Senate Finance and Public Administration Legislation Committee [Part 2], , 1:29:57 to 1:43:07
The department provides updates on the independent cost reassurance process conducted by Turner & Townsend for Snowy Hydro. Officials discuss the timeline of board meetings and the analysis of project benefits and net present value.
Topics: Snowy Hydro, Infrastructure, Electricity grid
Speakers: Senator The Hon Jane Hume, Marisa Purvis-Smith, Senator The Hon Katy Gallagher, Matt Yannopoulos, Unknown Speaker, Senator Karen Grogan
>> Well, it's more than hypothetical. It's kind of a sensitivity analysis, isn't it? I mean
>> we're going through the analysis with Snowy to be a able to provide advice to
>> Sorry, can you say that?
>> We're going through analysis to be able to provide advice to government,
>> right?
>> On a range of factors on what it would look on what options for financing would
Uh yesterday the CEO of Snowy, Mr. Barnes confirmed that the net present value of the project won't be updated following the cost reassessment. So would an updated NPV help finance to make its recommendations to the minister about the requested
Senator, I I would come back to the fact that uh we will be looking at all of the analysis provided to us by Snowy uh and providing analysis uh for the government
that kind of doesn't really answer the question that I asked.
>> Every aspect of it is being considered as part of all of the new information. uh and the decisions the government needs to take in relation to this are all all currently before government and no further decisions have been taken.
>> All right, we'll turning to the cost reassessment announcement itself which had a revised cost to complete of 25 billion. How confident is finance in the veracity of that assessment?
Senator, we have commissioned a an independent uh cost reassurance process.
>> That was my next question.
>> From Turner and Towns End that has not yet been finalized. Uh that information will go in and inform advice to
>> Okay. So, it was confirmed at uh estimates last night that the cost reassessment announcement was provided to DQ on the 30th of September. Sorry, forgive me. I asked you for what that date was and you >> confirmed that. Can you tell me what date um um what did >> Okay, sorry forgive me. I actually think that I've just answered my own question. The letter was provided to finance and to you minister on the 30th of September, but why did we only find out about it and that cost blowout on the last business day before Senate estimates? Is there an obligation upon you to disclose that sooner?
>> I think it's pretty soon. Um I can't I mean have I'm looking for the timeline. >> It was
>> but I it was that So Senator that's correct. There was a board meeting that Snowy Hydro had to go through and they had to go through their own processes to sign off from the board uh to be able to then uh needed to uh be able to get something firm enough to put in their >> annual report.
>> Right. When was the board meeting?
>> Uh that I might not have with me. Just bear with me. >> It's not in this. >> It's not in my
>> material. I think we got the materials. I we probably had a couple of weeks I think uh Minister Bine and myself I had briefings from finance we met with the board um and um and then the announcement was made. I mean I think it in light of I think it would all happened reasonably quickly from my point of view of getting the cost reassessment report getting reading that having the required meetings I needed to have uh and um the sh minister Bowen and I met with the um the chair and CEO of Snowy Hydro as well to discuss it. I think we wrote to the board or the chair as well on receipt of the >> yes >> cost reassessment uh prior to that. So I think it's a pretty quick turnaround. I don't think there was anything about senate estimates um you know timing of senate estimates was not a factor
>> senator the I have the board the timing of the board meeting for you which was uh >> 28th
>> 28th of se
>> of of September
>> of September. Yes. Okay. It's only the 27th today, isn't it? Yes. Okay, that makes sense. Okay. Um, can I ask will you do a a new net present value assessment?
>> Uh, we will see what information we get particularly from the independent cost assessment from Turner and Townsend uh to provide information to government.
>> When's that expected?
>> Uh, it's shortly. We would expect it to shortly. They've been working with Snowy Hydro for a while. Uh it's not something that they come in at the end but it's not yet finalized.
have Turner and Tanzen then are they um contracted to Snowy Hydra? Are they contracted to finance?
>> They're contracted through finance from Department of Finance. That's right.
>> And obviously that contract is something as you said it's been been ongoing for
some time. It's been it's been ongoing for a little while, but there's only so much they can do until the information and the line by line cost reassessment is done by Snowy Hydro. >> So, they have been working with Snowy Hydro for a little while to get information, but they they're not able to finalize their report until they have all of the relevant information from Snowy Hydro, which which uh they are working through. Now,
>> you seem to have a natural sort of reluctance to say that there will be a new NPV completed.
