Intrigue around Australia’s biggest renewable energy project has deepened after the Italian-based Webuild bought its contracting partner in the delayed and over budget Snowy 2.0 project for a peppercorn sum.
The South-African based Murray and Roberts announced overnight that it had agreed to sell its interest in Australian engineering firm Clough to We Build for a cash consideration of just $500,000, and the cancellation of a $350 million intracompany loan.
Murray and Roberts appears to have had little choice but to sell. It revealed earlier this year that the Snowy 2.0 project was delayed and over-budget – something that Snowy Hydro itself has only admitted this week – and that it had no working capital facility for the project, a situation its own CFO described as “ludicrous.”
In its statement, Murray and Roberts says the sale agreement is directly linked to the “acute” problems around working capital pressures being felt largely by Clough, which also precipitated a major share price fall.
“The Group has been reviewing a number of strategic options to address Clough’s working capital needs, which have become increasingly urgent,” it said.
“Having reviewed all available alternatives and based on the above background, the board of directors of Murray & Roberts concluded that a transaction with Webuild was the preferred course of action.”
Murray and Roberts says the cash position of Clough will be boosted by an interim loan facility of $A30 million by Webuild, presumably to enable it to manage its part of the Snowy 2.0 contract. The loan is still dependent on due diligence.
The sale follows confirmation from Snowy Hydro executives this week that the Snowy 2.0 is running over budget and is heavily delayed, and that it is in negotiations with the contractors over the cost issue.
Federal energy minister Chris Bowen in June announced that the project was running up to 18 months behind schedule, amid reports that it could be up to $2 billion over budget due to delays, logistics problems and supply constraints and costs.
Snowy Hydro this week confirmed that the budget for the Snowy 2.0 project has now blown out to just under $6 billion and is running around 12 months behind schedule.
