By rosebell
The revised cost represents a substantial increase from the project’s original A$2bn estimate in 2017. Snowy Hydro announced the updated target following a comprehensive review of costs, delivery performance and the construction schedule.
The higher-cost scenario reflects the project’s technical complexity, delivery risks and challenges associated with estimating costs for a large-scale underground infrastructure project.
Technical Complexity and Productivity Challenges Drive Costs
Snowy Hydro chief executive officer Dennis Barnes said the reassessment had identified several factors contributing to the increased cost, including design immaturity, construction difficulties, lower-than-target productivity and global cost escalation.
The review identified the following principal causes:
- Design immaturity: Detailed technical analysis has continued to reveal the scale and nature of design deficiencies present when the final investment decision was made.
- Construction complexity: Technical and construction challenges have contributed to FGJV falling short of productivity targets.
- Cost and planning performance: Underperformance in cost estimation and planning led to earlier underestimation of the work required to complete the project.
- Global cost escalation: Equipment, services and labour costs have risen beyond the allowances included in the 2023 contract reset.
Barnes said the cost increase was disappointing but argued that measures introduced during the 2023 project reset had helped limit the financial impact.
He said moving away from a fixed-price contract had reduced the risk of further disruption caused by large contractor claims, similar to those that had affected the project before the reset.
New Measures to Strengthen Project Delivery
Snowy Hydro has introduced additional controls to improve productivity, cost management and oversight of the remaining construction work.
Measures include:
- Establishing an operational project control office within FGJV, using enhanced data and analytics to monitor productivity and identify risks earlier.
- Embedding independent infrastructure delivery and cost experts to strengthen oversight.
- Creating a board oversight committee with external advisers experienced in delivering major infrastructure projects.
- Implementing leadership changes within FGJV, including appointing a new project director responsible for daily cost and schedule performance and strengthening the senior leadership team.
The contract established during the 2023 reset includes provisions intended to encourage FGJV to manage costs and programme performance while meeting safety, environmental and quality requirements.
Barnes said the project was now more advanced than it had been at the reset, with a greater proportion of the work completed and more risks understood. He added that design completion had increased from 44% at the reset to 96%.
TBM Tunnelling and Underground Construction Progress
Snowy 2.0 continues to advance its underground works, with more than 5,000 people now working on the project. TBM-driven tunnelling is 65% complete, and cavern excavation is 90% complete.
Key developments include:
- TBM Lady Eileen Hudson: Decommissioning has commenced after the machine completed its second tunnel, following 8.6km of tunnelling.
- TBM Florence: The machine is approaching the halfway point of its 15km drive.
- Underground power station: Construction has commenced.
Despite the revised cost and schedule, Snowy Hydro said the project was in its strongest position yet, while acknowledging that risks remain to be managed.
The updated target is to complete Snowy 2.0 in late 2029, with the total cost potentially reaching A$25bn.
