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Australia's $3.6 billion Snowy hydro project faces delay to 2028 -report

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MELBOURNE (Reuters) - Australia's A$5 billion ($3.6 billion) expansion of the country's biggest hydro scheme faces a delay of up to 19 months, pushing start-up of the massive energy storage project out to 2028, the Australian Financial Review reported on Friday.

The delay was due to a string of issues with contractors and construction, which took the new Labor government by surprise, the newspaper said.

"This is exactly the kind of chaos and mismanagement of the energy portfolio that put Australia in its current mess," Energy Minister Chris Bowen said in texted comments to Reuters, calling the delay a "hidden parting gift" from the previous government.

The country is getting a taste of what could happen if power supply becomes strained, with around 25% of its coal-fired power units out of action or running at reduced rates, which has sent power and gas prices soaring.

The market will need power from the massive pumped hydro project at the Snowy Hydro scheme to help replace capacity from three coal-fired power stations due to close by 2028.

The Snowy 2.0 project, being built by a consortium led by Italy's Webuild SpA, will add 2,000 megawatts (MW) of capacity, pumping water uphill into a dam when there is cheap power and releasing the water downhill to generate power when prices are high.

The aim is to shore up the grid when solar and wind power supplies are low as Australia's power supply becomes more dependent on intermittent renewable energy.

The new Labor government wants 82% of the east coast market's power to come from renewables by 2030, up from 30% now.

Snowy 2.0 was proposed in 2017 by the then-conservative government. To help speed up the project, the federal government took over full ownership of the company Snowy Hydro for A$6.2 billion in 2018.

The government had first hoped it would be built by 2021. That deadline was later pushed out to 2026.

Webuild deferred comment to Snowy Hydro, which declined to comment.

($1 = 1.4081 Australian dollars)

(Reporting by Sonali Paul; editing by Kim Coghill and David Evans)

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