Hydro facing 'perfect storm'

OUTGOING Hydro chairman David Crean has warned of a perfect storm brewing over record profits in one of his last official speeches at the helm.

Dr Crean spoke before a crowd of about 80 business representatives, board members and special guests after a Hydro meeting in Launceston on Tuesday night.

He announced that the company was set to announce a record annual cash profit for the past financial year, far above last year's $230 million gain.

Dr Crean said Hydro's total returns to government in the past five years would be in excess of $700 million.

But he warned it would be the last year of record profits for the government business enterprise "for some time".

"Last year I spoke of dark clouds on the horizon, and now those clouds have gathered into the perfect storm," Dr Crean said yesterday.

"Abolishing the carbon tax will strip $70 million from Hydro's annual profits, and softening demand for Tasmanian power is having a significant impact on our revenues."

Dr Crean said that if the Renewable Energy Target scheme was scrapped with nothing put in its place, the effect on Hydro's bottom line would be severe.

"Hydro has raised several hundred million dollars in revenues from the RET scheme since 2001," he said.

"It is worth several hundred million more should it extend to 2030 as planned."

Dr Crean said Hydro must be swift in responding to the range of challenges to minimise any potential impacts.

He said the company must grow its interstate retail business, reduce costs and work with government to ensure that Tasmania was not disadvantaged by changes to the RET system.

Dr Crean said that although Hydro had enjoyed four years of record profits, it was not all that long since its three worst years of inflow between 2006 and 2008.

"Hydro must now focus on reaching profitability levels which occurred prior to the carbon price being put in place," he said.

Dr Crean said the company could return to those levels (of about $70 million cash profit a year) in the "medium term", but he could not specify how many years away that might be.

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