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Environment and Communications Legislation Committee
25/05/2021
Estimates
INDUSTRY, SCIENCE, ENERGY AND RESOURCES PORTFOLIO
Snowy Hydro Limited

Snowy Hydro Limited

CHAIR: I now call officers from Snowy Hydro Limited. Welcome, Mr Broad and Mr Whitby. Would either of you like to make an opening statement?

Mr Broad : Yes, thank you, Chair. As you may have heard, there's been a major fire explosion at a power plant in Queensland—2,000 megawatts. Some of the old-timers think it's the largest trip they've seen. It's a look into what might be coming. So I'd ask my chief operating officer, Roger Whitby, who has 35 years of experience in the power industry, to take you through that and how that's applicable to what we do at Snowy.

Mr Whitby : Thanks, Paul. Obviously the events of earlier this afternoon in Queensland were quite unfortunate, to say the least. What we know is that there was a fire of some description in one of the power stations—either Callide B or Callide C. It appears that three of the thermal generating units at that location have tripped and a number of transmission lines coming out of the substation have tripped for reasons not currently known. As a result, AEMO had to shed significant demand, as Paul said, in the order of 2,000 megawatts in South-East Queensland. AEMO have been progressively restoring that load this afternoon, and a number of gas-fired power stations in Queensland have started up. They're not normally operated, but they have come to the rescue in terms of meeting that critical demand in Queensland.

The events, unfortunate as they are, do highlight some of the issues of operating a power system and particularly the markets around the power system. I have to say, generally speaking, it's my observation that those issues aren't well understood. Electricity is a product that we obviously all rely on, and we're all familiar with, but some of the complexities surrounding it are quite challenging, and I just want to touch on some of those challenges.

As I said, electricity is a wonderful product. It's essential to our modern day life. The beauty of electricity is its ability to transfer and distribute some primary source of energy. Electricity in itself is not a source of energy. The critical thing about it is there is absolutely no storage of electricity. Before anyone reacts, there is storage of energy that can be transformed, but there's no storage of electricity itself. Imagine any other marketplace that is critical and doesn't have any primary storage. Of course it's going to be risky. So let's just examine some of those risks, if I may.

The AC power system that we operate is what's called dynamically unstable; it has to be actively balanced. All the different parts of it are actually synchronised together, but it's only loosely synchronised. In lay terms, it's only loosely connected and it's quite springy, so it's very unstable. To keep it in balance, it's got to be actively controlled. It has to be in the Goldilocks zone, if I can use that term. If there's too much energy coming into the power system relative to the demand going out, the whole system starts to speed up. If it gets within one or two per cent out of the nominal 50 hertz of the power system, bad things happen. On the high side generators start to trip off. If it's on the low side even worse things start to happen: loads start to trip off. And if that's not done correctly the whole power system can almost instantaneously collapse. If it collapses you have the system black and it's incredibly difficult to restart. That might take a minimum of eight hours, if you're lucky. It could take days. So managing is quite a challenge. I want to go over a few other issues.

CHAIR: Before you do, how much longer do you intend to go?

Mr Whitby : Approximately five minutes. I think this is going to be useful background. Based on the recent press, I'm anticipating a few questions, and I think this will be quite important background to answer some of those questions.

CHAIR: The main purpose of this is questions, but if there's no objection from committee members then, yes, five minutes, but please keep it within that.

Senator GREEN: I have lots of questions.

CHAIR: If you can keep it well under five minutes, please, that would be useful.

Mr Whitby : As I said, the power system has to be actively balanced and I'm only talking about frequencies. It also has to be balanced in terms of voltage right across the network and that's a bigger challenge technically. I haven't touched on some of the stability issues. Transmission also has to be managed while that balancing is going on. If transmission lines are overloaded the lines themselves can be damaged. They heat up and sag and they can kill people and create fires and all those sorts of issues. That means that this management has to be done on a macro level and it has to be done on a local level as well. Obviously the criticality of supply is high. Not to be too glib, if those outages or blackouts occur over extended periods people literally die: people on life support in homes and hospitals, traffic lights go out. There is absolute chaos. Communications in the long run rely on electricity supplies, and day-to-day businesses, obviously, and homes. To put it in an economic sense, the value of lost load in electricity is extremely high. Numerous studies look at this. It's not to say all loads have this value but critical loads have a value of lost load somewhere between $25,000 and $50,000 a megawatt hour, simply because of those issues. The other great challenge in the electricity—

CHAIR: Wrap up in one minute, please.

Mr Whitby : Okay—is that both demand and supply are inherently variable. It varies second by second, hour by hour, day by day, week by week, season by season, year by year. The demand varies. Everybody puts their loads on in the morning when they get up and put the kettles and toasters on simultaneously. Similarly in the afternoon, everybody rides the train home, puts their evening meals on. Of course, some of the big variables in demand are heating loads. Air conditioning, for example, is very dependent on weather, whether you have a short duration hot spell or you have extended heatwaves. Similarly with cold, whether you have supplies that are driven off heating loads et cetera. Supplies are even more uncertain—major generators are pretty damn reliable in the main part, but, of course, you need outages to maintain them. Importantly you always have some level of forced outages—that is failures. Those level of failures are going up, particularly as the plant is ageing and particularly as the maintenance, arguably, is not keeping pace—

CHAIR: Mr Whitby, I'm going to pull you up there because we do need—

Mr Whitby : Just one more point and then I've finished that section, and that's the variability of increasing wind and solar that's coming in. Wind comes in waves, both on the supply side and the absence of it, so you have wind droughts and you have wind floods, similarly with solar. All of those variables have to be managed to keep that complex supply at critical times when you need it.

CHAIR: Thank you very much. Senator Roberts.

Senator ROBERTS: Can I just make a note: I appreciate what we've just heard, because we tend to walk into a room and flick a switch, and we take it for granted, but it is a very complex and highly important part of our society. Thank you.

CHAIR: Point well made, thank you, Senator Roberts. Senator McAllister, you have the call.

Senator McALLISTER: Mr Broad, when will Snowy's business case in relation to the Kurri Kurri project be made public?

Mr Broad : I committed at the last meeting to make that public, and I will do so. We are in the middle of some tricky negotiations to purchase equipment. Once that's done, we'll make it available. We don't want to give to our other side what that might look like, but I made a commitment to make it available, and I will—exactly the same as I did for Snowy 2.0.

Senator McALLISTER: Do you have a sense about the time frame?

Mr Broad : I'd like to be definitive. The contracts are being negotiated now. As you know, the decision by the government wasn't made until last week, so we couldn't commit ourselves until that was all done. We are in that process right now. So as soon as possible. I understand the sensitivity. I also understand that my competitors will be watching me like a hawk, and I don't necessarily want to give them a leg-up. So I'll give as much as I possibly can to keep everybody informed. I can say to you that the internal rate of return is double digit.

Senator McALLISTER: Mr Broad, you observed that the decision was only recently made by government. When was that decision communicated to you and how?

Mr Broad : A day or so before.

Senator McALLISTER: Sorry, a day or so before when—before the announcement?

Mr Broad : Yes.

Senator McALLISTER: What was the means by which that was communicated?

Mr Broad : I think it was a phone call.

Senator McALLISTER: So there's been no written statement about the terms on which the equity arrangements will be established with Snowy?

Mr Broad : No, but, as you appreciate, for 2.0 we have agreements in place federally, and on equity into Snowy 2.0 my expectation would be that it would be the same.

Senator McALLISTER: Just on this question of timing, I recognise your commitment to doing it as soon as possible. You've previously made a commitment to doing it after a decision on the business case is made by government. Can we expect it within the next couple of months?

Mr Broad : Yes.

Senator McALLISTER: Mr Broad, how much of the peaking market will Snowy Hydro control if Kurri Kurri goes ahead?

Mr Whitby : There's no such thing as a peaking market per se. There are different plants in the marketplace and there are a variety of supply and, obviously, demand side also completes. So it's really an artificial construct.

Senator McALLISTER: Okay, but it is a construct that's regularly used by market commentators and by market participants in understanding how the market functions—

Mr Whitby : There are a lot of commentators out there.

CHAIR: Mr Whitby, please don't over-talk the senator. Wait till she's finished her question.

Senator McALLISTER: I don't accept your proposition that this is not a meaningful concept. It is a concept that's used in the market. I'm trying to understand, of the conventional gas and hydro market, the peaking market, how much Snowy Hydro will control if Kurri Kurri goes ahead.

Mr Whitby : To really answer that question, I'm going to have to describe the marketplace in a little bit more detail, if I may, please. In terms of the issues that I spoke about—balancing supply and demand—that's done by AEMO. They're the market operator and they operate a physical dispatch market. And it is a wholesale marketplace. So they issue, on a day ahead basis, a forecast of what plant's going to be dispatched to meet demand, and that's based on the bids that each generator submits.

Senator McALLISTER: Mr Whitby, if it assists, if I just may explain so that you can tailor your response to my level of knowledge. I do know something about how the electricity market works, so you don't need to take me through it from absolute first principles; you can assume that, actually, most of the senators in the room have had some contact with your industry before. That is just as some background for you in constructing an answer that is relatively brief.

Mr Whitby : Okay. I'm just going to bear this out, because there are two parts of the marketplace that I want to describe. One is this physical marketplace, which I'm sure you know a bit about. I just want to make sure the context is set, because I appreciate there will be a few questions. Every five minutes AEMO estimates what it thinks demand is at the end of the five-minute period and it dispatches generators at a level to meet that demand while managing the transmission limits and flows that I spoke about earlier. Generators obviously bid into the marketplace to be dispatched. But one of the issues, by the way—and this is a side issue—is that price sensitive loads are not bid into. So there is no transparency on what the loads do in the marketplace, with the exception, by the way, of Snowy pumps. Based on that market clearing that AEMO does—and it uses a very complex market engine to dispatch generation at least cost to meet the demand that it sees—it issues dispatch instructions to generators that are cleared, and it is a breach of the national electricity law if the generators don't follow those dispatch instructions, and you must follow them. Price is then set, and each generator that is dispatched gets paid that price for the five-minute period, subject to losses, but that's another matter, in each of the market regions. So, based on those other factors that I spoke about previously in my introduction, it is a very risky marketplace. There are long periods of relatively benign prices and an occasional short period of potentially very negative prices, down to minus $1,000, and short periods of potentially very high prices of up to $15,000, which is less than the value of lost load, but that's another issue. So it is an incredibly risky place for these wholesale participants to operate.

