Snowy 2.0 contractor drama continues, with talk of sale raising new concerns

Snowy 2.0 contractor Clough Engineering is reported to be up for sale in a development that could hold implications for the delivery of the massive federal government-backed pumped hydro project in New South Wales.

South Africa-based Murray & Roberts, which owns Clough – a 35 per cent partner in the consortium building Snowy 2.0 – revealed in September that Clough had no working capital facility, describing the situation at the time as “ludicrous,” RenewEconomy has reported.

The decision by Clough and Murray & Roberts to pursue a sale may have been forced partly by mounting financial difficulties, with a string of problems at big projects piling pressure on its balance sheet, reports said on Monday.

(See latest update: Snowy contractor shares plunge after it reveals “acute” working capital issues

Webuild of Italy, Clough’s joint venture partner on Snowy 2.0, is the only company remaining in early negotiations to buy the Western Australia-based contractor, according to unidentified sources cites by The Australian.

Clough did not immediately respond to a request by RenewEconomy for comment.

Webuild, previously known as Salini Impregilo, already holds a 65 per cent sake in the joint venture, having won a $5.1 billion fixed price contract from Snowy Hydro in 2018. A purchase of Clough would give Webuild 100 per cent of the contracting work and greater control over the timeline of the project.

Reports of the potential sale of Clough only heighten concerns over the progress of Snowy 2.0, already the subject of heated debate over its market benefits and its economic impact.

Over time and over budget

Earlier this year, reports emerged that the project is running more than $2 billion over its already inflated budget of $5.1 billion (not including transmission). Rumoured delays to the project’s delivery of up to 18 months have not been communicated to the market operator.

Webuild Asia-Pacific director, Marco Assorati told the Australian Financial Review in July that delays on Snowy 2.0 were not due to geotechnical challenges but instead to the difficulty of bringing in fly-in, fly-out workers to a remote location during the pandemic, and the project’s technical complexity, which requires people with specialised skills,

In August, Snowy Hydro’s chief executive, Paul Broad, suddenly resigned after years at the helm of the government-owned utility, with some reports saying he was “sacked.”

Snowy 2.0 is not the only energy project in Australia that could be altered if Clough is sold and delays stretch out.

The company is also building for Transgrid the NSW part of the $1.5 billion Project EnergyConnect transmission link between South Australia and NSW, currently up to a year behind schedule.