Snowy 2.0 entrepreneur has no working capital but denies dispute

One of the two main contractors of the over $5 billion Snowy 2.0 pumped hydro project says it has no working capital.

He describes the situation as ‘ridiculous’ – but denies an ongoing dispute with project owner Snowy Hydro.

South African firm Murray and Roberts, owner of Clough Engineering – a 35% partner in the consortium building the massive project – disclosed the status of its working capital situation during a recent investor briefing.

He blamed the liquidity problems on the cost of new equipment, such as the huge tunnel boring machines digging into the mountains of the national park and other costs now subject to “contingent revenue” claims.

The same firm, however, is also building the NSW portion of the $1.5 billion EnergyConnect project transmission link between South Australia and NSW for Transgrid, and the Tallawarra B gas-fired power station for EnergyAustralia, the first in the country to be “hydrogen capable”.

Murray and Robert Group CFO Daniël Grobler told analysts:

“Can you believe it, there’s no working capital. It’s ridiculous for Clough to have nothing in place.

Among the options being considered for the company are new banking facilities — and it says it is seeking up to $50 million in capital from two different sources — or even an equity issue.

(Source: Murray and Roberts)

The revelations come as there is growing concern about the progress of the Snowy 2.0 project, the taxpayer-funded investment that has previously sparked controversy over its economic and business benefits and economic impact.

Reports have surfaced that the project is running over $2 billion of its already bloated $5.1 billion budget (excluding transmission), with delays of up to 18 months still not communicated to the market operator and the sudden resignation last week of CEO Paul Large.

The situation around the project schedule is quite extraordinary. The delays were announced by Clough and Federal Energy Minister Chris Bowen, in fact the owner of the company, but not by Snowy Hydro itself, which continues to press AEMO, the operator of the market, so that it runs on time.

Reports also revealed that Clough was in conflict with Snowy over the timing and scale of payments, and a recent audit report highlighted differences in claims to Snowy Hydro from its subcontractors and payments. carried out.

Chris Bowen Slams Morrison Government For Snowy 2.0 Delays

Murray and Roberts revealed in its latest annual accounts that it had around 2.7 billion rand (A$231 million) in ‘uncertified income’, which represents claims that have not yet been approved by its customers. But he did not break down the source of that revenue, other than that it is the division managing the Snowy and Transgrid contracts.

Its net cash was reduced to 730 million rand (A$62.4 million) as of June 30, from 2.26 billion rand (A$193 million) a year earlier.

The Transgrid contract is also suffering from delays, with AEMO revealing this week that it is up to 12 months behind schedule, a situation it says could present challenges for grid reliability in years to come.

Clough CEO Peter Bennett played down the differences between Clough and Snowy Hydro.

“Despite what you might read in the press, we are not in conflict with the client here,” he told the analyst briefing.

Snowy 2.0 does not measure up economically or ecologically

He continued:

“What we have is a fairly collaborative approach to seeing how to mitigate these impacts, both in terms of time and cost, as we look ahead to the next few years of project execution. So we are working very closely with this customer.

At a briefing in June, where Bennett first spoke publicly about the project’s 18-month delay, he spoke of the difficulty of finding enough trained people to operate the giant tunnel boring machines. He says the situation has now been resolved and all three machines are now operational.

He said:

This project has also taken advantage of everything from bushfires to the pandemic to get to where it is today.

But what I’m happy to report is that as of today, the project has its three tunnel boring machines in operation.

The precast segment factory is operating at full capacity constructing all the elements to line the tunnels and we are also about to start excavation work for the main underground power station.

So really, the field execution phase of this project is in full swing right now, much of the preparatory work and support work associated with building the construction camps or surface facilities is behind us.

This article by Giles Parkinson was originally published in RenewEconomy and has been republished with permission.

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