CHAIR: Mr Whitby, sorry to keep interjecting, but we have less than an hour in total. I have at least six senators who wish to ask questions, which means, at most, 10 minutes per senator. If your answers are taking three to five minutes each, that becomes very unworkable. So if your answers could be very succinct, and if there's more you'd like to add you are very welcome to put it on notice.

Mr Whitby : Okay. I'm coming to the senator's question in a very short while. Because that's extremely risky for all of these major participants there has to be a way to manage the risk, not only in that very short term but in the longer term, and I'm talking quarters, years, multiyears, and they do that by the financial markets that sit over the top of that spot market. So sophisticated wholesale players enter into derivative contracts, of both the buy and sell kind, and they're typically in the forms of swaps and caps, and they use those to hedge out the risk of this incredibly risky spot market.

Senator McALLISTER: Okay. Thanks very much for the explanation. In terms of installed capacity in the traditional peaking market of gas and hydro, you'll be somewhere between 65 and 80 per cent if these two projects are completed?

Mr Whitby : The point I'm getting to is that the marketplace is for megawatts and, over time, megawatt hours. It is a completely fungible and interchangeable product. And over the top of that physical market are hedges that participants write. Participants can write any form of style of contracts, and there is no such thing as a short-term hydro or gas marketplace. That is an artificial construct and meaningless, I'm sorry, Senator.

Senator McALLISTER: It's not the way that market analysts think about your market, Mr Whitby, but thank you for the advice. Could you confirm the size of the existing gas-fired plant at Colongra.

Mr Whitby : Colongra is about 660 megawatts.

Senator McALLISTER: And what percentage of time does it run?

Mr Whitby : It operates in the order of several per cent and it depends highly on market conditions as they occur. For example, if you take the summer of the previous year, when, as everybody is aware, it was extended heatwaves and bushfires et cetera, it operated obviously for a greater period of time. Last summer, in terms of heat conditions, it was a complete dud and it didn't operate very much.

Senator McALLISTER: But, on average, sometimes just over one per cent, sometimes at ½ a per cent—

Mr Whitby : No. I said in the order of several per cent. And its role is to provide that critical insurance, essentially, to the marketplace, that risky part of the curve that I spoke about previously. So it's not a question of percentage of time—

Senator McALLISTER: I am not intrinsically critical, Mr Whitby—

Mr Whitby : Sorry, Senator, I was talking then.

Senator McALLISTER: Well, you're providing very long answers. I'm not intrinsically critical of an asset that is not running all of the time, such is the nature of the electricity sector. What percentage of time do you expect the Kurri Kurri plant to run?

Mr Whitby : The EIS provided for an up to 10 per cent capacity factor and an up to two per cent capacity factor on diesel. In terms of our expectation, it's of the order of two per cent to five per cent—it's something in that vicinity. As I said, it will be subject to whatever the market requires.

Senator McALLISTER: Chair, I understand there are senators here who also wish to ask questions. I do wonder how we're going to handle the fact that Snowy are scheduled to be here for an hour. There are a lot of questions to ask of them, and these are long answers, so I'm not sure an hour is going to be enough.

CHAIR: Let's proceed through the group and we'll see what questions are unanswered at the end of the time and, if needs be, we can extend.

Senator ROBERTS: Thank you all for being here. What is the true costs of Snowy 2.0 including associated transmission, linkages and costs required to make it operational and productive?

Mr Broad : Transmission, as I have said many times here, is not part of 2.0. The transmission is to enable the transition to renewables. The cost of all that transmission is in the hands of others, not in our hands. I can't comment on transmission. For Snowy 2.0, as I have said here many times, in nominal dollars it's 5.1 and then, attached to that, we have a contingency factor of $400 million. We can now confirm that the environmental costs, the offsets costs, are of roughly $100 million.

Senator ROBERTS: What is the average annual saving that Snowy 2.0 will enable in the marketplace?

Mr Broad : I don't understand.

Senator ROBERTS: What is the saving? Economic modelling has found that Snowy 2.0 will provide savings of market benefits of between $4.4 billion and $6.8 billion and produce spot prices, leading to lower costs for consumers.

Mr Broad : Yes.

Senator ROBERTS: What will be the benefit?

Mr Broad : As I said here, I think, four years ago, what it does is firm up renewables and allow it to compete. We do so at a price point. At that time I said it—and some of you senators were here at the time—we said we can compete with base load power. That has been proven to be true even with the existing Snowy. The benefits all come with renewables and lower prices et cetera that stem from 2.0. I emphasise again that you can't go down the renewables track without significant amounts of deep storage.

Senator ROBERTS: That's an added cost to renewables?

Mr Broad : You can't have renewables without it.

Senator ROBERTS: So it is an added cost to renewables?

Mr Broad : Yes.

Senator ROBERTS: Do the projected savings take us back to a sustained $40 per megawatt hour price that prevailed prior to government interventions favouring renewable energy that brought the post 2015 price increases?

Mr Broad : I can't comment on that. I can comment that the renewable penetration is significantly pushing downward on prices. Wholesale prices are significantly down. The forward curve is down. But you've got to be able to balance that out. That's been helped a lot by existing base load plants being flexed up and down to keep the lights on. I can't comment on going back to those days; those days were driven by a cheap base load.

Senator ROBERTS: Driven by a cheap base load—that's correct. That's my understanding too. Coming to the Kurri Kurri project, do you think that private sector participants perceive the risks of such a new plant? My understanding is that the minister was really keen for private sector to take on the Kurri Kurri plant or provide what the Kurri Kurri plant would be providing, but, instead, that's not happening so the government is jumping in. Do you think that private sector participants perceive the risk of such a new plant to be excessive in light of government subsidies, present and planned, to intermittent wind and solar?

Mr Broad : EA, EnergyAustralia, didn't. They're building a plant at Tallawarra B. The other one was AGL. They've been talking about building a plant at Tomago since 2012. I don't believe it was ever in their interests to build and enable competitors to offer up more competitive products than what they currently supply from the base load power stations. I suspect there are wider considerations than just gas plants for AGL, but I'm speculating.

Senator ROBERTS: So there are many complicating factors. I get that.

Mr Broad : Yes, many. We look on the other side. When the bushfires happened here 18 months ago—the tragedy of those fires—only for Colongra, the lights would struggle to stay on in New South Wales. We faced, because of the contract market that Roger was describing, losing somewhere in the order of $150 million because we were on the wrong side of the contracts. Colongra came on, and we lost, I think, $30-odd million in an hour and a half, which is the nature of the business; we're in a risky business, so you've got to take some losses at times. You have got to be able to have faster, firming generation to enable this transition to happen. That's just what's happening now. It's happening in Queensland right now. In Queensland, there are 400,000 properties without power. There is a hospital in Queensland on emergency diesel right now. This is real. And they're firing up gas plants. Please, this is serious. This is deadly serious. This is people in serious predicaments. We sit here today—let me tell you, I spend my life thinking about this. That's what I do every day. I think about what we can do to not let that happen.

Senator ROBERTS: Mr Broad, I have been thinking about it for a decade. I don't have your level of expertise in the electricity sector but we knew this time was coming, based upon policies that Labor and Liberal governments have pushed. Does the decision of Snowy Hydro Limited to undertake such an investment at Kurri Kurri indicate it has a lesser risk aversion than its private sector rivals?

Mr Broad : No. I don't think that is true at all. I think EA have obviously seen that they need to go. I think AGL have other considerations to think about. I can't comment on Origin. I can't work that out, because they have a wonderful hydro plant just on the edge of the Sydney basin—the Victoria Falls hydro plant was a fabulous plant. I can't really look into that, but I don't think there's a difference on risk. We manage risk to the nth degree.

Senator ROBERTS: Is it because private firms just cannot justify the risk and investment because government has favoured high-cost renewables, or 'unreliables', as I call them?

Mr Broad : I don't think so. No.

Senator ROBERTS: You don't think so?

Mr Whitby : No. I think Energy Australia is proof-positive of that effectively.

Senator ROBERTS: Okay. I have another question on Kurri Kurri. Isn't the private sector effectively competing with government subsidised 'unreliables', especially after Matt Keane in New South Wales and Lily D'Ambrosio in Victoria recently declared further fostering of 'unreliables', with transmission lines and guaranteed payments and controls favouring and protecting 'unreliables'?

Mr Broad : I think the subsidies have flown to the private sector as much as anyone else. I note that Energy Australia got $80 million or thereabouts. I think 50 out of New South Wales and some from the feds. I notice Twiggy Forrest got $30 million for his proposed LNG plant. I'm sure he needs the $30 million. I don't think you can single out any one group in the industry. But, let's be clear: the transition is happening. Once the renewables get—and transmission can deliver it to the market, the firming that needs to be built is massive. It is on a scale that it is hard to even comprehend.

Senator ROBERTS: The minister himself, Mr Taylor, has cited Bloomberg's graph on the support of clean energy, or 'unreliable energy' as I call it, and Australia, per capita, is investing twice as much as the next major country investing in this 'unreliables' energy. We are investing double what the United States is and six times what China is. We have already heard from you and Mr Whitby what's happening as this transition occurs—this forced transition—and it's bringing considerable risk to our whole electricity sector. I would see Snowy 2 itself as an admission of failure because it relies on high peak power rates. It wouldn't work without that.

Mr Broad : I think that is a comment, not a question.

Senator ROBERTS: Yes.

CHAIR: Senator Waters.

Senator WATERS: Will the $6 million be in equity funding?

Mr Broad : Yes.

Senator WATERS: Has the government communicated the timing of when that money will come across?

