Senator ROBERTS: Thank you for appearing here today. I said in 2018 that this is a dog: no cost-benefit analysis, no transparent business case and no basis. From your January 2024 project update, it seems that Florence has started moving again, drilling the headrace tunnel at Tantangara. How much distance has been made since the machine became bogged?

Mr Barnes: As of this morning, 241 metres.

Senator ROBERTS: How many weeks is that?

Mr Barnes: That’s about eight weeks.

Senator ROBERTS: Let’s move on to the water. Once completed, how much water will the project require to operate, and what will the losses be to evaporation and seepage?

Mr Barnes: The Tantangara Dam reservoir will contain 350,000 gigawatt hours of water equivalent, which is around 700 gigalitres.

Senator ROBERTS: How many gigalitres?

Mr Barnes: Sorry, 240 gigalitres, two-thirds of that. The losses on moving the water uphill and bringing it downhill is in the order of 20 per cent.

Senator ROBERTS: And evaporation and seepage?

Mr Barnes: There’s no additional evaporation caused by the operation of Snowy 2.0.

Senator ROBERTS: I appreciate you can access Talbingo water, but I’m looking at issues around Tantangara, the top dam. Tantangara Dam has a poor catchment design, as I understand it, holds a nominal 250 gigalitres—you said 240—and is currently at 19 per cent capacity, so roughly 47 gigalitres. You must be watching the water closely, since water is essential to your project. Can you tell me the latest capacity and how much of that is that is dead storage?

Mr Barnes: Tantangara reservoir allows us to store 240 gigalitres. Obviously, before we were to operate Snowy 2.0, we would ensure that it was more full than 19 per cent, but there’s no lost storage in effect.

Senator ROBERTS: What is the effective storage that you’re counting on?

Mr Barnes: It’s 240 gigalitres, which turns into 350 gigawatt hours.

Senator ROBERTS: The long-term weather forecasts say it’ll be fairly wet until it starts becoming dry around 2032, when Snowy 2.0 starts. Tantangara, as I understand it, is used to store and release all of the environmental water going into the Murrumbidgee River. What happens if the 40 gigalitres available after dead water—unless there’s another figure in there; dead water being the amount of water that’s basically inaccessible because it’s below the outlet—are required for environmental flow? Who owns the water that you pump from Talbingo to Tantangara? Can you show me the water use agreement between your project, the federal government and the NSW government, please?

Mr Barnes: We don’t own the water; we operate under the terms of our water licence, which is a public document. Perhaps Mr Whitby can—

Mr Whitby: Senator, I think you’re not taking into account the natural inflows that occur into the upper Murrumbidgee, which, from memory and off the top of my head, is about a similar amount to that 240 gigalitres of storage.

Senator ROBERTS: It’s a fairly small catchment, though, as I understand it.

Mr Whitby: There’s still quite a bit of water that comes in there.

Senator ROBERTS: Quite a bit—how much?

Mr Whitby: I just said, off the top of my head, that it’s around 240 gigalitres of natural inflows.

Senator ROBERTS: So that’s in addition—

Mr Whitby: And, additionally, when Snowy 2.0 is operating, depending on the balance between pumping and generation, you can take water out of Talbingo, the lower storage, which is the whole point of the arrangement.

Senator ROBERTS: My understanding is that the Commonwealth Environmental Water Holder owns and controls every drop in that dam.

Mr Whitby: No.

Senator ROBERTS: The Snowy Water Inquiry Outcomes Implementation Deed, SWIOID—which was some years ago—is currently under review based on the upper Murrumbidgee River running dry recently. Will any outcome from that review lead to your water entitlement being reduced or affected in any way?

Mr Barnes: I think it’s too early to say that; it has some time to go.

Senator ROBERTS: That would be a significant risk to the whole project. Surely you’ve done some assessments of it.

Mr Barnes: I think the review will take into account and balance the needs of our stakeholders, including the national electricity market. There are times, of course, where—if we go back to the 2019 drought and bushfires—the flows through the upper Murrumbidgee were higher than naturally would have occurred, as a result of our operations. So it can have a positive effect.

Senator ROBERTS: According to an ABC article, Snowy Hydro has previously stated that the regulation governing water allocations for the scheme is independent of it and that the government owns the water; is that correct?

Mr Whitby: Yes.

Senator ROBERTS: So there’s no agreement at risk here—or anything subject to an agreement?

Mr Barnes: We operate under our water licence. The implementation deed you referred to from 2002 is the instrument that’s under review.

Senator ROBERTS: From 2002—that’s SWIOID.

Mr Barnes: Yes.

Senator ROBERTS: Three weeks ago, the New South Wales government announced temporary water restrictions on Murrumbidgee water licences, specifically water sources I and II, high-flow river licences. Are you confident you’ll always get your water? Everyone seems to be claiming the water—the farms, the towns, the environment—but who actually gets it in the water brawl?

Mr Barnes: I might leave that one to Mr Whitby, but we don’t consume any water.

