Australia Agrees on Pared Deal for Multi-Billion Undersea Cable

(Bloomberg) -- Australia has struck a deal with Tasmania to keep a multi-billion dollar undersea power cable project linking the island state with the mainland afloat, despite cutting the capacity in half due to a blow out in costs. 

The original vision of two undersea cables would be downgraded to one, with “negotiations to continue on a second cable,” according to a joint statement from the federal and Tasmanian state governments on Sunday. 

Tasmania’s cost burden will be about 17.7%, with “the option to sell its stake to the Commonwealth upon commissioning of the project,” the statement said. The Commonwealth’s share will be 49%, while Victoria’s share will pay for 33.3% of the total. 

The Marinus Link project — which plans to turn Tasmania into a renewable power hub for Melbourne and Sydney via over 345 kilometers (214.37 miles) of undersea and underground high voltage cable — is estimated to cost between A$3 billion ($1.9 billion) and A$3.3 billion ($2.1 billion). However, an increase in costs prompted the Tasmanian government to announce last month that it wanted to renegotiate terms. 

“It’ll mean a big step forward in our plans to bring the entire energy grid to 82% renewables,” Minister for Climate Change and Energy Chris Bowen said at a press conference Sunday morning. “The Marinus Link has had challenges, but we are not going to let it hit the wall.”

Tasmania, which already gets almost all of its power from hydro and wind, plans to generate twice the power it needs by 2040 using the cable. The excess will be sent to Australia’s coal-reliant urban centers of Sydney and Melbourne. 

©2023 Bloomberg L.P.