Mr Broad : We're in discussions right now; we've got teams sitting down with the departmental people right now.

Senator WATERS: Does the business case, which I'm pleased to see you will release—although I didn't catch the time frame for when that would be.

Mr Broad : Since Senator McAllister asked for the time frames, I committed to do it in two months, I think we agreed. I've got to go to my board—and my board might not be happy!

Senator WATERS: I just wanted to check on that. So there are a couple of months more to wait on that. Does the business case adequately incorporate the 12 gig of policy support that New South Wales is going to have in new renewables and storage since the Liddell Taskforce report?

Mr Broad : No, I think there's a long way to go. They're going to need a lot more firming for that to work.

Senator WATERS: Sorry, does the business case factor that 12 gig in or not?

Mr Broad : The business case factors in a certain amount of renewables to firming it, so it goes to a bunch of products, not dissimilar to the business case we put out for 2.0.

Senator WATERS: I'm not understanding whether it does includes the 12 gig of projects already set up—

Mr Broad : Yes, the 12 gig is part of it, but we can't firm up 12 gig. That's my point.

Senator WATERS: Okay. Last week the Tomago Aluminium smelter temporarily shut down because, according to Minister Taylor, there wasn't enough power available. Do you agree with him? Was there not enough power?

Mr Broad : I can't comment on that. I can comment on what happened with us, and I'll ask Roger to go through it, because there has been some misinformation put up about whether Colongra operated or not.

Senator WATERS: Yes, I'm interested in that. My understanding is it didn't.

Mr Broad : No. It operated for five hours, actually. Again, given the background Roger talked about—and I understand, Chair, timing, and I appreciate we can answer a lot of questions on notice. Send us a question and we're going to answer it, don't worry. But it's really important, because these things get misrepresented to you, the senators, and we want you to be precise, so—

Senator WATERS: Can I beg your patience and ask you to do that on notice, because I've got a series of other questions and I really do want to ask them.

Mr Broad : Okay. Absolutely.

Senator WATERS: I appreciate you've said it did bid in for five hours. That's a useful piece of information. I'll await the detail on notice. Colongra runs about half a per cent of the time—is that correct? I think you also said that Kurri Kurri would run between two and five per cent of the time. I'm interested in your level of confidence in the two and five per cent when you've got Colongra only running half a per cent of the time.

Mr Broad : Just so we're clear, we run lots of gas plants. We run two in Victoria. We've got Colongra in New South Wales. We run some diesel plants. We run diesel plants in South Australia—160 megawatts. We keep the lights on in South Australia. We've got diesel plants in the HEZ. We've got a whole suite of plants we put in our portfolio, and we put each one of them on to meet the demands that AEMO has forecast on any particular day, and we use the lowest-cost, most-economic form of that.

Mr Whitby : If I could just add, we obviously prefer to dispatch our hydro plant to meet the critical demands. Only in those circumstances where, for other reasons, such as transmission or whatever, we have to burn more expensive fuel do we do that, so that's only on rare occasions.

Senator WATERS: Just as a matter of interest, what proportion of the power that you're supplying would be from hydro, which is, in my view, renewable, as opposed to the gas plants and diesel plants?

Mr Broad : We are a small player in the market. We're only 14 per cent of the national—

Senator WATERS: Yes.

Mr Broad : So we're a very small player. Out of that, gas is a very small part, and diesel is even much, much smaller.

Senator WATERS: Can you be a bit more specific?

Mr Broad : In any one year, as Roger said, it varies a lot. If I were to go back the year the fires were on, the percentage would have been a lot. If you go back seven years when we had a big drought, we ran our gas plants in Victoria nearly flat out day after day. So it depends on the year, so I don't want to mislead you.

Mr Whitby : We can take that on notice.

Senator WATERS: Okay. With Kurri Kurri, assuming it goes ahead—and I don't want to enliven this discussion about peaking markets—my understanding is it would then be roughly 80 per cent of the peaking market that Snowy controls. Let's just take that as a hypothesis, if you will.

Mr Broad : I'll take that on notice, and we'll come back, and we'll have a written argument about that one.

Senator WATERS: I can't wait!

Mr Broad : I know Senator McAllister will love it!

Senator WATERS: Indeed. Has the ACCC had discussions with you to prevent manipulation of market power given that very large controlling stake?

Mr Broad : No. I've heard some report today. That's all news to us.

Senator WATERS: Sorry. The answer is: no, they haven't yet had discussions.

Mr Broad : No, not yet. There's been no indication—no nod, no wink. Nothing.

Senator WATERS: I wouldn't expect the ACCC to give a nod and a wink, but you never know. Things are a bit strange lately.

Mr Broad : We see a lot of them. Just so we're clear, I reject the implication of your question. There isn't any. We are open to the ACCC constantly. We sat alongside the ACCC when AGL bought Macquarie Generation, which led to the oligopoly. The biggest problem in the market is the oligopoly. No-one likes talking about it. We know it. We see it every day.

Senator WATERS: Coming back to the $600 million, what does that include? Is that the total cost of the project to the Commonwealth? Are there any other costs that you're anticipating?

Mr Broad : No, there isn't.

Senator WATERS: According to your EIS—correct me if I'm wrong—the project would release half a million tonnes of extra pollution each year. I'm conscious that there were thousands of people on the streets last week saying no to new gas. Are you expecting that there will be massive protests against this project of yours?

Mr Broad : I can't comment on that.

Senator WATERS: Has the $6 million figure factored in the cost of security for protecting the construction site from protests and blockades?

Mr Broad : I'm sure that the local law enforcement will deal with that.

Senator WATERS: Has there been any discussion with the New South Wales police on contracting or managing the logistics and costs for protecting the site?

Mr Broad : No.

Senator WATERS: Has the $6 million figure factored in the cost of delays to the project for targeted boycotts and divestment of third party construction and supply contractors?

Mr Broad : The $600 million has a lot in it. As I said, I'll release the business case, and you can save all your questions up to then. That might be more appropriate.

Senator WATERS: I'll proceed in any case. Has the $600 million factored in the cost of delays to the project from legal action?

Mr Broad : No.

Senator WATERS: Are you concerned about the impact of a campaign urging Australians to divest from your retail divisions, Red Energy and Lumo Energy, as a result of this gas peaking plant?

Mr Broad : It will be very sad if they do. We're the most renewable retail business in the land, the thing you support most.

Senator WATERS: Yes, not gas-fired peaking plants though. We don't support public money going to that.

Mr Broad : We can only have renewables if it's firmed.

Senator WATERS: There's such a thing as batteries, which I'm sure you well know—and I'm sure Mr Whitby is about to give me a detailed discussion of that!

Mr Whitby : Yes. In terms of doing it economically, the fastest way to decarbonise is to bring in commodity energy in renewable form and firm it up with a variety of sources. In certain critical roles, the best way to do that is with gas-fired power stations. As we've heard today, it will only operate under very limited durations to meet the critical demand when it's most needed, and that will be the most economical way to decarbonise, because that will displace the good old base load energy, which is very, very carbon intensive—if we're serious in the long run about doing the job.

Senator WATERS: Certainly my party is serious about doing the job, but I don't think fossil fuel backup is the way to go. But that's obviously something that the government and the Greens disagree on.

Senator Seselja: We rely on things that actually work.

Senator WATERS: You don't think that batteries and renewables work. You want to have that discussion now?

Senator Seselja: You tend to be against policies that work.

CHAIR: Help me stay on schedule.

Senator WATERS: I've got one final question, Chair, and then I'm done, if the minister can contain his climate antagonism. What would you say to those people who think that building a new gas-fired power station in the middle of a climate emergency is a crime against humanity and who will do what it takes to stop this project from going ahead? What would you say to them?

Mr Broad : I'd encourage them to stop and think. You can't have renewables without it. I would ask them to think about—

Senator WATERS: Batteries.

Mr Broad : Batteries, batteries.

Mr Whitby : If I could just add, what seems to be missed in this debate is the economics. It's got to be feasible economically. Batteries are great, and over time they'll get cheaper. I know that. But, in the foreseeable future, the economics don't allow for battery storage alone to meet those critical factors that I've spoken about. The quantity of energy—

Senator WATERS: With the $11 billion in fossil fuel subsidies.

Mr Whitby : if I could just finish—that has to be spread to meet those demand and supply gaps that I spoke about is absolutely phenomena. The quantities of batteries and lithium to do that is unbelievable, at the same time that batteries have to be decarbonising transport et cetera. It is a phenomenal challenge, if I could get on my high horse for a minute.

Senator WATERS: Can I point out the $11 billion in subsidies to the fossil fuel industry, if we're talking about discussions—

CHAIR: Order. Senator Waters, that's a comment, not a question.

Senator WATERS: May I please finish? This is my last contribution.

CHAIR: You said you had one more question, which you have asked. We're running out of time. I'm going to give the call to Senator McAllister.

Senator McALLISTER: Thanks, Chair. There has been some discussion about the decision by Tomago to cease operations for a number of hours to avoid a spike in the market in recent weeks. There are reports that, during that period, Snowy Hydro did not dispatch any electricity from the Colongra plant, despite the fact that the prices were running at between $2,000 and $7,000 a megawatt hour. Is that correct?

Mr Broad : I committed to give a full account a minute ago to the previous questioner if I could take it on notice. It would include our version of Tomago and what happened day by day. We were ready to run. We ran for five hours on Thursdays and Fridays. There is a lot of misinformation put out there. I agreed to give Senator Waters—

Senator McALLISTER: I'm asking the question. With my time, I would like to know the answer—

Mr Broad : And I said we'll take it on notice and we'll give you a full answer. If you want the full answer now, it's going to take half an hour to give it to you. Or you can get a detailed response, day by day, hour by hour—

Senator McALLISTER: Mr Broad, with the greatest respect, this is not a forum where you dictate which questions you'd like to answer. The Senate and the senators here are here to ask you questions as a government-owned business enterprise.

CHAIR: Senator McAllister, it is also true that a witness can take an answer on notice.

