Due to rising labor and logistical costs, one of the largest foreign contractors operating in Australia’s renewable energy and energy network sectors has reported significant losses on some of its Australian projects. The Spanish group Elecnor, which is building the country’s biggest transmission project, Project EnergyConnect that will link South Australia and NSW, and several other key projects, says it lost €13.4 million ($A22 million) in its last calendar year from “negative margins” on its Australian projects.
Elecnor attributes the delays to the COVID-19 epidemic, worldwide economic volatility, and an excessive rise in labor, material, and local prices due to elevated inflation rates.
The corporation did not address Renew Economy’s inquiries or provide a breakdown of the projects that had negative margins in its report. Project EnergyConnect, the largest transmission project in Australia and one of Elecnor’s most well-known undertakings, has had financial difficulties and delays, especially on the NSW portion of the project. Following the collapse of its joint venture partner Clough, another casualty of the skyrocketing costs of civil construction in Australia and around the world, Elecnor emerged as the leading contractor on that $1.9 billion project.
Additionally, Elecnor is working on two wind farms: Iberdrola’s 144 MW Flyers Creek wind project in NSW and Neoen’s 412 MW Goyder South wind farm in South Australia, which is the largest in the state. Additionally, it is developing Neoen’s Blyth Battery in South Australia, which when combined with Goyder South, will supply the massive Olympic Dam mine operated by BHP with the first-ever “baseload renewables” contract.
The expense concerns have emerged as a recurring topic in its most recent quarterly reports; the March quarter report repeated the following claims from the 2023 year and third quarter reports:
It describes these projects as “strategic” for Australia and says it hopes to be able to will be able to “reverse the situation that has been estimated in 2024.”
It states, “These contracts have recognized negative margins as a result of these circumstances.” “In this context, and in cooperation with our clients, we are collectively looking for solutions to carry out these strategically important projects for the nation.”
In recent years, cost overruns have been a common occurrence in Australia’s renewable energy sector, partially because of the extremely complex grid connection regulations and partly because of the skyrocketing prices of civil engineering that have affected all industries. At times, such as in the case of the disastrous Snowy 2.0 pumped hydro project, these cost overruns have also been the consequence of poor budgeting, poor planning, and unfortunate circumstances.
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