Labor slams Coalition’s “back of envelope” Snowy 2.0 estimates as wait continues for latest cost blowout

Federal Labor has hit back at LNP criticism of cost blowouts and time delays to Snowy 2.0 with a reminder that it was a Coalition government that first signed off on the much maligned mega-project nearly 10 years ago, based on infamously off-target “back of an envelope” calculations.

Federal Parliament’s Senate Estimates committee on Tuesday night received a progress report on Snowy 2.0 that told of a “significant milestone” in the tunnel-boring department, but offered no updates at all on how much further the project’s now $12 billion budget might have blown out.

Speculation has been rife over what will be the outcome of the “line by line” reassessment of costs Snowy Hydro requested from its main contractor in October last year – and which the contractor rather ominously said would take nine months to complete.

A report in The Australian last month cited the latest modelling from experts based out of the Victorian Energy Policy Centre that has estimated a final price tag for Snowy 2.0 of $42 billion, factoring in the added costs of interest and connecting the project to the grid.

Speaking at the hearing, Snowy Hydro chief Dennis Barnes dismissed the $42 billion figure as “completely conflated with transmission costs and interest costs which we have never claimed to be part of this project.

“It’s highly unusual for a generation project to include the whole transmission costs of the east coast of Australia in its estimate. We are not responsible for those transmission costs,” he said.

But when pushed to provide alternative figures to counter the speculation, or to address the construction costs which various reports have put at around $20 billion, Barnes could only offer up various versions of the same response:

“If I were to give you a number – which I don’t have, by the way – on the cost of the [Enterprise Bargaining Agreement], I would be commercially prejudicing our position with the contractor,” he said.

This did not go down well with Liberal Senator Sarah Henderson.

“I mean, I find it extraordinary that you’re not able to, not willing to, disclose those costs,” she said to Barnes, after more than 10 minutes of trying to get an answer.

“What actions are you taking to rein in this project? I mean, this just looks like a project that has run out of control, with no regard to the cost on the taxpayer.”

Eventually, the federal minister for industry and science, Tim Ayers, stepped in to break up the clinch; likening Henderson’s dogged quest to conjure figures out of thin air to when “Mr Turnbull and Mr Taylor and Mr Joyce signed off on this project in 2017 and told the Australian public it’d cost $2 billion and be finished by 2021.”

“It was done on the back of an envelope, by Mr Joyce, Mr Turnbull and Mr Taylor, that’s what happened here,” Ayers told the hearing. 

“Three blokes on the back of an envelope hoodwinked each other and then hoodwinked the government. 

“And Mr Barnes has a responsibility here to manage the company in a way that he described in his opening statement. 

“It is a completely reasonable and consistent position for him to adopt to say that he is not going to provide you a speculator, you know, a guess, he’s explained why a guess would be inappropriate – you can’t press him for a guess. 

“What he has told you is that there is a timetable for the project to be provided with the analysis that the contractor is required to produce for him; that Snowy, itself, will go through a proper assessment process of that. 

“And when that reaches a conclusion, he’s very happy to be transparent about it. That’s as good as it gets. You can’t press him to provide a figure that he doesn’t have.”

What Barnes did have for the committee was an update on the progress of tunnel boring machine Lady Eileen Hudson, which had achieved the “significant milestone” of completing the 6km tailrace tunnel into the machine hall.

“Snowy 2 is connecting an upper reservoir to a lower reservoir through around 27 km of tunnels, with two massive caverns in-between, about a kilometre underground, which will hold a power station the size of the Sydney Opera House,” Barnes told the hearing in an opening statement.

“The breakthrough means we have now connected the lower reservoir to the power station cavern. Cavern progress is well advanced and we’re getting set to begin power station construction, moving the project into a new phase.

Barnes said he was aware there was “a natural and understandable frustration” about the project’s time and cost, but stressed that Snowy 2.0 would be a strategic national asset, designed to operate for 150 years and essential for reliability in the future energy mix.

“The project is clearly a unique and complex engineering endeavour, in a unique and complex environment. It is a project that went through many iterations, and we publicly described the design immaturity that was at play, three years ago,” he said.

“My job is to stay focused on safely delivering this critical project, ensuring it remains transparent and accountable, while importantly protecting the taxpayers’ commercial position with the project’s principal contractor.

“We went early, by disclosing that we would not complete the job for $12 billion and I think there would be an expectation that we run through a reassessment of the cost base diligently and with independent scrutiny,” Barnes said.

“We expect our contractor to provide us with their assessment before the end of June and then we will go through the multiple levels of scrutiny.”

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