Senator McALLISTER: Certainly they may, but a witness may not hold the Senate hostage by insisting that the only answer they're prepared to provide is a half-hour answer. That is completely—

Senator Seselja: Chair—

Senator McALLISTER: I am now making a point in relation to what appears to be a procedural discussion with the chair. That is not an acceptable way for this witness to behave. We have endured something like half an hour of filibustering from these witnesses, with very limited information in response to questions posed by senators. I would ask you to assist us, from the chair, in a more reasonable approach.

CHAIR: Senator McAllister, you know I am trying to assist in this.

Senator McALLISTER: You usually are.

CHAIR: Minister, do you have a point?

Senator Seselja: I don't think it is a fair characterisation to suggest that there has been filibustering. I would make this point: Mr Broad and others have been endeavouring to answer questions. They have made it clear that in order to answer this particular line of questioning, it would involve a fair degree of detail. You have indicated you would prefer they did not give those types of long answers, so they are between a rock and a hard place: giving a short answer doesn't actually answer the question, and you've instructed they shouldn't give the long answer. To be fair to the witnesses, they have made it clear they're happy to answer, but there is a complexity to these things and so they should either be allowed to give that complex answer or take it on notice and provide it that way.

CHAIR: Minister, you make a fair point. Mr Broad, what I will undertake to do is to see if we can arrange for this committee, out of estimates, to have a session that will be public, potentially broadcast, where you can make the points very clearly so that people do understand the complexity of these issues, and why these superficial factual figures can sometimes be misleading. But to facilitate today, could you please either give Senator McAllister and other senators what information you can or, if you can't do it genuinely, say you will take it on notice and then we'll move onto the next question. Senator McAllister.

Senator McALLISTER: Public reporting suggests that between 17 and 19 May this year there were very significant price spikes, and that Colongra did not dispatch during that period of those intense spikes at any time—is that correct?

CHAIR: Mr Broad, did you hear the question?

Mr Broad : Yes, I did.

Mr Whitby : Let's start with Sunday, because that's when the shortfall, or potential shortfall, that AEMO saw, in terms of having sufficient reserve for Monday afternoon, was first forecast to the marketplace. In terms of the context, that was cooler weather; there was low wind output forecast, particularly over the evening peak when solar obviously disappears; and there were multiple large coal-fired unit outages. I won't go into the details of that, but they were numerous. Compounding that was transmission outages and constraints across the network.

We saw that, and responded. On Monday morning, we rescheduled a critical outage that we had on our Tumut 3 power station, and we made an additional 600 megawatts of capacity from our Tumut 3 plant available to cover that shortfall that was signalled by AEMO, the market operator, so that on Monday—

Senator McALLISTER: 17 May.

Mr Whitby : there was more than enough capacity in the marketplace, including our Colongra plant, to be available to meet demand.

During Monday, on AEMO's forecast, there were approximately five hours of very high, and by that I mean something like 15,000 megawatts of prices, forecasts over the evening peak. Basically, during that forecast event, all of our Colongra plant was forecast to operate. What happened over the course of the rest of the day was other plants bid themselves available, and, in terms of the forecast, that essentially disappeared, to a large part at least, and in real time in the evening peak. I can set out the details, but, without reference, from what I can see, to the marketplace or indication, Tomago progressively tripped off a number of potlines.

Senator McALLISTER: Mr Whitby, is it correct that during that five-hour period you had your entire capacity priced at $15,000 per megawatt hour?

Mr Whitby : In terms of our operation, we managed our risk positions using our hydro plant. As I mentioned before, we would obviously prefer to run hydro whenever we can, and we did that. We had numerous energy constraints and issues that we were managing across that period, and we managed our portfolio in the marketplace. So AEMO—

Senator McALLISTER: And what price were you offering during that period?

Mr Whitby : if I can get to the point—didn't dispatch our plant. They are the only ones that can dispatch our plant.

Senator McALLISTER: What price were you offering at that time, Mr Whitby?

Mr Whitby : Most of the Colongra plant at that period was offered in at VoLL, because we were managing our market positions and our customer base, either directly in terms of our retail business or in terms of our portfolio contracts, using the rest of our plant.

Senator McALLISTER: Sorry; most of the Colongra capacity was offered—I didn't hear you. What was the price that you were offering?

Mr Whitby : I'd already said that, during that period, most of the Colongra plant was offered at approximately $15,000.

Senator McALLISTER: $15,000. So the market cap?

Mr Whitby : Close to, yes.

Senator McALLISTER: So your evidence is that the reason that Colongra was not dispatched was because you were only prepared to accept a price of $15,000 per megawatt hour during the entire period of projected shortfall in the market?

Mr Whitby : What I'm saying is our plant and a variety of other plants were offered in at the marketplace at $15,000.

Mr Broad : And just to give some context to that, on the Friday we offered Colongra at minus $1,000, and we got on.

Senator McALLISTER: It's just that earlier today much was made of the shortfall in capacity in the market—

Mr Whitby : I said—

Senator McALLISTER: not by you, Mr Whitby; in other evidence—and the consequences for Tomago of that shortfall. And yet your evidence here is that, in fact, there was capacity in the market that day, it's just that you, as a government-owned business enterprise, were choosing to bid into that market at the maximum possible price that is permitted in that market.

Mr Whitby : As I set out, we have a variety of plants and we have a variety of issues to manage—including transmission and energy constraints and availability of water and availability of gas—in a very risky marketplace, and we have direct financial obligations, both to our direct retail customers and also to our wholesale customers, in terms of hedging contracts, that we have to meet on an instantaneous basis. That's over a period of time, given all of those uncertainties that I went to great lengths to set out and which are incredibly risky and uncertain. So we have to make sure that we preserve and manage our financial position.

Quite frankly, we're not in the business of managing somebody else's customers' financial business. We're in the business of managing our own. That means we have to manage the resource both now and into the future in an incredibly unknown and uncertain environment. We manage our risks and, of course, if there were a critical supply shortage that would have been dispatched. But, as it turned out—in the midst of all that uncertainty—it wasn't required on that occasion.

Senator McALLISTER: Mr Broad, you indicated earlier that the internal rate of return on Kurri Kurri is expected to be in double digits. Is the basis on which you can make that assessment that you intend to operate the Kurri Kurri plant in the way that you operate Colongra, but also propped up with a $600 million taxpayer injection of equity? Is that the basis on which you get an IRR in double digits?

Mr Broad : No. We're like any other business. If we want to do the investment, we either raise capital by debt or we approach our shareholders. So we raise equity. We make a return on that equity and that return shows up in dividends. In the last seven or eight years we've paid somewhere in the order of $1.3 billion in dividends and another $800 million, or thereabouts, in taxes. So we earn and return. Our shareholders would not be giving us equity unless we did. That's absolutely clear. We're a business in our own right—we're a corporate entity under Corporations Law, and the fiduciary duties that we have are clear.

If it were a subsidy—a la others in the market, who get subsidies—it would be a subsidy and not equity. That's the way it is. It's not without its risk—I'm not trying to overplay this: it is not without its risk. Our view is that the penetration of renewables is unstoppable, and when more transmission is built it will flood. We're dealing with 9½ thousand megawatts of renewable players today. We have written contracts to firm up a thousand megawatts to sell to customers today. We get it; we're all over it. We know that we need to build more and more firm capacity in the market to enable that to happen. It's unpopular, as some of our senators may see it, but there's no alternative.

Again, I suggest that when you go home tonight you check what happened in Queensland and what's keeping the lights on there now.

Mr Whitby : If I may just add to that, Paul: imagine if we ran our reserves down and the events of yesterday happened here today. The lights would go out and we would pay out on all our contracts. That's why we have to manage our risks. We're in the business of providing products to customers competitively by buying cheap energy, firming it up and competing in the marketplace.

Senator McALLISTER: Mr Whitby and Mr Broad, thank you for finally answering my question about the actual price that you're asking in the market. I appreciate that you're telling a complex story about how your business runs but, for most of today, we've had a very simple story about how marvellous Kurri Kurri is going to be. Is it your intention to operate Kurri Kurri on the same principles that you use to operate the other assets in your system, as you've described this evening?

Mr Broad : When Kurri Kurri comes on, effectively, 2,000 megawatts are going out. There's a big hole. How do we propose to keep the lights on?

Senator McALLISTER: Sorry, Mr Broad, that's not an answer to my question. You're now actually asking me questions. Is it your intention to operate Kurri Kurri under the same model that you presently use to operate your existing generation assets?

Mr Broad : I'm saying that we will operate to meet the market conditions, which are about to change dramatically.

Senator McALLISTER: Thanks, Chair.

CHAIR: Senator Hughes.

Senator HUGHES: Just a couple of questions from me, Mr Broad. Can you walk us through some of the impacts that the construction of Snowy 2.0 had on its local community and local businesses, and what kind of impact you think the project in Kurri Kurri is going to have in a similar way within the Hunter region?

Mr Broad : I will go to Kurri Kurri first. I'm not sure how many senators have been to Kurri Kurri.

Senator HUGHES: I've been there.

Mr Broad : It's my backyard. I come from the Hunter. It's a wonderful part of the world. I can tell you: if you walk the streets of Kurri Kurri, it's all they're talking about. If you've got kids who have got a chance, they're going to get jobs—jobs, jobs, jobs. Kurri Kurri, Cessnock, Maitland and Weston often get left behind. It's an old industrial site. They're very, very excited.

In terms of Snowy 2.0 we've made it a priority to get lots of locals working there. There's something in the order of 1,200 to 1,500 workers down there now, of which the majority are locals; there are very few internationals. They are local contractors. We're a bit worried in the mountains about pushing up the price of skilled labour. As I noted the other day, I think there was something in the order of 60 logging truck drivers who lost their work at the back end of the fires. The mental health issues that occurred during the fires are still deep and profound in the mountains we love, and the fact that we can offer work and opportunity to people is a small part in helping them recover.

