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Snowy Hydro announces new cost, completion date for Snowy 2.0 hydro project

Snowy Hydro announces new cost, completion date for Snowy 2.0 hydro project
(photo courtesy Snowy Hydro)

Snowy Hydro announced the outcomes of resets for its Snowy 2.0 project and the Hunter Power Project.

Snowy 2.0 includes the construction of an underground power station and about 27 km of tunnels within the Kosciuszko National Park in the Snowy Mountains region of New South Wales. Snowy Hydro said Snowy 2.0 is “critically important” and “will help underpin Australia’s transition to a renewable energy future.”

For Snowy 2.0, the revised total cost to complete is $12 billion. At the end of June 2023, expenditure on the project was $4.3 billion. First power is to be delivered in the second half of 2027 and a target date for commercial operation of all units is December 2028.

The fixed-price EPC contract was executed by Snowy Hydro and Future Generation Joint Venture (FGJV) following the final investment decision in a relatively benign and supportive environment, the company said. However, the EPC contract is no longer fit for purpose. Snowy Hydro and FGJV are finalizing an amendment to the contract to move to an incentivized target cost contract model. Snowy Hydro will also settle all outstanding claims with FGJV.

Snowy 2.0 is the largest renewable energy project under construction in Australia and will provide crucial deep storage central to the country’s renewable transition, according to a release. The value of Snowy 2.0 to the national electricity market has increased materially since the final investment decision in December 2018.

Snowy Hydro said it would deliver an additional 200 MW or 10% capacity, bringing total capacity to 2,200 MW. Snowy 2.0 will provide 350,000 MWh of energy storage for 150 years.

Snowy 2.0 remains value accretive, with the company projecting a NPV of about $3 billion (based on a $12 billion revised target total cost and December 2028 delivery). Snowy Hydro is working closely with its shareholder 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 Hunter Power Project has experienced similar challenges to Snowy 2.0 and, after a comprehensive review, the expected cost is now $950 million. Despite the increased cost the Hunter Power Project remains economic, Snowy Hydro said. Construction continues to progress, with about 460 people working on the project, which remains on track to be delivered by December 2024.

Snowy Hydro Chief Executive Officer 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. Moving to an incentivized target model with FGJV will result in closer collaboration, stronger oversight and alignment of interests between Snowy Hydro and FGJV,” he said.

“Snowy 2.0 … 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% 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.”