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Hydro Tasmania - Power Station Remaining Useful Life

Dr Rosalie Woodruff MP

Dr Rosalie Woodruff MP  -  Friday, 2 December 2022

Tags: Hydro Tasmania

Dr WOODRUFF - Thank you. Minister, on page 31 of Hydro's annual report, it notes the residual value and remaining useful life of its assets are annually reviewed. What is the remaining use for life of the Tarraleah power station and for each of the other remaining 29 hydro power stations? I am happy to take that on notice if that would suit you.

Mr BARNETT - I'll pass to the CEO.

Mr BROOKSBANK - Thank you, minister, and through you. The individual asset life for the assets we have is not to hand, so we will take that question on notice.

What I would say is that Hydro Tasmania has a 10-year strategic asset management plan which outlines the work that we will do on each of our assets over a 10-year period. The purpose of that plan is to ensure we are budgeting and forecasting our capital expenditure and the works required to maintain our plant in safe, efficient and productive capacity.

As we know, Hydro Tasmania and Tasmania is blessed with some very long-running valuable assets - Tarraleah, for example, commissioned in the late 1930s. These assets require considerable work to maintain them. The reason we review the asset lives each year is because the work we have done in the intervening period between the previous review, and the year in review, will have reset the economic and the productive life of those assets.

Tarraleah, for example, with reference to a question you asked earlier. Tarraleah has two pathways. One would be a redevelopment; the other would be a refurbishment. A refurbishment is akin to what our asset management program is for, for our existing asset base.

The west coast upgrades, which the minister referred to earlier, also are existing assets - six turbines and five stations that will undergo a level of refit and refurbishment over the next five years, starting on 25 October, with the first outage. That will reset their economic and useful lives, based on prudent economic and asset management principles.

Dr WOODRUFF - Thank you. Minister, what are the residual values of each of the Hydro power stations that are managed? I am wondering whether the residual values include demolition and refurbishment costs that the CEO was just referring to? If it does, whether that would result in negative values for some of those assets?

Mr BARNETT - Thanks for the question. That is an operational matter, so I will pass to the CEO.

Mr BROOKSBANK - Thank you, minister, and through you. The values get reset each year in line with revaluation of our productive assets. So, in terms of individual asset values, it is not a set-and-forget, it's a revalue each year. You see that movement flowing through our balance sheet and, if required, through the profit and loss.

In terms of the productive life of an asset without refurbishment, then clearly these are older assets. Without refurbishment you wouldn't have reliable, safe assets to run, so in short, the answer is that we reset those economic values each year in line with market conditions for the future productive output of those assets.

Dr WOODRUFF - Thank you. Could you take on notice the question about the residual values for each of the Hydro power stations? Is that possible, because there are too many to talk about?

Mr EVERY-BURNS - I would like to make a point, if I may. The company operates on a continuing basis and we don't sit back with any view that any of the assets will end their life in a number of years. We need the assets to continue generating, so all our forward plans don't have a figure about the end of life of an asset. The point is we've got continuous refurbishment going on so the life of those assets just continues into the future. We can't give a date or the residual value of a single asset because it's planned for continuity, it's planned to be here forever and a day.

Dr WOODRUFF - Thank you. I think there is a misunderstanding because the annual report says that you provide an annual review of residual values for each power station. My question was about this year's annual review for each of those power stations. Can I get that on notice?

Mr BARNETT - I am pretty sure we can assist the member. I am more than happy to take it on notice and assist the committee.

Dr WOODRUFF - Thank you.