Senator HUGHES: Do you have any estimates of how much investment might flow into the community, and, similarly, like the 1,200 to 1,500 jobs around the Cooma region, how many jobs do you think this will generate around Kurri Kurri?

Mr Broad : I haven't got a number off the top of my head—I'll get you one—but it's significant. With direct contractors in Cooma alone, it's in the order of $60 million to $80 million today. I'll get you a number, convert that to dollars and give it to you.

Senator HUGHES: If you can take that on notice, that would be great. Thank you very much.

Senator McMAHON: One quick question, Mr Broad: if intermittent generators such as wind and solar continue to enter the market in New South Wales at the rate they currently are, what would be your estimate of how many Snowy 2.0s we would need in 10 years time to firm those generators?

Mr Broad : I think the AEMO, the market operator, said five Snowy 2.0s over 20 years.

Senator McMAHON: Is that something that would even be feasible to do?

Mr Broad : Big ask! And you'll have to have lots of gas generators as well. You'll have batteries as well. Like the demand management argument, that's a Tomago type scenario. It's very hard to make an economic case or attract business when you're regularly turning them off.

Senator McMAHON: Thank you.

Senator SHELDON: I want to turn to evidence you gave at the spillover hearing recently. You went through a time line which has come to light, regarding the old transcripts from the previous hearing. At a hearing in October 2020 you revealed the Snowy Hydro board were considering the Kurri Kurri site in January 2020; is that correct?

Mr Broad : I haven't got the chronology in front of me, but we've been looking at a site in the Hunter for 14 years. The Hydro Aluminium site has always been one of those we looked at—when it was operating.

Senator SHELDON: Are you aware that one of the owners of that site is a Mr Jeff McCloy?

Mr Broad : Cesilia Kim, who handled all the land negotiations—

Senator SHELDON: Sorry, Mr Broad, I was asking you first. Do you know Mr McCloy?

Mr Broad : Of course I know Mr McCloy, yes.

Senator SHELDON: How long has your association with Mr McCloy been?

Mr Broad : We went to university together, so we have probably known each other for 40 years.

Senator SHELDON: Were you in the Young Liberals together?

Mr Broad : No.

Senator SHELDON: Any other political organisation?

Mr Broad : No.

Senator SHELDON: You said there was an additional answer you wanted given by one of your associates?

Ms Kim : So the question was?

Senator SHELDON: Well, it was invited by Mr McCloy's friend, Mr Broad. Now, are you aware that Mr McCloy has made numerous illegal donations to the Liberal Party.

Ms Kim : So—

Senator SHELDON: No. Mr Broad, I'm asking you.

Mr Broad : I can't comment on what Mr McCloy does.

Senator SHELDON: No, you can comment. I'm asking you a question. Do you know or do you not know?

Mr Broad : You can ask the question and I'll give the answer.

Senator SHELDON: You haven't answered. Do you know or do you not know?

Mr Broad : I heard press reports and an ICAC inquiry—that's what I know. But, beyond that, questions of political donations are not for me. I'm not a politician, I've never been involved in it—

Senator SHELDON: I just asked you to tell me the truth. In fact, you've told me that you are aware of his track record—that he was in front of ICAC, as you're aware, and that findings were handed down in 2016 regarding his inappropriate behaviour regarding donations to funds for a Mr Owens, a Liberal candidate in the 2011 state election campaign. This is the finding:

Mr McCloy intended to evade the Election Funding Act laws relating to the ban on the making of political donations by property developers and the applicable cap on political donations. By not reporting the donation, he intended to evade the disclosure requirements of the Election Funding Act.

That finding was made in a number of other cases as well in regard to Mr McCloy. Are you aware of that?

Mr Broad : I'm not aware of those details. I trust what you say is right. I am not aware of those details. I read the press reporting that was going on at the time, like everybody else. When you come from Newcastle you can't miss it.

Ms Kim : May I address the question in the context of the Kurri Kurri site?

Senator SHELDON: That's okay. At the moment I'm asking Mr Broad questions about the relationship and what he's aware of and what he isn't aware of. Are you aware that Mr McCloy became a part-owner of the site in March 2020?

Mr Broad : Again, because I handed all the land negotiations to Cesilia, I think it's important, when I was chairman of Hunter Development Corporation, prior to joining Snowy Hydro, we were in negotiation with Snowy Hydro on other matters in the Hunter, so I deliberately excluded myself from all land negotiations between Snowy Hydro and Hunter matters, and continued to do so. Cesilia and the rest of the team handle it. She can take you through, chapter and verse, what we knew and when and how.

Senator SHELDON: No. I'm asking you a question, and that's not the question I'm asking.

Mr Broad : Yes, I know you're asking a question, and I'm asking my colleague to answer it.

Senator SHELDON: No, I asked you a question. When did you become part-owner of this site—

Senator DAVEY: Point of order, Chair. Mr Broad has said that he excluded himself from all land negotiations. I think it is only reasonable that the person who was in charge of land negotiations be afforded the opportunity to answer. I think, in saying he excluded himself, Mr Broad has answered the question—that he wasn't involved.

Senator SHELDON: That wasn't the question I was asking. Through you, Chair, the question I was asking is: was he aware that Mr McCloy became part-owner of this site in March 2020? I'm just asking him whether he was aware of that.

CHAIR: Senator Sheldon, in terms of his official role, if he has excluded himself from the official role, then, to a certain extent, the question of whether he knew or not becomes irrelevant, because he excused himself from the role.

Senator SHELDON: In fairness, Chair, you might think the question is irrelevant. The question is appropriate to be asked, and he is able to answer it either yes or no.

CHAIR: Mr Broad, do you have—

Mr Broad : I read the press report that a group was in negotiation with Hydro. I'm not even sure who owns the site—I don't know. There was a press report on it. I read that, yes. But we were looking at that site well before McCloy or anyone else got involved.

Senator SHELDON: Are you aware that that was two months after the board identified that particular property and six months before it was known to the public?

Mr Broad : We identified the property back 14 years ago, as I said.

Ms Kim : We have been looking at sites in the Hunter region since 2007.

Senator SHELDON: I am asking the question of Mr Broad.

CHAIR: Senator Sheldon, just wait for a minute please. Ms Kim, if you'd like to, just complete your answer. Then we'll go back to Senator Sheldon.

Ms Kim : I'd like to take the senators through the process that we went through in acquiring—

Senator SHELDON: I'm not asking that question.

Ms Kim : an interest in land.

Senator SHELDON: I'm not asking that question.

Ms Kim : But I think it is important in the context—

Senator SHELDON: I'd like you to answer the questions I'm asking, please.

Senator DAVEY: I'd be interested to hear it, since a lot of your questions are—

CHAIR: Senator Davey, order! Senator Sheldon does have the call and, with respect, if that's not the question he's asking, then Senator Sheldon will please continue.

Senator SHELDON: Back to Mr Broad. So you're aware that, two months after the board identified this property and six months before it became known to the public, Mr McCloy had purchased that property? Are you aware of that sequence of events?

Mr Broad : I'm not aware that he'd purchased that property then, no.

Senator SHELDON: Are you aware that he took part ownership in that property?

Mr Broad : I'm not aware of those details, no.

Ms Kim : Senator, the owner of the property—

Senator SHELDON: Mr Broad, can just I ask you another question regarding that? I understood that—

CHAIR: Senator Sheldon, one of the officials of Snowy Hydro is seeking to actually add some information. I think it would be appropriate if we allowed her to do that. Ms Kim.

Ms Kim : I would like to clarify the ownership arrangements of the land. The entire Kurri Kurri smelter site is owned by Hydro aluminium. There's a joint venture between two local developers, between the McCloy and Stevens groups, called Regrowth Kurri Kurri, that has an exclusive redevelopment arrangement in place with Hydro aluminium. So the land continues to be owned by Hydro aluminium. The site we're looking at for the Kurri Kurri power station comprises less than one per cent of the entire Kurri Kurri site—just to be clear for context. Our discussions and our interest in the Kurri Kurri site predate the formation of the Regrowth Kurri Kurri joint venture.

CHAIR: Thank you. Senator Sheldon.

Senator SHELDON: Thank you for that evidence. Mr Broad, I'll rephrase my previous question. Are you aware that Mr McCloy became a joint developer of the site in March 2020, two months after the board identified it and six months before it was known to the public?

Mr Broad : No, not aware.

Senator SHELDON: When did you become aware that he was shared developer for that site?

Mr Broad : I read a press report in the press in the Hunter.

Senator SHELDON: So when was that?

Mr Broad : Sorry; I can't recall.

Senator SHELDON: Was it March, April 2020?

Mr Broad : I don't know. I don't remember.

Senator SHELDON: So it was shortly after he purchased it?

Mr Broad : No. I don't know. I honestly don't know.

Senator SHELDON: Did anyone from Snowy Hydro meet or communicate with Mr McCloy between late 2019 and the announcement of the plant in September 2020?

Mr Broad : On the land?

Senator SHELDON: Regarding his development; regarding that land.

Mr Broad : I'd have to ask Cesilia.

Ms Kim : No. There've been no interactions. We've been interacting with the joint venture, who have the rights over the site.

Senator SHELDON: Mr Broad, you've given evidence to say that you haven't spoken to him about that as well?

Mr Broad : No. I spoke to Jeff about other matters, but not that.

Senator GREEN: Spoke to whom?

Mr Broad : Mr McCloy.

Senator SHELDON: I think you referred to him as Jeff—that's Mr McCloy?

Mr Broad : Jeff McCloy, his name is.

Senator McALLISTER: I'm having a bit of trouble hearing you. These microphones require us to sit a bit closer.

Mr Broad : Sorry. I'll come closer. Mr McCloy.

Senator McALLISTER: So was your evidence that you did or did not speak with Mr McCloy?

Mr Broad : I have not spoken to Mr McCloy about this land in terms of what the senator is referring to.

Senator McALLISTER: Right. Thank you.

Senator SHELDON: Further regarding the ICAC inquiry, you've given evidence that you're aware of reports and you also mentioned you're aware of the ICAC inquiry. Did you raise with any of your staff concerns about the potential conflicts of interest that might exist?

