Transgrid hands out multi-billion dollar contracts for controversial HumeLink build

Transgrid has named its preferred contractors to build the controversial HumeLink transmission line, with the two contracts worth a total of $2.8 billion announced on Monday.

Cimic Group’s subsidiaries UGL and CPB Contractors will build the western section of the line, connecting Maragle, where the equally controversial Snowy 2.0 pumped hydro project will link into the grid, and Wagga Wagga. 

They’ll handle the construction of 148kms of 500kV transmission lines along that route, and build two new 500kV substations at Gugaa and Maragle and upgrade Transgrid’s existing Wagga Wagga 330kV substation.

A joint venture between ASX-listed GenusPlus Group and Spain’s Acciona will build the eastern section, connecting Barnaby to Wondalga with a 237km dual circuit 500kV transmission line and a 500kV substation.

Cimic says the project is expected to bring in $1.4 billion in revenue, and the GenusPlus-Acciona joint venture values the contract at the same. 

Early works are to start immediately and finish in mid-2024 and include detailed design, investigations, procurement and project mobilisation.

HumeLink is one of the largest energy infrastructure projects proposed for New South Wales, with plans for 360km of new transmission lines, and new or upgraded infrastructure at three locations.

The 500-kilovolt connection will link Wagga Wagga, Bannaby and Maragle. It’s particularly important to connect the 2.2GW Snowy 2.0 hydro project to Sydney, Newcastle and Wollongong.

Tight deadlines

Owner Transgrid says it already has construction underway, well before it gets the final, formal nods from state and national governments and regulators. 

Transgrid is working to a very tight schedule, planning to have the second and final stage of construction done in a year and for the whole line to be ready to start in mid-2026.

It only submitted the Environmental Impact Statement (EIS) in August and its own timeline anticipates this will be approved by New South Wales and the Commonwealth next year. 

The early works will be crucial to obtaining the final approvals, including from the AER next year if Transgrid proves the project is in consumers’ best interests, in order to start the second and final stage of building.

In July, Transgrid struck a deal with China’s ZTT International for the delivery of more than 17,500 kilometres of high-voltage conductors to get ahead on HumeLink and VNI West.

Money troubles

It is also, already, massively over-budget. 

The original cost was $1.3 billion, which rose in 2021 to $3.32 billion, and which Transgrid admitted to a NSW committee earlier this year was now around $5 billion. 

The slippage is coming even in spending on early works. 

The Australian Energy Regulator (AER) approved a total of $632.9 million in spending in August 2022 and in August this year for both early works and ordering heavy duty equipment which have very long lead times, such as transformers. 

The Australian Energy Market Operator (AEMO) had estimated that number to be $558.8 million.

HumeLink is not Transgrid’s only transmission project, as it is also leading or collaborating on the $2.3 billion Project EnergyConnect linking NSW and Victoria, and the VNI West link between NSW and Victoria.

Courting controversy

Proposing 360km of overhead transmission lines will have a capacity of 2.2 GW, and has of course courted controversy with Transgrid forced to explain in report form and to a NSW inquiry why it didn’t consider putting the lines underground. 

Criticism from farmers, local communities and green groups has been scathing over its potential impacts on locals – visual, financial and fire safety – and on the environment it cuts through, including on the Kosciusko National Park.

In the face of this public push-back, an inquiry was set up in July to look into the possibility of changing the construction of the overhead lines of 850 towers strung 300-600 metres apart and with each tower 50-72 metres high, to underground.

Late last year Transgrid’s final number for an underground line was between $12 billion and $18 billion depending on whether AC or DC lines were installed, or a minimum of three times the then-cost of $3.3 billion of the project.

That estimate is being disputed by some groups, and the inquiry ruled out putting the transmission lines underground. But with community anger still hot, the idea may be still in play. 

In August energy minister Penny Sharpe told radio station 2GB she was open to looking at options to put part of the line underground, provided it didn’t impact the final cost or timeline.

Some of the controversy is being eased by Transgrid’s decision to move the route in response to requests from landowners and a widening of easement zones to 70 metres — and the subsequent higher hosting payments to landowners that come with that.