Tasmanian swaps
Hydro Tasmania shows Tasmania swap offers to authorised counterparties on request.
Authorised counterparties are wholesale counterparties (as defined under the Corporations Law) with whom we have an ISDA contract in place and which meet Hydro Tasmania’s credit requirements. In practice this would cover any existing participants in NEM with a reasonable credit rating.
Tasmanian caps
Hydro Tasmania will also show Tasmania $300 cap offers to authorised counterparties on request.
Southward Inter-Regional Revenues (IRRs)
Hydro Tasmania will also show over-the-counter offers in respect of southward flows by means of Basslink. These are similar to the Settlement Residue units which NEMMCO auctions for the other NEM inter-regional links. Basslink, however, is not a regulated link and the southward IRRs represent the difference between the value of energy in Victoria and the value of that energy once it has been transferred to Tasmania. This difference in value is primarily due to the price difference between the two regions. Price differences are due to the inter-regional transmission constraints or the dynamic loss factors that apply between the two regions.
Inter-regional swaps (IRS’s)
IRS’s are the result of the simultaneous purchase and sale of swaps against two different regions. Hydro Tasmania will offer inter-regional swaps (selling Tasmania to buy Victoria) to authorised counterparties that will be negotiated around prevailing market prices.
Given the relatively large flows across Basslink, Tasmanian prices are related to prices in Victoria, although there are a number of factors in the Tasmanian system which are unique including the reliance on hydropower system and associated water values. In addition, transmission constraints and dynamic losses result in price differences between Tasmania and Victoria.
For further information please contact Mr Vernon Swanepoel, Manager Contract Trading, on 03 6230 5423; email vernon.swanepoel@hydro.com.au