This is the eleventh post is the second of four related to the financial position of Hydro Tasmania with a focus on the balance sheet. All eighteen chapters are related to how Hydro Tasmania actually earns money, how the National Electricity Market shapes its fortunes, and why the numbers in its accounts now matter more than at any time in the past two decades. It also seeks to dismantle the myths that have dominated public debate.
I thank John Lawrence for his assistance in preparing this information, his attention to detail and research over many years as we have worked together to better understand one of the most complex areas that impact our state, economically and functionally.
Glossary of acronyms used in this chapter
AEMO – Australian Energy Market Operator: Runs the NEM, dispatches generators, manages system security, and publishes key planning documents.
IRR / IRRs – Inter‑Regional Revenues / Inter‑Regional Residues: The financial mechanism that captures price differences between NEM regions. Historically a major windfall for Hydro.
LGC – Large‑scale Generation Certificate: A renewable energy certificate created for each MWh of eligible renewable generation.
MI – Major Industrials: There are four – Bell Bay Aluminium, Temco, Nyrstar and Norske Skog who consume 55 per cent of the State’s electricity via contracts with Hydro.
Hydro Tasmania – The Balance Sheet – What Hydro Really Owns and Owes
If underlying profit tells us how Hydro performed this year, the balance sheet tells us how much risk it is carrying into the next. It is the second half of the story – the part that reveals what Hydro actually owns, what it owes, and how its financial position has shifted beneath the surface.
Hydro’s statutory balance sheet is notoriously difficult to interpret. It is cluttered with derivative assets and liabilities that swing with market prices, actuarial adjustments to the defined benefit superannuation liability, and revaluations of property, plant and equipment that can add hundreds of millions of dollars without improving Hydro’s cash position by a single cent. To understand Hydro’s real financial position, the balance sheet needs to be stripped back to its essentials: the assets Hydro uses to run the system, and the liabilities it must ultimately pay.
Once you reconstruct the balance sheet in this way, the picture becomes much clearer.
| BALANCE SHEET $m | 2024 | 2025 | Change |
| ASSETS | |||
| Cash/receivables/prepayments/inventories | 323.3 | 434.1 | 110.8 |
| LGCs on hand | 48.5 | 20.9 | -27.6 |
| Property Plant Equipment & Software | 4,072.2 | 4,833.2 | 761.0 |
| TOTAL ASSETS | 4,444.0 | 5,288.3 | 844.3 |
| LIABILITIES | |||
| Trade & other payables | 276.4 | 422.7 | 146.3 |
| Loans & borrowings | 811.8 | 1,046.5 | 234.6 |
| RBF super liability | 272.0 | 269.4 | -2.6 |
| Employee provisions | 32.7 | 35.2 | 2.5 |
| Onerous contracts LGCs | 82.2 | 142.7 | 60.5 |
| BassLink liability | 5.8 | 0.0 | -5.8 |
| Interest swaps | 186.7 | 159.8 | -26.9 |
| Energy price derivatives | 158.6 | 157.1 | -1.5 |
| TOTAL LIABILITIES | 1,826.1 | 2,233.3 | 407.2 |
| NET ASSETS | 2,617.9 | 3,055.0 | 437.1 |
With the above, the first thing that stands out is the sheer scale of the increase in assets – more than $800 million in a single year. But almost all of that increase comes from a revaluation of Hydro’s physical assets. It is an accounting uplift, not an operational improvement. It does not give Hydro more cash, more flexibility, or more resilience. It simply increases the book value of the hydro system.
The more important story sits on the liability side. Total liabilities rose by more than $400 million. Borrowings alone increased by over $230 million, pushing Hydro’s debt to levels not seen in a while. The 30th June 2025 balance of $1,046 million is well below Hydro’s $1.5 billion TASCORP borrowing limit, but this is misleading. It reflects the position on a single day, not the pattern across the year. In reality, Hydro almost certainly drew on that facility repeatedly to manage liquidity swings – paying the Australian Energy Market Operator (AEMO) before major industry (MI) customers paid Hydro, covering Large Generation Certificates (LGC) purchases before LGC sales settled, and smoothing the timing mismatch between Inter-Regional Revenues (IRR) accruals and IRR receipts. The facility is functioning as a working‑capital buffer, not a strategic reserve.
Trade and other payables jumped sharply as well, rising by more than $140 million. That movement is not a sign of strength. It reflects a tightening liquidity position – a business leaning more heavily on its creditors as cash flow weakens. The receivables spike tells the same story from the other side: revenue booked but not yet received in cash, particularly from IRRs, LGC sales, and MI settlements. Together, these movements show a business using its working capital to bridge gaps that operating cash can no longer cover.
The defined benefit superannuation liability remains a significant burden, sitting just below $270 million. This is not a theoretical number. It behaves like debt. Just as the State government chose not to borrow to fully fund the now closed defined benefit superannuation scheme, Hydro followed suit and opted to pay benefits as they fall due, which makes the liability a de facto borrowing. In 2024/25 the amount paid was $20 million. These payments will probably peak at around $25 million a year in the next 8 years. The liability itself will peak at around $350 million. It is a real claim on Hydro’s future cash.
The onerous LGC contract is another structural weight as we saw in Chapter 6. The liability increased from $82 million to nearly $143 million, reflecting the widening gap between the fixed prices Hydro must pay for certificates and the much lower prices they now fetch in the market. This is unlikely to be a one‑off. It is likely to continue until the LGC scheme finishes in 4 ½ years’ time.
Then there are the derivative liabilities – more than $300 million across interest rate swaps and energy price derivatives. These are not cash losses today, but they represent future cash outflows or reduced future revenue, unless prices move in Hydro’s favour. They move with market conditions, not with Hydro’s operational performance, and they can swing by hundreds of millions of dollars. They are a reminder that Hydro’s risk exposure is far larger than its operating profit suggests.
When you step back from the table, the pattern is unmistakable. Hydro’s assets have risen because of revaluations. Its liabilities have risen because of debt, provisions, and market exposures. The increase in assets does not make Hydro stronger. The increase in liabilities does make Hydro more vulnerable.
The reconstructed balance sheet shows a business that is more leveraged, more exposed, and more dependent on favourable market conditions than at any time in recent memory. It also shows a business whose liquidity is tightening – where working capital movements are masking underlying stress, and where rising payables are doing more of the heavy lifting than rising cash.
Hydro’s working capital is also unusually large and volatile relative to its turnover. This is not a normal retail or industrial business where receivables and payables move in small, predictable steps. Hydro operates in a market built on five‑minute dispatch, derivative settlements, environmental certificate obligations, IRR accruals, MI settlements, and AEMO’s rigid payment cycles. As a result, receivables, payables, and derivative positions can swing by hundreds of millions of dollars in a matter of weeks. These movements are structural features of Hydro’s business model, not signs of growth or strength. They make the balance sheet look bigger than the underlying business and make liquidity management far more complex than the headline numbers suggest.
None of this is visible in the statutory balance sheet unless you know where to look. And none of it has been acknowledged in the public narrative. The official story emphasises asset values, long‑term opportunities, and the promise of future revenue from firming. The reconstructed balance sheet tells a different story: one of rising obligations, shrinking buffers, and increasing reliance on debt.
If underlying profit shows that Hydro’s operating performance has weakened, the balance sheet shows that its financial resilience has weakened as well. The next chapter brings these two strands together by examining the cash flow – the final test of whether Hydro is generating enough real money to sustain itself, service its debt, and support the State Budget.