Snowy Hydro has announced new budgets for Snowy 2.0 and the Hunter Power Project, with the total cost for the former revised to $12 billion. At the end of June 2023, expenditure on the Snowy 2.0 project was $4.3 billion.
First power from the project is expected to be delivered in the second half of 2027 with a target date for commercial operation of all units in December 2028.
The fixed-price EPC Contract which was executed by Snowy Hydro and Future Generation Joint Venture (FGJV) following the project’s Final Investment Decision in a relatively benign and supportive environment, but it is no longer fit for purpose.
Snowy Hydro and FGJV are currently 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.
Snowy Hydro has also announced it will deliver an additional 200 MW or 10 per cent capacity; bringing total capacity to 2,200 MW.
Snowy 2.0 will provide 350,000 MWh of energy storage for 150 years.
Snowy Hydro states Snowy 2.0 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 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’s total target cost has been revised to $950 million and will be funded by Snowy Hydro. The project delivery is still scheduled for December 2024.
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. 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.
“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,” Mr Barnes concluded.