State-owned energy generator Hydro Tasmania was forced to buy the seldom-used site from Aurora Energy last year, under directions from the former government.

Energy Minister Matthew Groom told a scrutiny hearing yesterday that Hydro was made to pay $360 million for the station, which he said was only worth $200 million.

‘‘That asset has now been lumbered onto Hydro,’’ Mr Groom said.

‘‘It is part of the difficult circumstances they confront and what the government is doing is working with the Hydro to deal with that issue.’’

Mr Groom said the government was now actively investigating selling the plant’s largest turbine, which is capable of generating more than half the site’s energy.

The sale would reduce the station from a base load generator to one capable of responding only to peaks in demand.

However, Mr Groom said no final decision had been made.

‘‘We need to be satisfied that any sale of the Tamar Valley Power Station combined cycle unit does not present an unacceptable risk from an energy security perspective,’’ he said.

Opposition Leader Bryan Green warned it could prove impossible to find a buyer for the debt-laden plant.

Mr Green said the former government would have jumped at the chance to sell the plant, but there had been no takers.

Hydro chairman Grant Every-Burns said transferring the site from Aurora Energy to Hydro last year was probably the right decision.

‘‘Decisions were made at points in time that probably made sense at the time,’’ he said.

But Mr Every-Burns said it was highly unlikely that   the site would operate at full capacity any time soon.

‘‘It is fundamentally uneconomic to run the combined cycle plant in large amounts of output as was previously planned, because we simply lose more money doing it,’’ he said.

Greens leader Kim Booth accused the government of trying sell off the best bits of a ‘‘rusty lemon’’  that  should never have been commissioned.