Mr Broad : As I said, I excluded myself from all land negotiation and left it with my staff.

Senator SHELDON: No, I'm not asking that question. You gave me that answer before, and I appreciate it. What I'm asking is a different question, and that is: did you say to your staff that there is a potential conflict of interest?

Mr Broad : I'm not sure what— My potential conflict of interest?

Senator SHELDON: Sorry; I'll make it very clear. Did you explain to your staff that there may be a conflict of interest with Mr Jeff McCloy—and I'll add your additional comment—including a potential conflict of interest of yourself?

Ms Kim : Senator, if I may answer that question.

Senator SHELDON: Mr Broad?

Mr Broad : No, I didn't.

CHAIR: Senator Sheldon I'll pull you up there, because there's an imputation or an inference that because of past conduct his current conduct may somehow be corrupt, and that Mr Broad should have flagged that. You just need to be careful how you're phrasing that question because that inference is out of order under standing order 73.

Senator SHELDON: I could read chapter and verse—which I won't—of the ICAC inquiry, which gives a clear—

CHAIR: I'm not disputing the ICAC inquiry, I'm just cautioning you about how you phrase the question and the inferences you make.

Senator SHELDON: I'll be very mindful of what I'm saying and I'll be very mindful of the questions I ask. Thank you.

Senator McALLISTER: A point of order, Chair. I'm not sure the standing orders do constrain senators from making inferences. In fact, whilst I'm sure Senator Sheldon wishes to proceed in an entirely proper way—he's a very straightforward person—I'm not sure that the standing orders do allow you to provide that direction to him. He's entitled to ask a question in any form he wishes—

CHAIR: It's standing order 73, sub-para 1, sub-para (c): inferences—very specifically. Senator Sheldon, you have the call.

Senator SHELDON: There are a number of occasions where there has been inappropriate behaviour by Mr McCloy. I'll read this particular section:

During the 2011 NSW state election campaign, Garry Edwards, the NSW Liberal Party candidate for the seat of Swansea, received a political donation by way of a cash payment of about $1,500 from Mr McCloy, a property developer. Mr Edwards accepted the donation with the intention of evading the election funding laws relating to the ban on accepting political donations from property developers and the requirements for disclosure of political donations. Mr McCloy knew he was making a political donation and that, as a property developer, he was prohibited from making such a donation.

Were those concerns raised with any of your staff? Were they raised with the board?

Mr Broad : No.

Ms Kim : Senator, it seems to me that the issue at hand is whether, as a GBE, we've adequately acquired rights over that land. I'm happy to take the senators through the process we went through as a commercial entity and the robust procurement processes we have in place to ensure that all boxes have been ticked and that the process is found very reasonable.

Senator SHELDON: Thank you for your comments. Mr Broad, as you're aware, before David Knox, the chairman of the Snowy Hydro board joined Snowy Hydro, he was chair of SANTOS—a major donor to the Libs, the National Party and also to other political parties, including the Labor Party, but more to the coalition. I might also add it has recently been reported that Mr Knox was involved in a preselection battle in South Australia, throwing his support behind a particular candidate from the Liberal Party. Did Mr Knox know Mr McCloy?

Mr Broad : I have no idea.

Senator McMAHON: Point of order, Chair. What has this got to do with Snowy Hydro?

Senator SHELDON: This is the Snowy Hydro board.

CHAIR: Senator Sheldon, the point that Senator McMahon raises is worth exploring. I understand you are obviously concerned about due diligence and making sure that there has been no corruption, but most of your questions go to the past conduct of somebody who is associated with the joint venture. Mr Broad recused himself from decisions. There was no evidence to him that I'm aware of that there was any conduct that would cause a concern for the board. I think Senator McMahon's comment is valid: that where you're taking this has a bunch of imputations, but it's not directly associated—given that Mr Broad has recused himself from those decisions because of his personal relationship—with anything for Snowy Hydro to answer in terms of their due diligence or process.

Senator DAVEY: Indeed, we haven't been able to hear about their due diligence, because Ms Kim has not been allowed to provide that evidence to the committee.

CHAIR: Thank you, Senator Davey.

Senator McALLISTER: Chair, on that matter, Senator Sheldon is asking a series of questions about the relationships and the processes undertaken by the CEO and the board. Notwithstanding Mr Broad's general advice that he recused himself, Senator Sheldon is quite entitled to ask further questions about the practical application of such a decision. He's asking questions about relationships, conversations and actions that Mr Broad has undertaken in his role as CEO. It's pretty straight up and down. He's entitled to do so.

CHAIR: Senator McAllister, I make the point that the majority of the facts, evidence or context that Senator Sheldon is bringing in goes to the past conduct of somebody completely external to Snowy Hydro. That is the context that's being brought in here, not the behaviour or the due diligence of the board of Snowy Hydro. Snowy Hydro are here as a government business enterprise. We're not here to explore the past conduct of somebody who may have had, or who has had, a friendship with the current CEO.

Senator McALLISTER: Chair, questions of risk, including risks associated with conduct and probity, are absolutely the responsibility of the CEO and the board, and Senator Sheldon is quite entitled to ask questions about those things.

CHAIR: He is entitled to ask, but that goes to the points that Ms Kim is seeking to raise around the process within Snowy Hydro, not to the reports of ICAC that talk about the past behaviour of an individual who's not part of Snowy Hydro.

Senator SHELDON: Chair, this is what I'm trying to ascertain from Mr Broad. He's already said that he recused himself—and I take that evidence as it was given—from discussions with Mr McCloy and handed them over to somebody else. I'm asking him, as the CEO, questions about whether there are other people who had a relationship with Mr McCloy.

CHAIR: And he's answered the question: he does not know if the chair of the board had a relationship with Mr McCloy.

Senator SHELDON: I then go to the non-executive director Richard Sheppard.

Mr Broad : No idea.

Senator SHELDON: The non-executive director Scott Mitchell?

Mr Broad : No idea.

Senator SHELDON: The non-executive director Tony Shepherd?

Mr Broad : No idea.

Senator SHELDON: Did anyone from Snowy Hydro meet or communicate with Mr Jeff McCloy between late 2019 and the announcement of the plant in September 2020? I asked that question before, and Ms Kim might want to answer that.

Ms Kim : No, nobody within Snowy Hydro has had any discussions or contact with Mr McCloy.

Senator SHELDON: So nobody in the organisation has had contact with him at any time? Is that just during that period or since that period?

Ms Kim : Nobody—not to my knowledge.

Senator SHELDON: Mr Broad has already given evidence to say he hasn't spoken to him about this particular project, but Mr Broad made it clear that he does keep in regular contact, so some people do have contact with him. Are you aware of other people who have contact with him?

Ms Kim : Not to my knowledge.

Senator Seselja: Could I just add to an answer from before. Obviously, Senator Sheldon has been asking a lot of questions about donations and the like. Apart from the fact that it's been outlined that this is an arm's-length transaction, I would just like to put on the record that I think this individual, Jeff McCloy, has donated $55,000 to the New South Wales Labor Party and also has been effusively praised by the member for Hunter, who said: 'Great day for the Hunter Prostate Cancer Alliance. Thanks to Jeff McCloy and McDonald Jones Homes for the house and land package.' I just want to get that on the record, to the extent that some of this questioning was even relevant in the first place.

Senator SHELDON: I appreciate the fact that someone who was found guilty in ICAC made a donation to a charity. That's an appropriate thing to do. Minister Seselja, are you suggesting I'm saying that some bloke who's been—

Senator Seselja: And the New South Wales Labor Party.

CHAIR: Senator Sheldon, you have the call.

Senator SHELDON: I just want to go back to this question, and I'll go to Mr Broad. Do you have any concerns about potential conflicts of interest within this matter?

Mr Broad : No.

Senator SHELDON: I'll go to the question which Ms Kim might be able to assist us with, and that is: what has been done to ensure accountability and transparency around this transaction?

Ms Kim : As with all land acquisitions, and Kurri Kurri's no different, we follow a very robust procurement process which comprises of three steps. The first step is for the company to assure ourselves as to the adequacy of the land for the purposes of developing a gas-fired power station on it, as against key criteria that are detailed in the EIS. The criteria ranges from the land being available, proximity to critical infrastructure—such as gas and electricity—as well as connections, biodiversity, heritage, aviation groups and of course noise impacts. The second component of that process is the cost of the land, ensuring that it is fair and reasonable. That is always supported by independent valuation advice and negotiated at arm's length with the vendor. Finally, we do undertake due diligence on the vendor's ability to perform their obligations as the seller of the land, which typically comprises of: (1) owning the land and (2) any remediation or subdivision requirements, as there were in the case of Kurri Kurri. Based on those three components we assessed Kurri Kurri to be the optimal site.

If I could take you to the EIS, pages 61-65 set out in detail the process we went through to satisfy ourselves that Kurri Kurri was the optimal site for gas-fired development. We assessed it against seven other sites, four of which were located in the Hunter region and three in Greater Western Sydney. Based on that thorough analysis we concluded that Kurri Kurri was the optimal site. This is something that had started in 2007, even when the Kurri Kurri smelter site was operational, and continued and concluded very recently as part as the case development process.

CHAIR: Senator Sheldon, you have had a very good run. You can have one last question.

Senator SHELDON: Thank you, Chair. To you, Minister, are you aware of Mr McCloy? At any time that you became aware of Mr McCloy, did you notify the chairman of the board David Knox? Did you notify Non-Executive Director Richard Sheppard? Did you notify Non-Executive Director Scott Mitchell? Did you notify Non-Executive Director Tony Shepherd? All of these people have been active in the same groups as Mr McCloy. Did you notify them of any potential conflicts of interest?

Senator Seselja: When you say 'me' I assume you mean the minister who I'm representing. I don't know the answer to the question but I'm happy to take that on notice.

CHAIR: Senator Davey?

