Snowy 2.0: The “nation building” project that won’t be using all Australian steel

The Snowy Scheme from 1949 saw 100,000 men and women from over 30 countries define what Australians and Australian industry are capable of.

Fast forward to today and the Snowy 2.0 pumped hydro scheme now under construction in the Snowy Mountains was meant to be nation building, and part of a plan to reinvigorate local industry.

Then Prime Minister Malcolm Turnbull said in 2017: “I am a nation-building Prime Minister and this is a nation-building project.

“This is the next step in a great story of engineering in the Snowy Mountains and the courageous men and women who are confident and committed to Australia’s future.”

That was the intention, but the $5.1 billion Snowy 2.0 scheme will be built without using Australian made steel for its most massive and important components, according to a series of documents and letters obtained by @AuManufacturing news.

Future Generation, a joint venture created specifically to build Snowy 2.0, has informed Snowy Hydro that it intended to let a sub-contract for 7,000 tonnes of steel to ATB Riva Calzoni S.p.A. of Italy for six steel-lined, high pressure penstocks up to 3.8 metres in diameter that feed water into the generating units.

Only a smaller contract for 2,800 tonnes of low pressure draft tube, collector tunnels and surge shafts would be let to ‘Australian entities’ according to an October 22, 2021 letter seen by @AuManufacturing news and sent to Snowy Hydro from a project director for Future Generation.

Future Generation is a joint venture of Italy’s Webuild (formerly Salini Impregilo), Australian-based Clough and US-based Lane Construction.

Letting the penstock contracts to an overseas producer appears to breach the original tender specification from 2018 – Snowy 2.0 3.04 – Particular functional requirements, clause S4.8, tunnel steel liners.

The clause said of steel plate supplies under ‘source’: “Steel plate shall be sourced from Australian manufacturers’ (image, below).

Not only that but Snowy Hydro told would-be tenderers during the tendering process that they would not budge on local content, and insisted ‘all steel plate to come from ‘Australian manufacturers’, namely BlueScope and Bisalloy according to a project specialist familiar with the contract.

BlueScope declined to comment publicly.

There is no doubt that ATB is a highly competent and highly experienced contractor especially in the hydro sector, with its main workshop in Roncadelle, Italy.

However, ATB tendered and won a contract on the basis of utilising Australian steel, but cannot now fulfil the terms of the contract.

Australian industry does not have the opportunity of using involvement in Snowy 2.0 as a capability-building exercise that could then be applied to other pumped hydro projects – which was the intention of the original tender specification from 2018.

And it has prevented other tenderers who might have been able to source steel overseas, but who did not submit their own tenders because of the local content requirement, from competing for the contract.

Late last night no comment had been received from Snowy Hydro and the energy minister Angus Taylor in response to questions submitted by @AuManufacturing.

For comments from stakeholders in response to this story, and excerpts from questioning at Senate estimates, see here.

The documents obtained by @AuManufacturing news were tabled in Senate estimates in October but received no publicity at the time.

In estimates, Snowy Hydro COO Roger Whitby was asked by Senator Rex Patrick as to what steps the company had taken to ‘engage Australian industry and upskill Australian industry in relation to steel production? (to meet the penstock requirement)’.

Whitby said: ‘I think the process we went through is essentially outlined via the letter from our contractor, which we’ve tabled.’

However, the documents describe a request for quotation process utilising the independent Industry Capability Network website, which was followed by ‘a two month period of technical and commercial clarification process’.

This ended with two foreign bidders compliant, and final negotiations with these two companies.

Future Generation in the documents dated October 7, 2021 gave a list of reasons for the ‘non-selection’ of Australian companies, including that none had experience manufacturing penstocks and:

• Calbah Industries’ offer covered only supply and fabrication
• Keppel Prince Engineering covered only supply and fabrication of draft tubes and collectors
• And Thornton Engineering Australia covered only supply and fabrication.

The project director for Future Generation said in the letter to Snowy Hydro: “Therefore, please be assured that the contractor in discharging its obligations under the contract is fully committed to provide the Australian entities to have full, fair and reasonable opportunities to bid for the supply of key goods and services for the project.

“…the contractor trusts that this letter and the attached document satisfactorily addresses any concern the employer (Snowy Hydro) may have have had in regard to the contractor providing fair and reasonable opportunities to the Australian entities in this procurement process.”

However one Australian company, Hofmann Engineering of Bendigo, Victoria pulled out of the tender because of ‘the compressed time schedule for the execution of the subcontract works’, according to a letter from Hofmann to Future Generation dated April 29, 2021.

And CB&I – McDermott of Australia, who originally bid for the contract with with the ultimately successful Italian company ATB, also pulled out of their venture in a letter dated 26 May, though they gave no reasons for their move.

Their bid had initially been welcomed by the Future Generation JV considering the mix of experience from the industry (ATB) and the local component from a reputable player (CB&I).

The project specialist familiar with the contract told @AuManufacturing news: “The successful contractor has had since early 2019 when the Federal Government awarded them the project to get this steel plate work package in order to comply with the tendering requirements regarding local supply of steel plate.

“They have had two years to directly engage local steel mills for feedback on metallurgy requirements and get feedback on manufacturing lead times for plate so they could plan for local fabrication.”

The Snowy 2.0 pumped hydroelectric storage and generation project will involve the construction of a series of 27km of concrete-lined tunnels that will connect the existing Tantangara and Talbingo reservoirs located within the Snowy Scheme in New South Wales.

The first power produced from Snowy 2.0 is expected in late 2024-25.

This story was first published on AUManufacturing, reproduced with permission of the author.