One of two prime contractors for the $5 billion-plus Snowy 2.0 pumped hydro project says it has no working capital facilities, a situation it describes itself as “ridiculous” but denies an ongoing dispute with the owner of the Snowy Hydro project.
South Africa-based Murray & Roberts, which owns Clough Engineering, a 35 per cent partner in the consortium building the massive project, disclosed the status of its working capital situation at an overnight investor briefing.
He blamed the liquidity problems on the cost of new equipment, such as the huge tunnel-boring machines that dig into the mountains of the national park and other costs that are now subject to “contingent income” claims.
However, the same company is also building for Transgrid the New South Wales portion of the $1.5 billion Project EnergyConnect transmission link between South Australia and New South Wales, and the Tallawarra B gas-fired power station for EnergyAustralia. , the first in the country to be “hydrogen capable.” ”
“Can you believe it? It has zero working capital facilities. It’s ridiculous that Clough has nothing prepared,” Murray and Robert group chief financial officer Daniël Grobler told analysts.
Among the options being considered for the company are new banking facilities, and it says it is seeking up to $50 million in capital from two different sources, or even an equity issue.
The revelations come amid growing concern about the status of the Snowy 2.0 project, the taxpayer-funded investment that has already sparked controversy over its economic and market benefits and economic impact.
Reports have emerged that the project is running more than $2 billion over its already inflated budget of $5.1 billion (not including transmission), delays of up to 18 months that have yet to be communicated to the operator of the market and the sudden resignation last week of CEO Paul Broad.
The situation around the time of the project is quite extraordinary. The delays have been announced by Clough and Federal Energy Minister Chris Bowen, effectively the company’s owner, but not by Snowy Hydro, which continues to insist to AEMO, the market operator, that it is running on time.
Reports have also emerged that Clough is in dispute with Snowy over the timing and scale of payments, with a recent audit report noting differences in claims to Snowy Hydro from its contractors and payments made.
Murray & Roberts revealed in its latest annual accounts that it has some 2.7 billion rand in “uncertified income”, representing claims that have not yet been approved by its clients. But he did not disclose the source of this income, other than to say that it comes from the division that manages the Snowy and Transgrid contracts.
Its net cash position has shrunk to R730m as of June 30, down from R2.26bn a year earlier.
Transgrid’s contract is also experiencing delays, with AEMO revealing this week that it is up to 12 months behind schedule, a situation it says could present challenges to grid reliability for years to come.
Clough CEO Peter Bennett downplayed the differences between Clough and Snowy Hydro.
“Despite what you may read in the press, we are not in dispute with the client here,” he told the analyst briefing.
“What we do have is a pretty collaborative approach to looking at how to mitigate those impacts, both in terms of time and cost, as we look into the next several years of project execution. So we’re working very collaboratively with that client.”
At a briefing in June, where Bennett spoke publicly for the first time about the project’s 18-month delay, he spoke of the difficulty of finding enough trained people to operate the giant tunnel-boring machines. He says that the situation has now been resolved and all three machines are now up and running.
“This project has also enjoyed everything from wildfires to the pandemic to get to where it is today,” he said.
“But what I am pleased to report is that, as of today, the project has all three TBMs up and running.
“The prefabricated segment factory is working at full capacity, building all the elements to line the tunnels and we are also about to start the excavation work for the main underground machine house.
“So really, the field execution phase of this project is in full swing right now, a lot of the preparatory and support work associated with building the construction camps or surface facilities has been left behind.”
Note: This story has been updated to note that Clough has zero working capital facilities, rather than zero working capital.
Giles Parkinson is founder and publisher of Renew Economy, and is also the founder of One Step Off The Grid and founder/publisher of The Driven, focused on electric vehicles. Giles has been a journalist for 40 years and was deputy and business editor of the Australian Financial Review.