Energy infrastructure investor APA Group will seek to acquire the troubled Basslink interconnector, telling an investor briefing that it hopes to find a resolution to a years-long dispute with the Tasmanian government.
Basslink, which is owned by the Singapore based Keppel Infrastructure Trust, ran into financial troubles triggered by a prolonged outage of the interconnector caused by a failure of its undersea cable in 2015.
Earlier this week, APA announced that it had acquired the rights to Basslink’s outstanding debts at a discount from the receivers – which has a face value of $623 million – with ambitions of completing an outright acquisition and converting the troubled undersea link into a regulated asset.
“The successful acquisition of 100 per cent of the bad debt in Basslink provides APA with the opportunity now to work with the receivers and managers to put that link on a sustainable footing going forward,” APA CEO Rob Wheals told an investor briefing on Wednesday.
“That further demonstrates our commitment to supporting this critical energy infrastructure so that it can continue to deliver reliable interconnected electricity between Tasmania and Victoria, and into the national electricity market.
“If we are successful in acquiring Basslink, we will work with Hydro Tasmania, the customer, the state of Tasmania, the Australian energy regulator and other key stakeholders to convert that link to be a regulated asset.”
The Basslink interconnector allows for up to 500MW of electricity to be transferred between Tasmania and Victoria, but it was forced offline between December 2015 and March 2016 due to a fault in the undersea cable.
The Basslink failure occurred at a tricky time for the Tasmanian electricity system, cutting off a crucial supply of power from the Australian mainland during a period Tasmania’s hydroelectricity storage was significantly depleted by drought, and the state’s only gas generator was also offline.
The supply crisis forced Tasmania to deploy 200MW of costly diesel generators as a stop-gap measure, to alleviate pressure on the state’s hydro generators, while Tasmanian wholesale electricity prices surged to around $250 per MWh.
As a consequence of the outage, Basslink owes utility Hydro Tasmania around $40 million in damages, which led to Basslink’s owners opting to put it into administration while its future is resolved.
The Tasmanian government recently terminated a service agreement it signed with Basslink, escalating efforts to recover the damages and putting further pressure on receivers to resolve the dispute.
APA Group has sought to position itself as an owner of assets that it sees as having significant growth potential throughout the transition away from coal as Australia’s primary source of electricity generation.
APA gas made significant investments in gas infrastructure and, more recently, sought to grow its involvement in the electricity sector through acquisitions of network assets and renewable energy projects.
The ASX listed group, which provided shareholders with a half-year results update on Wednesday, said that it continued to see gas playing an expanded role in Australia’s energy market, particularly as the exit of coal generation accelerates.
“With coal generated electricity retiring over the coming decades, we remain highly confident in the critical role for gas as a source of timely, cost effective and secure energy.” Wheals said.
“It is an essential companion for the ongoing growth in renewable energy. Gas is also the critical energy source in high heat and hard to abate sectors, supporting Australia’s industrial businesses.”
“At the same time, we have continued to invest in renewables, battery storage, microgrids, electricity transmission and the energy solutions of tomorrow,” Wheals added.