Mr Whitby: I’m not sure I really understand the question, Senator. Are you asking if we’re confident that we will get future inflows?

Senator ROBERTS: Yes.

Mr Whitby: That’s a matter for the gods; I’ll leave it there.

Senator ROBERTS: So we’re leaving it to the gods.

Senator ROBERTS: Of the now $12 billion projected cost, how much of that is private money?

Mr Barnes: I’m not sure I understand the question, but—

Senator ROBERTS: Is it all taxpayer money?

Mr Barnes: Snowy will finance its debt position, because of course we have debt for the purposes of our operating cash flows, from the bank market or the bond market, and I think we’ve been public that the $6 million increase will require some equity support from the Commonwealth. That level hasn’t been determined yet.

Senator ROBERTS: So its component is privately funded; the debt will be privately funded and then paid back through the revenue?

Mr Barnes: Well, we pay a dividend, obviously, to the Commonwealth and over the last 10 years we’ve paid $2 billion in dividends and $1 billion in taxes, so it is an investment that the Commonwealth get a return on.

Senator ROBERTS: I understand that in answer to Senator Cadel earlier on, you said the net present value is now $3 billion.

Mr Barnes: That’s correct.

Senator ROBERTS: Is that with a $5 billion cost or $12 billion cost?

Mr Barnes: A $12 billion.

Senator ROBERTS: Could you provide on notice the price of the power you sell that you envisage? Your selling price? We’d like to get a feel for the cost.

Mr Barnes: The Snowy 2.0 concept is that its revenue comes from two sources: the provision of insurance to all the participants in the market—so that doesn’t have a power price; it has a fee—and then the difference in the cost of pumping the water up, which will likely occur when there is excess renewables, and the revenue from generating electricity as the water comes down. So there isn’t what you would call a translatable energy price that results.

Senator ROBERTS: On what basis is the project calculated to give a net present value of $3 billion? If we could have the basis for that.

Mr Barnes: We’ve done market modelling on those two revenue streams. Bear in mind that that is an activity we undertake today for our current 5,500 megawatts. We have seen increasingly, with the increase in variable and renewable electricity, that the market value of those two services has gone up.

Senator ROBERTS: Can we get access to your costs, please, so that we can understand how the $3 billion net present value is calculated?

Mr Barnes: We haven’t released the detailed business case on the present value of the project.

Senator ROBERTS: So we can’t get it?

Mr Barnes: I think we have taken on notice in the past that we would consider what business case could be provided. But the business case essence is no different to when it originally went to FID.

Senator ROBERTS: A lot of the key assumptions back then were redacted.

Mr Barnes: A business case was released a number of years ago, and all of the same dynamics apply, except that the market for the services we provide has increased.

Senator ROBERTS: Can we get a feel for the revenue from the guarantee—the insurance if you like—as well as the profit on the price difference?

Mr Barnes: I think I’ve said publicly before that—and one can calculate this—the revenue from Snowy 2.0 is in the order of a billion dollars a year. One-third is from capacity sales, and one-third is from a shift in electricity from low-price times to higher price times.

Senator ROBERTS: Minister, it seems to me the taxpayer is taking a big risk here so far with what we’ve seen of the performance of Snowy 2.0. Why can’t the taxpayers see what they’re paying for and the risk they’re being exposed to?

Senator McAllister: I think the history of this project is well understood. We’ve asked Snowy management to take a more active role in assessing and responding to project risk, and we’ve talked already about the reset. I think, as part of the reset, Snowy management—Mr Barnes and his team—released quite an amount of information and the results of their analysis of their position, and they’ve made clear their assessment about the value that sits within the project. If there’s any further information we can provide, we’re happy to consider it.

Senator ROBERTS: Could you take that on notice, please. What are your annual maintenance costs in your net present value calculations?

Mr Barnes: I don’t have the number off the top of my head, but it’s relatively small.

Senator ROBERTS: Could you take that on notice.

Mr Barnes: Yes.

Senator ROBERTS: This is my final question. We’ve heard reports from someone who’s local, so we’re not saying it’s definite—I haven’t got a publication; it’s just reports from a local. Have you encountered natural asbestos as part of land clearing, drilling or construction of Snowy 2.0?

Mr Barnes: I’m not sure we have to date, but we do expect to—

Mr Whitby: I would phrase it as there is a risk that we may encounter naturally occurring asbestos.

Senator ROBERTS: What sort of risk is that? Is it from geology projecting forward? What’s the basis of it?

Mr Whitby: From projection, geological models based on the geological surveying that we’ve done.

Senator ROBERTS: And drilling as a part of that?

Mr Whitby: Correct.

Senator ROBERTS: Where is it, what are the costs, and what delays will this cause?

Mr Barnes: We don’t know exactly where it may occur, but the design of Florence is such that, were it to be encountered, Florence would convert into its closed or slurry mode and be able to handle the excavation. It’s a risk that’s already been planned for.

Senator ROBERTS: So it’s incorporated in the cost?

Mr Barnes: Yes.

Senator ROBERTS: Thank you, Chair, and thank you.