>> Is there I'm just not sure, Senator. I I I I don't want to mislead. Uh I I'm just not sure. We will get a lot of information and we've got a lot of information and we will provide that information to government uh to provide options.
>> Okay. So, there was a new um project benefits analysis that was released just last week. um that didn't include an updated NPV which is surprising. So do you know what the net present value of this project is? Now
>> again Senator we're we're as I've just mentioned we're going through all of the information uh and we'll use the Turner and Town Center assessment to provide information to government.
since the receipt of the letter, has Snowy provided the ministers or the minister's office with any additional information or additional submissions about that cost reassessment? I know you said that you've met with the board and you've spoken to them, but is there additional information that they've provided you since that original letter?
Uh well the cost reassessment report was part of that. So the the report which was provided to us
>> I thought that hadn't been completed.
>> Snowy's cost reassessment one >> finance are doing some assessment of that assessment
>> assessment of the assessment. Okay I get it. I understand. All right. Um, has uh there been any material on the potential sensitivities arising from that cost reassessment that has been provided to you from Snowy directly? Have they been explicit about maybe I should be asking you this from a government perspective? What are the potential seven sensitivities that would be arising from your cost reassessment of their cost reassessment?
>> I think we need the the cost assurance material from Turner and Town and
Senator. say we don't have the third party artifact yet that enables us to see are there differences of view over what Snowy's own reassessment has done um to be able to answer that question and that is what we're waiting on and then we will use that to provide advice to the government as part of the myo decision-m period.
>> Right. Can I I I say the minister uh Mr. Bowen has said that the costs will be made public. Is that your understanding?
>> It'll be a decision for government >> uh in conjunction with the board as to what is made public like there has been public the cost reassessment is from Snowy Hydro's view is 22.2 with a $3 billion uh contingency amount.
>> Right.
>> Um so that has been disclosed. Uh
Minister on in uh December 2024 you provided Snowy Hydro with a new statement of expectations. Now that revised statement followed the release of uh an updated business case which itself followed the 2023 project reset which showed a 12 billion budget In view of this now $25 billion blowout, would you provide a new statement of expectations to Snowy?
>> Well, um, uh, Minister Bone and I will make some further decisions around how we respond to, uh, the cost escalation that we are seeing. I'm not sure if that will form, you know, require a new statement of expectations. Um, but we haven't I'm not ruling it out either. We haven't made those decisions yet.
>> Can I ask uh whether a third party assurance on Snowy's own cost reassessment is um I mean I I I agree with you that it's necessary. Is it normal? Is this something that has been done in the past specifically for Snowy or is it something that is done for other GPUs?
>> Uh Senator, it's it's this not the first time that I'm aware that finance has undertaken or other departments actually have undertaken an independent cost assurance process. Um uh most recently uh I understand that the department of infrastructure undertook a co an independent cost assurance process for inland rail >> uh which assisted government make decisions. Uh so for large mega projects it is uh it is not uncommon for uh an independent cost assurance process to be undertaken.
>> Okay.
>> Yeah. or independent advice um outside of cost is pretty routine. I mean finance is it's the commercial advisor to me across a whole number of um GBEs and and sibs and things like that. So I think taking independent advice to verify and provide assurance to the government is not unusual.
>> Okay. Um, Minister, I I realize that you are one of two shareholder ministers for um for Snowy. Uh, the other shareholder minister has said publicly that um when he has information once Snowy Hydro has um reassessed >> that he will um release the data. I think that he said, what did he say? released the report. >> I think it was on Sunrise. He might have said that it was one of it was it was a breakfast TV show anyway. Um >> is that something that he had discussed with you as the other shareholder minister and something that you had agreed upon?
>> Yes.
>> Oh, good. Okay. So it will be so the report will be
>> we had discussed I think the process now and we're mindful there's an OPD I think but also um prior to that we had discussed the need for um as much information to be made available as could be. I understand there's some commercial incompetence sensitivities that we will have to consider as part of that but um we we will do that um to make sure we can provide as much information as possible. Okay. All
right. Thank you very much for that. That was very helpful. I want to go back to um some questions about the whole of government regulatory reform agenda that I asked a little earlier. Um
>> so just while you're gathering reports there, Senator Hume, I will just note that we are still uh somewhat behind on the agenda and any senator who would like to place their questions on notice um that would be delightful.