Horizon Power
Horizon Power has valued the opportunity presented by the Office of the Auditor General’s audit into the Pilbara Underground Power Project and notes the following:
- With respect to the recommendation made by the Auditor General, all expenditure incurred by the project has been appropriately reported.
- Horizon Power has effectively addressed issues in delivering PUPP on time and on budget.
- The Auditor General found that since early 2012 the changes made by Horizon Power “address the problems experienced in delivering PUPP and improve the likelihood of meeting the revised completion date and budget”.
- The 2009 estimate of the project’s cost and schedule was unrealistic and further impacted by the unanticipated cost escalation of the mining boom.
- Throughout 2011 the project was subject to increasing levels of internal scrutiny following appointment of a new Managing Director. Actions taken included:
- addressing the problems experienced with the primary contractor for the Karratha component of the PUPP;
- relocating management of the project to the Pilbara; and
- restructuring delivery into smaller, more manageable tranches of work supervised internally over a more realistic time frame.
- The revised capital budget of $230 million for the project is realistic, as determined by an independent engineering consultant.
- The Auditor General has recognised that the City of Karratha is not contributing to the $28 million voltage upgrade component of the $230 million capital budget.
- Disclosure of all additional operating expenditure, absorbed by Horizon Power, has been presented to Government, the external steering committee and publicly through audited financial reports.
Department of Regional Development
DRD welcomes the findings and recommendation of the Auditor General’s report and acknowledges the work undertaken by his staff.
In response to the Auditor General’s recommendation concerning DRD, I can confirm that all proposals for Royalties for Regions funding are required to include a comprehensive business case which includes information on project feasibility. This requirement has been in place since July 2013. The concept of undergrounding power in Pilbara towns evolved into what became PUPP through several reviews and proposals before Cabinet approval in June 2009. While there was no single specifically developed business case for PUPP, the combined information from several key industry experts provided a reasonable case that substantiated the State’s support for the PUPP project.
As validated by the Auditor General’s report, PUPP has proven to be a significantly more complex project than initially envisaged by all key stakeholders. Nonetheless, DRD has always acted in an appropriate, timely and proactive manner in relation to the emerging issues and risks of the project.
For example, in 2013 DRD engaged audit firm Stantons International to conduct an independent audit on Horizon Power and PUPP. This audit was instigated by DRD due to identified issues pertaining to delays and overspend associated with PUPP. The audit confirmed that Horizon’s current project management practices are adequate and that the governance and management arrangements for this project match the risks and complexities of the project.
Department of Finance (Public Utilities Office)
The Department does not have any concerns with the content of the draft as far as it relates to the involvement of the former Office of Energy.
I am pleased to note that the performance audit recognises improvements that have been implemented prior to the audit process.
The Department of Finance supports the recommendations made.
Pilbara Development Commission
The Pilbara Development Commission, as part of its role on the PUPP steering committee, will provide to our Minister for Regional Development and for the information of the Minister for Energy the minutes from the Pilbara Underground Power Project External Steering Committee monthly meetings. These minutes include updates on progress and project risks.