Snowy Hydro delay creates a fiscal risk for the government in its budget

The government has moved to modify its fiscal risks flowing from the Snowy Hydro projects, revealing it had been forced to inject additional equity into the energy business.

The Albanese government has flagged a change to its fiscal risks from its flagship Snowy Hydro energy business, revealing it has provided additional equity to support its Snowy 2.0 pumped hydro project and the Hunter Power project.

The budget notes the government has moved to inject further funds into the Snowy Hydro business, in a bid to support the viability of the company’s energy security and reliability project.

But the budget warned the projects faced risks for potential construction delays, cost pressures, and cash flow forecast shortfalls.

“The government continues to monitor these risks through engagement and oversight of Snowy Hydro’s activities, noting that cost and schedule reviews are currently underway on both projects to determine the impact of adverse weather conditions, global supply chain constraints, site conditions and Covid-19 related delivery challenges,” the budget said.

“The Australian government will provide sufficient funding to cover costs and liabilities incurred by Snowy Hydro Limited for the delivery of Snowy 2.0 and the Hunter Power Project, capped to the total remaining undrawn equity, in the event that the Commonwealth terminates the Equity Subscription Agreements between the Commonwealth and Snowy Hydro Limited.”

Snowy 2.0 has been blighted by tunnelling delays, including a landslide which caused one of the hydro project’s boring machines to become stuck.

The government has also provided indemnities for each of Snow Hydro’s directors “to protect them against certain claims”.

However, the budget noted the government had removed the contingent liability it had recorded for water releases from Snowy.

Originally published as Snowy Hydro delay creates a fiscal risk for the government in its budget