Senator DAVEY: Thank you. I think we have covered a lot, but while I have got the call—a complete change of topic. When you were explaining the important role that Snowy plays in firming the power supply process, you mentioned that during the drought one of your gas-fired power stations was on a far higher percentage most of the time, in fact almost permanently I think you said. I take it that was due to the low access to water that you would normally use to run your hydroplants. Given we've just come out of a major drought —and, indeed, in the New South Wales Murray storages we are not sitting too comfortably yet—what impact did the two preceding years have on your capacity to produce power through your hydroturbines? What impact did that have on your need to fire up your other power sources? How are we sitting now, looking towards the next year, with regard to water storages and ability to rely on your hydroresources more than fossil fuel?

Mr Broad : The drought I was referring to was the millennium drought, so a once in 500 year drought. The storages got down to—it was before my time—I think it was about—

Mr Whitby : About four per cent.

Mr Broad : Four per cent. So, fortunately, in the last drought, we didn't get that low. We were down to around 10 to 12 per cent. But Roger might briefly take you through that just to highlight the fact that, in the millennium drought, the gas plants in Victoria worked considerably harder than they do now.

Mr Whitby : Obviously, there have been below average inflows over the last several years, with the exception of the more recent times when it's been slightly above. In terms of outlook, our weather forecasters are predicting about medium or slightly above medium, which is reasonably consistent with other forecasters at this current point in time. As you mentioned, the Murray is still not back to normal; the Murrumbidgee is actually looking quite a bit better. The recent rainfall on the most easterly catchments has bolstered storages there. In fact, ironically, there's potential for release constraints on the Blowering storage, which may have a negative impact on us, but that's something we'll watch and manage. It may be an interesting time. Generally speaking, the limited water hasn't been a major operational problem for us in the immediate term. Looking forward, if it reversed to medium in the next little while, I think we're reasonably well placed. I don't know if that goes somewhat to your question, Senator.

Senator DAVEY: It's slightly reassuring that we're not looking at those drastic times again. With regard to the construction of 2.0, is that construction going to hamper or hinder your day-to-day operations of things like the required annual release and annual provision of water to inland irrigation?

Mr Broad : No.

Mr Whitby : No, absolutely not.

Senator DAVEY: I have one final question, and then I'm done for now. We were talking earlier about your firming capacity. You mentioned that you've got gas, diesel and hydro. Hydro is obviously the cleanest, and when it's available, it's a very secure source. You mentioned you've got a diesel plant in South Australia, where I think the largest battery storage system still is. If batteries are so good, why do we still need a diesel power plant in South Australia? How many reserves does that battery give Adelaide to underpin and firm their power supply? Why do they still need diesels?

Mr Broad : I'll let my colleague answer that, but it's an interesting question.

Mr Whitby : There was the recent occurrence where the batteries simply ran out of storage duration to meet demand, and, under those circumstances, the only thing left standing, so to speak, is the diesel capability, which keeps the lights on in those critical circumstances. One of the issues with the battery storage is that they're not very deep, so they don't store much energy relative to the capacity, and, if you need them for an extended duration, you'll run out of that capability. I did go to some length to explain the uncertainties in the marketplace, but, you never know, looking forward, if it's going to be a high price or, indeed, a low price. So do you keep your battery full or do you keep it empty? You've always got to be juggling that, and, invariably, you get that decision-making wrong. If you don't have that capability for deep storage, you're just going to muff it up, and that's what happens on occasion.

Senator DAVEY: Thank you very much.

CHAIR: Thank you, and I've learned a new operational term, 'muff it up'. Senator Patrick, you have the call.

Senator PATRICK: Just going to the schedule that you provided to the committee, your most recent milestone was commencing excavation of the main access tunnel, due in Q4 of 2020. Was that achieved?

Mr Broad : Yes. The TBM has started, thank God!

Senator PATRICK: I'm sorry?

Mr Broad : The TBM has started. We've had a few false starts.

Senator PATRICK: Alright. In terms of commenced powerhouse evacuations, the evacuation of the powerhouse cavern is due in Q3 of 2021. Is the current forecast that you will hit that milestone?

Mr Broad : It is, but there may be a month or two in this, to be really frank to you.

Senator PATRICK: Sure. I like frank.

Mr Broad : The contractors are looking at an alternative way of digging out the cabin. As you appreciate, they were going to drill and blast it. Now they are looking using roadheaders, which will be far quicker, not dirtier, but we have to get ourselves right. So the contractors are looking at smarter, safer way to do that part of the job, which may mean a delay.

Senator PATRICK: So that means it takes a little bit longer to think about the problem, but if the solution comes out the way you described, you'll recover the schedule?

Mr Broad : It should get back on track. That's the expectation. The expectation, from what the contractors tell us, is they will build a fair bit of float into the drill rates of the tunnel boring machines. That's where they expect to pick up time to get us back on schedule. But, as you would know, these things move about quite a bit in the complexity of the jobs.

Senator PATRICK: Sure. In the milestone schedule you provided, the next milestone is 2025. I think that's way too far.

Mr Broad : We'll give you more. I like your interest in it. We will nail down a few more for you next time. I'll come back to you. I didn't want to mislead you; that's all.

Senator PATRICK: On notice, if you could fill out the next couple of years.

Mr Broad : Yes. I appreciate your interest.

Senator PATRICK: You understand that's a good way for a project manager to look at where you're at.

Mr Broad : I understand. As I said, my open invitation is to take you down and show you on the ground.

Senator PATRICK: Fantastic. I might take you up on that. In relation to the project spend to date, have you been tracking how much has been spent locally against the total budget?

Mr Broad : We have. Can I take it on notice to give it to you?

Senator PATRICK: Sure. Can you define what constitutes one category versus the other? Is it just an ABN? Do you track to make sure the work is done here in Australia?

Mr Broad : I hear you.

Senator PATRICK: I want to distinguish between where you give an importer a job.

Mr Broad : I understand your point.

Senator PATRICK: That would be appreciated. There were questions related to steel, which I have been trying to get to the bottom of. I'm not quite satisfied with the answers here. I asked a question about what standards you are using, and you gave me two with an indication that they were being modified, as opposed to the list of all of the standards that I think you are in actual fact using in relation to steel. It can't be that you are only using two standards.

Mr Broad : Again, I'd have to take it on notice to speak to the contractors who are doing that.

Senator PATRICK: Sure.

Mr Broad : So your question is: have the contractors looked wide enough in the steel they are applying? The submarine one, which you raised last time: if we can do it here, why aren't we looking at it?

Senator PATRICK: No, just at this point, I'm just after a list of all of the steel standards that cut across your project. You have given me ones that really focus on the tunnels, as opposed to all of the general activity.

Mr Broad : Across the project. I hear you.

Senator PATRICK: I'm interested in that. I'll just try to keep this short. I know there is pressure on in terms of time. My read of what you've sent to me in terms of answers, just looking at the standards, is that, basically, with the steel that you are trying to get hold of, you are trying to have the maximum length of the steel so that once you have rolled it into a tunnel you reduce the number of welds. Is that my reading of the answer you have provided?

Mr Broad : Again, I would have to speak to the contractors and get that answer.

Senator PATRICK: Let me just foreshadow what my concern is, so you know how to talk to them. I have been speaking to—

CHAIR: Could you put that in writing as a question on notice?

Senator PATRICK: I just want to explain where I'm coming from. This will be the last thing, Chair. It has been put to me that the length of steel that you are requiring for the fabrication of welding may well exclude Australian contractors. It may well simply rule them out, whereas with a shorter length that might be possible in Australia. It might involve more fabrication, but there is a trade-off between achieving what was put in your AIP, your Australian industry plan, and the value associated with local employment and all of those factors. My concern is that you are cutting out Australian participation in one engineering trade-off, when, as you know, it is complex; there are lots of factors that need to be considered. That's my concern. I wonder if you can come back and address that for me, please.

Mr Broad : Thank you. Yes, we will.

Senator SHELDON: I just have a follow-up question for Ms Kim. Thank you for your evidence before. When was it decided that the Kurri Kurri site was the optimal site? What was the date of that?

Ms Kim : The assessment was made as part of the EIS, which was submitted in April. So it was early this year but, formally, at the beginning of 2021. But over time, as I said earlier—since 2007, even when the Kurri Kurri smelter was operational—we had considered all the factors. However, we just weren't able to acquire an interest in the site. As soon as we knew that the Kurri Kurri smelter site had become available for redevelopment, we approached the joint venture and, prior to that, Hydro Aluminium, to engage in discussions. It wasn't necessarily to build a gas-fired power station back then, per se, but to have the option to do so.

We used to own land in Tailem Bend in South Australia and at Bannaby, south of Sydney. It's something that we've done since corporatisation in 2002; we maintain a portfolio of sites for potential gas development, to meet needs of the market. As my colleagues have talked about, there's a growing need for firming and other forms of price risk insurance products in the National Electricity Market—the NEM. So we're all about keeping our options open and adding to our dispatchable generation capability.

Senator McALLISTER: Thank you, very much, Ms Kim. You indicated that when you became aware the Kurri Kurri site may become available you approached, I think, the consortium—was that your evidence?

Ms Kim : Yes.

Senator McALLISTER: When was that approach made?

Ms Kim : It was prior to Hydro Aluminium. It was done by another colleague of ours, and it would have been around 2012—was it then? I'll have to take the exact date on notice, it was many years ago.

Senator McALLISTER: You approached Hydro Aluminium at that time.

Ms Kim : Yes, but I'll have to take that on notice and give you the full details.

Senator McALLISTER: Okay, thank you very much.

Senator SHELDON: I just have something quick: when you do due diligence, you go through the processes and there are potential red flags. I'm saying potential red flags—they are red flags, but potential red flags—on issues that are at bay. Did you do an investigation, for example, into Mr McCloy as a potential red flag?

Ms Kim : Our interest in the Kurri Kurri site predates the joint venture. As I said earlier, our key focus is on making sure that the land is suitable for gas-fired development. I'm happy to table the relevant sections of the EIS for you. It sets out in detail all the criteria that we look at. That is, first and foremost, the key consideration that we take into account. And then, of course, there's cost: does it represent value for money?

