Snowy 2.0 cost blowout to test credit rating: S&P

The news: The updated $12 billion cost of the Snowy 2.0 scheme will likely pressure the BBB+/Stable/-- credit rating of the state-owned energy utility, ratings agency S&P said.

The numbers: Climate Change and Energy Minister Chris Bowen today confirmed the project, which was originally slated to cost less than $4 billion, will now cost three times as much. It will be delivered in December 2028, slightly earlier than expected, and will deliver 2.2 GW of power, 200 MW more than was planned.

The context: Several delays due to tunnelling issues prompted the incoming Labor government to commission a review of the troubled mega project by Snowy Hydro CEO Dennis Barnes. S&P said Snowy's credit rating would only hold up with "extraordinary government support" in the form of additional equity, grants, dividend moderation, or indirect involvement in connecting the project to the transmission grid. However, the agency also noted that the credit rating would have to fall by three notches to BB for the final rating to be affected, at which time it may be considered a junk bond.