The owner of one of the key contractors on Australia’s biggest ever energy project – the Snowy 2.0 pumped hydro scheme – has revealed “acute” working capital issues and suffered a substantial plunge in the value of its shares.
South Africa-based Murray & Roberts, which owns Clough Engineering, one of the main contractors to Snowy 2.0, said in a statement on Monday that its margins were deteriorating and it was “reasonably” certain that its profits for the current six months will be “at least 100 per cent down” on the previous corresponding period.
The statement prompted a 37 per cent plunge in its share price on the local market, and came after reports suggested that the Clough Engineering business could be up for sale to relieve its working capital issues.
Murray & Roberts revealed in September that its energy division had no working capital facility – a situation its own chief financial officer described as “ludicrous” given the sheer scale of the Snowy 2.0 project, which is both delayed and running over its $5 billion budget.
Its latest statement reveals more project delays, supply chain disruptions, payment delays and deteriorating margins at two projects in the US (Traveler) and Australia (Waitsea gas field), although it makes no specific mention of Snowy 2.0.
“The Group’s working capital requirements are especially acute in its Energy, Resources & Infrastructure business platform,” the statement said, referring to the division that is managing its Snowy 2.0 contract.
“The Group is currently reviewing its strategic options to address this platform’s near- term working capital needs.”
It added: “The developments described above relating to the ongoing disruption to order book delivery may have a material effect on the price of the Company’s securities.”
Indeed, they did. The stock price plunged 37.3 per cent on Monday, taking its overall slump in the last two months to 67 per cent. During the day it fell to its lowest price in nearly two decades ahead of a slight recovery before the market close.
The problems at Murray & Roberts will raise concerns about the increasingly controversial Snowy 2.0 project, which has drawn criticism on its economic viability, its real benefits to the energy market, and environmental impacts.
Snowy Hydro is yet to release its latest annual report, and has not even publicly confirmed the delays revealed by federal energy minister Chris Bowen, and – at least until August – even to the Australian Energy Market Operator.
Snowy CEO Paul Broad resigned suddenly in August, later citing differences with Bowen over the role of green hydrogen in the equally controversial Kurri Kurri peaking plant that is currently being built in the Hunter Valley.
The Snowy 2.0 project – originally costed at around $2 billion when unveiled in 2017 by then prime minister Malcolm Turnbull – is now priced at more than $5 billion, not including the cost of the latest delays or the massive transmission links required to connect it to various parts of the grid.
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