pursuing plans for a large 600-megawatt wind-powered power station on King Island, in the Bass Strait.
This project would involve as many as 200 turbines being built.
Frequently Asked Questions about this Article…
The carbon tax boosted wholesale electricity prices, and Hydro Tasmania said the policy contributed about $70 million to its bottom line, helping drive stronger earnings in the year to June.
Hydro Tasmania more than doubled its pre-tax profit to a record $238 million in the year to June, a result driven by higher output, increased mainland electricity sales and the positive impact of the carbon tax.
Momentum, Hydro Tasmania’s retail sales arm on the mainland, generated about $800 million in revenue and contributed $17 million to group profits, reflecting its growing position in mainland retail electricity markets.
The company’s chairman said Hydro Tasmania would deliver more than $450 million to the state over the next two years, and the business expects to return an estimated $263 million to the Tasmanian government in the present financial year, including a $116 million dividend.
Hydro Tasmania cites lower electricity demand and uncertainty over carbon pricing as key risks to the outlook. The new Coalition government has pledged to remove the carbon tax, but timing is unclear and legislation has not been finalised.
On June 1 Hydro Tasmania took control of the Tamar Valley gas-fired power station and is pursuing plans for a large 600-megawatt wind-powered project on King Island in the Bass Strait, which could involve up to 200 turbines.
Carbon pricing can change wholesale electricity prices and company profits quickly: Hydro Tasmania directly benefited from the carbon tax (about $70 million), so any policy change—such as repeal or replacement—can materially affect earnings and dividends.
Investors should monitor electricity demand trends, any developments on carbon-pricing legislation, updates on returns and dividends to the Tasmanian government, and progress on new assets like the Tamar Valley station and the King Island wind project.
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