Snowy Hydro has released the expected results of major resets to two of its projects – Snowy 2.0 and the Hunter Power Project.
The revised total cost to complete the Snowy 2.0 project is now $12 billion. At the end of June 2023, expenditure on the project was $4.3 billion, with 80 per cent of these funds reinvested in the Australian economy.
First power is expected to be delivered in the second half of 2027 and a target date for commercial operation of all units of December 2028.
The fixed-price EPC Contract was executed by Snowy Hydro and Future Generation Joint Venture (FGJV) following Final Investment Decision in a relatively benign and supportive environment. The EPC Contract is no longer fit for purpose.
Snowy Hydro and FGJV are finalising an amendment to the existing EPC Contract to move to an incentivised target cost contract model. Snowy Hydro will also settle all outstanding claims with FGJV.
Additional delivery is expected from the project of 200MW or ten per cent capacity; bringing total capacity to 2,200MW.
Snowy 2.0 is the largest renewable energy project under construction in Australia and is expected to provide crucial deep storage central to Australia’s renewable transition.
The value of Snowy 2.0 to the National Electricity Market has increased materially since the Final Investment Decision in December 2018.
Snowy Hydro predicts that Snowy 2.0 will provide 350,000MWh of energy storage for 150 years.
The project remains value accretive, with the company currently projecting a NPV of approximately $3 billion (based on a $12 billion revised target total cost and December 2028 delivery).
Snowy Hydro said it is working closely with its shareholders to develop an appropriate capital structure for the company to support the increase in costs and to maintain the company’s target credit rating of BBB+.
The total target cost of the Hunter Power Project is now $950 million and will be funded by Snowy Hydro. The project delivery remains December 2024.
Snowy Hydro said that the project remains economically viable on a forward looking basis with the value of its firming capacity clearly demonstrated in the May/June 2022 energy crisis.
Snowy Hydro CEO, Dennis Barnes, said the project resets will enable the commercially sustainable and successful delivery of both projects.
“I am committed to ensuring these critically important projects are transparent and are placed on a robust and sustainable footing,” Mr Barnes said.
“Moving to an incentivised target model with FGJV will result in closer collaboration, stronger oversight and alignment of interests between Snowy Hydro and FGJV.
“Snowy 2.0 is being engineered to deliver clean and reliable storage and electricity generation for Australians for the next 150 years. It is a truly transformative national project that is generating jobs and significant investment in regional areas; it will deliver benefits immediately following its completion and will continue to do so for many future generations of Australians.
“Snowy 2.0 involves billions of dollars of investment, with approximately 80 per cent going into Australian jobs, goods, services and skills. We are building the skills of local workers that can later be used elsewhere to assist in Australia’s ongoing energy transition.
“The Hunter Power Project is an important project in Australia’s energy transition, enabling the roll-out of wind and solar projects by firming these intermittent generation sources into reliable power.”