Australia’s Snowy Hydro has detailed the outcome of the review and reset process for its key Snowy 2.0 Power Project. The estimated total cost for Snowy 2.0 project delivery has been revised to $12bn, with expenditure on the project to date at $4.3bn. The terms of the contract with Future Generation Joint Venture (FGJV), comprising Webuild/Clough/Lane Construction, are also being finalised to move to an Incentivised Target Cost contract model, which will result in closer collaboration, stronger oversight and alignment of interests between Snowy Hydro and FGJV. Snowy will also settle all outstanding claims with FGJV.
Snowy Hydro CEO Dennis Barnes said the project resets will enable the commercially sustainable and successful delivery, “I am committed to ensuring these critically important projects are transparent and are placed on a robust and sustainable footing. Moving to an incentivised target model with FGJV will result in closer collaboration, stronger oversight and alignment of interests between Snowy Hydro and FGJV,” Mr Barnes said.
The Snowy 2.0 cost revision reflects the compound effect of extraordinary factors. The external factors have impacted major projects around Australia and globally, in particular:
- The major disruption caused by the Covid-19 pandemic;
- Delayed ability to mobilise, given critical shortages of skilled labour, exacerbated by quarantine and movement restrictions;
- Extended and ongoing disruption to global shipping and supply chains caused by the pandemic, conflict and natural disasters, delaying access to key materials;
- Significant inflation in costs of key construction materials and inputs; and
- Significant inflation in labour costs.
In addition to the external factors, the project has been impacted by:
- Design immaturity at final investment decision, with a number of design elements requiring more time to complete due to their technically complex nature. The final design now being more expensive to construct; and
- The impact of variable site and geological conditions, with the most impactful being the soft ground encountered that is delaying tunnel boring machine (TBM) Florence’s progress at Tantangara.
Despite the challenges outlined above, the project remains economic. Strong and growing market demand for dispatchable electricity is expected to underpin demand for the services provided by the project well into the future.
Construction of Snowy 2.0 is now approximately 40% complete and solid progress continues to be made, including:
- Excavation of the main access and emergency cable and ventilation tunnels is now complete – approximately 6km of tunnelling;
- Excavation on the 6km tailrace tunnel has commenced and tunnelling on the 1.45km inclined pressure shaft will commence shortly;
- Work on the underground power station is now underway with access available from both ends and excavation and support of cavern crowns underway;
- Excavation at the Talbingo intake (where water will enter during pumping and exit during generation) is halfway complete, with 310,000m3 of earth excavated, while the first stage of earthworks at the Tantangara intake are complete, involving the movement of 205,000m3 of earth; and
- Manufacturing of the six pump turbines has commenced, the first major mechanical component has been shipped and has been transported to site.
Meanwhile, excavation of the headrace tunnel by TBM Florence is now ready to be continued, subject to the receipt of necessary regulatory approvals.
The target date for commercial operation of all units is December 2028 with first power to be delivered in the second half of 2027.