The National Electricity Market (NEM) is in the process of fundamental transformation – from baseload coal with some peaking assets to a complex, highly interconnected system with variable renewable energy backed by firming and storage. Snowy 2.0, with its massive 2,000 megawatts of generation and 350,000 megawatt hours of energy storage, is critical to Australia’s decarbonisation as it will help underpin the rapid transition to a fully renewable future.
Solid construction progress is occurring across a large number of Snowy 2.0 work fronts. At Lobs Hole, the Talbingo intake is well underway, the main access tunnel excavation by tunnel boring machine (TBM) Lady Eileen Hudson is completed and the emergency, cable and ventilation tunnel excavation by TBM Kirsten is close to completion.
Across the project, and as anticipated, the ground conditions encountered by the Snowy 2.0 TBMs are highly variable, ranging from soft, sandy ground to extremely hard rock. TBM Florence at Tantangara has been traversing a section of soft ground and is temporarily paused while plans to remediate a surface depression above the Tantangara adit (as reported on the Snowy Hydro website in December) are finalised.
Complex and variable ground conditions are not unusual in such projects. Snowy Hydro and the Snowy 2.0 EPC contractor, Future Generation Joint Venture, are focused on delivering the project safely and in a manner respectful of the sensitive environment, while managing impacts caused by external events including COVID-19, high material costs, global supply chain constraints, labour shortages across the Australian construction industry and ongoing weather conditions.
Commercial claims on construction projects are also common. As with other major infrastructure projects, Future Generation Joint Venture has experienced significant impacts from COVID, resourcing and supply chain challenges. Claims submitted to Snowy Hydro by the contractor continue to be assessed and paid appropriately, in accordance with contractual requirements.
Snowy Hydro’s BBB+ credit rating was reaffirmed by Standard & Poors in December. The move from stable to negative outlook primarily reflects forecast depressed earnings in FY2023 resulting from the critical role the company played during volatile market conditions in May to June 2022 and the potential project cost escalations for Snowy 2.0 and the Hunter Power Project owing to general market inflation and global supply chain issues. As Snowy’s earnings profiles become more certain, S&P will continue to monitor and assess Snowy’s outlook. At this stage, there are no current plans for any additional Shareholder equity beyond the current arrangements for Snowy 2.0 and Hunter Power Project.
The Snowy 2.0 budget is $5.9 billion and remains unchanged since the project approval. Snowy Hydro will continue to assess inflation and global supply chains moving forward.