A dispute has emerged between Snowy Hydro and its Italian chief contractor, Webuild, over escalating costs and delays in the Snowy Hydro 2.0 pumped-hydro expansion project. The disagreement surfaced in submissions to a parliamentary inquiry, prompted by a critical Auditor General’s report released in June, which highlighted management and budget concerns on the multibillion-dollar infrastructure upgrade.

Snowy Hydro 2.0, a major component of Australia’s energy transition strategy, has faced setbacks including stalled tunnel boring machines, supply chain disruptions, and rising labor costs. These challenges have contributed to significant cost overruns and timeline extensions. The federal government, which owns Snowy Hydro, has pushed for a detailed review of the project’s finances amid fears the budget has spiraled out of control. However, the review conducted by Webuild remains under consideration by Snowy Hydro months after its submission, leaving the final cost estimate uncertain.

Webuild, operating through its Future Generation Joint Venture (FGJV), attributes increasing expenses primarily to the region’s challenging geology requiring unexpected engineering solutions, such as introducing a fourth tunnel boring machine to complete key underground infrastructure. The contractor also pointed to ongoing "variations and continuing scope, design and quantity adjustment" as significant factors driving costs, intensified by inflationary pressures in materials and labor following the COVID-19 pandemic.

In contrast, Snowy Hydro acknowledged the project’s complexity and sector-wide cost increases but emphasized productivity shortfalls and contractual performance issues as contributors to the financial overruns. The government-owned entity specifically referenced disputes regarding how costs have been allocated within the contractual framework, a concern previously raised by the Auditor General, who criticized alleged misallocation of invoices affecting cost caps and contractor penalties.

The current contract structure, reset in 2023, shifted Webuild’s agreement to an “incentivised target cost model.” This blended approach combines a cost-plus payment basis with performance-based incentives and penalties intended to control costs and motivate efficiency. Webuild argued the reset brought “full visibility of project performance, costs and risks” to Snowy Hydro and maintained that it has consistently applied cost allocation methods agreed upon prior to late 2025. The contractor denies accusations of improper invoice categorization.

Snowy Hydro, while acknowledging imperfections in the revised contracting model, describes it as the best available option under the circumstances and stresses it allows for detailed cost oversight and intervention. The company intervened in October 2025 by instructing Webuild to undertake a comprehensive reassessment of project costs amid escalating expenses. That review was submitted in June but has not yet been publicly released. Snowy Hydro’s Chief Operating Officer Maia Schweizer recently stated that the cost review process is nearing completion.

This ongoing contention between Snowy Hydro and Webuild adds uncertainty to Australia’s flagship energy project at a critical juncture, with stakeholders awaiting the finalised cost evaluation and further government decisions on managing the budget blowout.