CHAIR: Senator Green, do you have any questions?

Senator GREEN: Thanks, Chair. I'll move on to another topic. I have your annual report in front of me and I'm looking at the executive remuneration section. Eight of your executives were paid short-term benefits, including bonuses, in the last financial year. But the annual report indicates that those may be paid in September. It's not quite clear about whether those were paid. It says, 'Are expected to be paid in September 2020.' Can I just check whether those bonuses were paid as it appears in the annual report?

Mr Broad : The bonuses were paid. If that was exactly as in the report, I would have to double-check. But there was no long-term bonus paid in that year.

Senator GREEN: Okay. But the remuneration packages equal about $8 million for the eight executives?

Mr Broad : Yes.

Senator GREEN: And in terms of the bonuses: I know there's a short-term incentive program which has a number of criteria involved. It includes safety, environment and a couple of other KPIs that you have to meet—obviously, major programs, reputation and risk. Are they all part of working out whether the short-term bonuses are payable?

Mr Broad : Yes. It's called a balance scorecard.

Senator GREEN: Okay. Is there any component of your bonus structure that relates to the amount of local content, or minimum local content, that you're able to source and provide to—

Mr Broad : No, but we are, as you might appreciate, very proud of our connections in the mountains and we seek to source, at all levels, as much locally as we can.

Senator GREEN: Okay. But there is nothing that goes into your remuneration.

Mr Broad : No.

Senator GREEN: In terms of the minimum portion of local content for your contracts, then, is there a policy that you have to ensure that your contracts reach minimum local content?

Mr Broad : Ms Kim also runs procurement, so she can give you a precise answer.

Ms Kim : In the context of the EPC contracts in general?

Senator GREEN: Just in your contracts for contractors.

Ms Kim : Generally across Snowy Hydro, yes. We do have an obligation. Any projects over $500 million, as you know, must have in place an Australian industry participation plan that requires contractors and, of course, the principal to ensure that local businesses are given a fair go: fair and reasonable opportunity to participate in what whatever the works are within the scope of the particular contract. For anything below $500,000 in our contracts, we do try to encourage contractors to use local content.

Senator GREEN: But there's no specific requirement like a target figure.

Ms Kim : No.

Senator GREEN: What does 'fair and reasonable opportunity' mean? Do you have a policy document you could table?

Mr Broad : As Senator Patrick was mentioning, it's how you write the contract. We make sure that the locals, who often struggle to put in complex bids, are not excluded because of that. We go to a lot of effort to try to encourage them to do so. Snowy is a huge player in the mountains, as you would appreciate, and we spend a lot of time trying to make that happen seamlessly.

Ms Kim : Particularly in the mountains, my procurement team is very proactive in having portals, information sessions consultations and panels in place to ensure that local contractors are aware of the opportunities that are out there in terms of the projects that we have in place and can participate.

Senator GREEN: What about contracts that you enter into for the purchase of energy.

Mr Broad : This was a question that came out last Senate estimates with Senator Carr. We purchase the energy. We don't control how or who they use to produce it.

Senator GREEN: Have you discussed the option of introducing a policy or developing greater guidelines to encourage who you purchase energy from? You said it's been brought up before, so have you gone back to the drawing board and thought, 'Actually, this is something we could actively do to encourage local content'?

Mr Broad : We purchase from the marketplace, and how they run their affairs is up to them.

Senator GREEN: But you've got huge buying power. Since it was brought up before, you haven't taken any steps to ensure that the people you purchase energy from would have local content?

Mr Broad : We buy off the marketplace. How people procure and build their resources is up to them. They do live in a market based economy.

Senator GREEN: So there is no local content requirement in the contract that you have signed to purchase energy from the Ryan Corner Wind Farm?

Mr Broad : No.

Ms Kim : They are power purchase agreements, which are financial in nature, so there's a financial pay-off. It's not a physical development contract.

Senator GREEN: Yes, I understand that, but that wind farm will go through a construction phase and, at the moment, there are no local content requirements as part of your purchase contract with them?

Mr Broad : No.

Senator GREEN: I'm right. We're very careful not to put hypotheticals, but have you done any work to determine what the cost to taxpayers would be if you actually started putting those types of requirements into your contracts to purchase energy?

Mr Broad : No, we haven't, but I can say that, like all businesses, we seek to maximise a return to those who own it, who are the taxpayers of the country.

Senator GREEN: Alright. Let's talk about some of those taxpayers. There are 150 people who work for Keppel Prince in Portland, Victoria, who are at risk of losing their jobs. Forty-two people—taxpayers—have already been made redundant, and one of the reasons is that the company that is contracted to construct the Ryan Corner Wind Farm that you will be purchasing energy from has decided not to use or possibly not to use Keppel Prince to manufacture wind turbines. Keppel Prince is one of the only local manufacturers of wind turbines. So, not only have those people lost their jobs but also it could be quite catastrophic for the local industry. Have you asked the people who are constructing the Ryan Corner wind farm what their process has been in determining which local provider to use?

Mr Broad : We don't interfere with the processes that other companies use to build their equipment—full stop.

Senator GREEN: That's a choice, though. There's nothing to stop you from doing that. That's a policy decision that you've made.

Mr Broad : If we were a social provider of subsidies to all forms of business we would go out of business. We simply buy off the market. Lots of other businesses that we deal with from time to time would have their own commercial problems because of how the market performs.

Senator GREEN: You think it's a form of social welfare to encourage the production of local manufacturing?

Mr Broad : I don't know whether they're using local or not. They could be using other locals. I don't know.

Senator GREEN: Well, they're not. And with respect, Mr Broad, there has been a lot of media coverage about the job losses at Keppel Prince. All of that media coverage has included commentary about Snowy Hydro. The workers, some of them who have lost their jobs—delegates from the area—have come to parliament and spoken to members of the government about this. So I would find it highly unusual that you wouldn't know what I'm talking about or that you wouldn't have had a discussion about some way that you could encourage local manufacturing through that process.

Mr Broad : It worries me if they can't compete, given the number of wind farms that have been built.

Ms Kim : We've been a net buyer of energy in the National Electricity Market for some time. We used to buy energy from Origin, Energy Australia, AGL and others. The nature of those contracts is such that we cannot dictate how they undertake their development to back their contracts.

Senator GREEN: My question now is: have you engaged with that contractor to ask whether the contract could be amended to allow for wind turbine towers to be built in Australia?

Mr Broad : No.

Senator GREEN: And why haven't you taken that step?

Mr Broad : Because the makers aren't competitive in the marketplace.

Senator GREEN: Uncompetitive because it would cost—

Mr Broad : Presumably, if they can't win because they're not competitive, then they're higher cost.

Senator GREEN: But you were just having a discussion with Senator Patrick about how, even though a local manufacturer might be slightly more expensive, the return on investing in local manufacturing jobs—I mean, the government talks about this all the time. The number of times I've seen ministers and members of the government rocking around with hi-vis vests at manufacturing sites—but when it comes to actually doing it and working through. You've got a government-owned entity that uses huge purchasing energy contracts. You've got the opportunity to talk to that contractor about whether it would be better for them to use an Australian local manufacturer, and you haven't had that conversation.

Mr Broad : Nope. And I'd encourage them to be competitive—there's a lot of demand out there—to look at their own cost structures and to be competitive. You couldn't get a better time to be building wind farms. You couldn't get a better time to be supplying them.

Senator GREEN: So, your answer to those workers, who—

Mr Broad : I feel for those workers. I feel very much for them. And if there's something in the business that can't be competitive, it breaks my heart. It breaks my heart to think that they can't be competitive. But I'm sure they're not after a handout. They want to be competitive. Businesses should look at themselves to find out why they're not.

Senator GREEN: Let's be clear, because that's a lot of information that you've put on the table there. None of those workers are looking for a handout. They want our government to invest in local manufacturing. And there is a contract to build wind farms at this wind farm—

Mr Broad : That's not our contract.

Senator GREEN: No, it's not your contract. It's not your contractor. But you are purchasing energy from that wind farm—

Mr Broad : And we don't have any say in how they—

Senator GREEN: and your answer is that they should just be more competitive.

Mr Broad : My answer is that we can't influence—

Senator GREEN: You think that's a satisfactory answer for workers who have lost their jobs?

Mr Broad : We can't influence those who are constructing it. We can influence when we do it. If we were building something—in answer to Senator Patrick's comment—if we were building something we'd bias it; that's true.

CHAIR: Senator Green, we have reached 6.30, which is the scheduled time to break for dinner. We can either come back with Snowy Hydro afterwards, or if you have one question I'll let you ask that.

Senator GREEN: My question is about going forward—whether, now that we've had this discussion and workers have put on the record that they would like to see a different behaviour from corporate entities like yourself that are funded by the taxpayer—

Mr Broad : Sorry, Senator: we're not funded by the taxpayer. We pay taxes. We pay dividends.

Senator GREEN: You're getting $600 million from the taxpayer—

Mr Broad : We're getting an equity injection, from which we earn a significant return.

Senator GREEN: Yes, $600 million in taxpayer funds. And you do get significant returns, and you do get significant bonuses. So, I'm just asking whether you could go out of your way to have a conversation with a contractor about whether they could use an Australian local manufacturer and save 150 jobs. Could you undertake to possibly have a conversation about how you could do that in the future?

Mr Broad : As I said, it kills me that they don't get the jobs. But I can't lean on a contract supplying us with that product.

Senator GREEN: It's too hard. Right.

Mr Broad : It's not too hard. It's not appropriate for us.

CHAIR: Thank you, Senator Green. That concludes our examination of Snowy Hydro Limited. Thank you for your evidence. You have agreed to take some things on notice—9 July is the date. And we will be in contact regarding an opportunity for a more fulsome brief about the complexities of the industry you work in, to move past the superficial discussions that sometimes occur. I do note that Senate estimates is a time for precise answers to precise questions. Both sides have a role to play in that. Thank you for your evidence tonight.

Proceedings suspended from 18 : 31 to 19 : 32