The Anthony Power Development of Hydro Tasmania diverts westward flowing rivers on the west coast of Tasmania into the eastward flowing Anthony River and thus into the upper reaches of Hydro Tasmania’s Pieman River Power Development. From a reservoir on the Anthony River this diverted water flows through a headrace tunnel to an underground power station. Water from this power station is discharged through a tailrace tunnel into Lake Murchison in the Pieman Development. The Anthony Power Development was completed in 1994 and was the last major hydroelectric development built by the then Hydro-Electric Commission. Completion of the headrace tunnel for this development was delayed when a large underground reservoir of water was encountered. This paper describes the investigation of this unusual geological feature and the modifications that were required to the layout of the tunnel in order that excavation could be completed.