JULY 2010

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1.

― Proven use of PPPs
PPPs have been used for a large number of infrastructure projects across a wide range of sectors and assets; including both economic and social infrastructure
― Leading role in PPP policy
Victoria takes a leading role in PPP policy and practice (other States often wait for Victoria to solve policy issues and Victoria provided template for Brisbane toll road projects)
― Partnerships Victoria
Partnerships Victoria was introduced in 2000 to provide the framework for a whole-ofgovernment approach to the provision of public infrastructure and related ancillary services through PPPs
― Experienced Procurers
Victoria has a core team of public servants experienced in delivering PPP projects
― Process reliability
Victoria has a well-earned reputation of process reliability — i.e. getting potential projects to market and then having decision made (in other States projects have been withdrawn, sometimes at the last minute)
― Consistent results
Victoria completed PPPs during the GFC when other jurisdictions were withdrawing or not proceeding (and thus suffered reputational damage)
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Public Private Partnerships (PPPs) refer to the partnering of the Government and private sector to work together in delivering infrastructure projects or services that are traditionally provided by Government
Timely Delivery
Efficiency
Performance
Financing
― History has shown that the construction of PPP projects tend to be completed early
― Private sector has ability to rapidly deliver a large number of sequential projects
― Financial penalties for late opening encourage timely delivery
― Transfer of certain risks to private sector and incentives for assets to be properly maintained
― Private sector has experience in dealing with asset to maximise use and resultant revenue streams
― Economies of scale benefits in project management, design, construction and operations
― Focuses all stakeholders’ attention on the “value for money” proposition
― Penalties for under-performance
― Service-related expenditure viewed as an investment, not a cost
― Satisfaction metrics can be built into the contract (eg. performance KPI’s)
― Capital expenditure kept tight
― Private sector can obtain best financing package that meets the “value for money” requirement
― Cost of project able to be spread over project life; so otherwise unviable projects can be completed
― Allows for more sophisticated and innovative financing structures
― Efficient debt financing process
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Project
Overview
Project
Date
Project
Value
― The Victorian Desalination Plant (VDP) will be
Australia's largest desalination plant and will supply Victorians with up to 150 GL of water a year
(approximately a third of Melbourne's annual water supply)
― The project is an availability based PPP to finance, design, build, commission, maintain and operate the desalination plant and associated ancillary infrastructure south of Melbourne, Victoria
― Financial close: September 2009
― Construction completion: June 2012
― Concession: 30 years
― Capital value: A$3.5bn
― Total project value: A$4.9bn
Consortium AquaSure Consortium, consisting of:
― Macquarie, Thiess, Degremont/SUEZ
Environnement (sponsors)
― Macquarie (financial advisor)
― Macquarie (equity arranger/underwriter)
― Thiess, Degremont Construction (D&C)
― Thiess Services, Degremont (Soft & Hard FM)
― AGL (power and RECs)
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― The VDP is a vital piece of Victoria’s water infrastructure with the capacity to supply up to onethird of Melbourne’s water demand from a rainfallindependent source
― World’s largest desalination plant ($3.5bn capital costs), the largest availability PPP world-wide in the last 5 years
― The largest PPP and PPP debt package in history since the GFC and in top-ten ever
― Innovative financing structure involving contingent
State support to provide certainty and allow financing volume
― Financial Close achieved within 30 days of Preferred
Bidder / Contractual Close
― The VDP also involved the delivery of a competitive green power solution which provided certainty to the
State via a fixed price, long term solution on black power and RECs over the project life
The VDP consists of:
― Reverse Osmosis seawater desalination treatment plant
― Tunnels supplying plant with seawater and discharging higher concentrated seawater back to the sea
― 85 kilometre pipeline transporting treated water to the
Melbourne Water network
― 88 kilometre underground
HVAC transmission line (to be transferred to the Electricity
Operator on Handover)
― Design specifications on all project components to allow future expansion to 200GL/year
― Green power solution for the project 100% offset via RECs
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Project
Overview
Project
Date
― Largest single infrastructure project ever constructed in Australia
― The fast-tracked project involved D&C of 45km of motorway-standard road connecting Melbourne ’s eastern and south-eastern suburbs. Incorporated in the works was the construction of 1.6km of twin, three-lane road tunnels
― Financial close: 2005
― Completion: 2008
― Concession: 39 years
Project
Value
― Construction cost: $2.5bn
― Total project value: $3.8bn
Consortium ― Thiess John Holland (D&C)
― Transfield Services (O&M)
― Macquarie (financial advisor)
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― At the time EastLink was the largest road project ever undertaken in Australia, and was the largest global road transport project closed in 2004
― Monthly turnover for the D&C component regularly exceeded $100 million with a workforce of 1,500 operatives and 450 staff, expending over 14 million manhours on the project
― Tunnelling was completed ahead of schedule
― Construction completed and road opened 5 months ahead of scheduled opening date
― The financing involved the largest underwritten
IPO in the Australian market in 2004 and one of the largest greenfield project financing debt syndication ever in Australia
― Environmental initiatives included planting 3.7 million indigenous plants and creating 40 new wetlands, 75% of water used was obtained from non-potable sources
― Most modern electronic tolling system in the world
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Project
Overview
― 22km of new or upgraded three and four-lane freeway standard roads connecting three of
Melbourne ’s four inner urban freeways
― CityLink was the world ’s first fully electronic tollroad PPP, with a large number of entry and exit points
― Simultaneous IPO of Transurban
Project
Date
― Financial close and IPO: 1995
― Construction completion: 2000
―
Concession: 34 years
― Total project value: A$1.8bn
Project
Value
Consortium ― Transfield Holdings (now John Holland)
― Obayashi Corporation
― Macquarie (financial advisor)
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― CityLink was Australia’s first fully electronic tollroad and the world’s first fully electronic tollroad PPP, with a large number of entry and exit points
― Efficient construction with minimal traffic disturbance to the public: Australia’s record weekly tunnelling production at the time was achieved in the Domain Tunnel
― One of the first road tunnels fitted with a Deluge fire protection system
― Operating since 1999, has consistently met all performance criteria without a breach, including free flow traffic requirements, air quality in tunnels requirements and community consultation requirements
― The project has won various engineering awards
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2.

― Consortium formation: finding the best team
― International investors unfamiliar with PPP process
― Tight documentation timeframe for investors
― Optimisation and agreement on pricing and risk
― Financial markets and appetite (eg. GFC)
― Fluctuating interest and foreign exchange rates
― Managing media and public relations
― Beating tough competitors
― Often tight timetable set by the State
― Meeting State design and financing requirements
― Managing probity issues
― High cost of bidding
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― Strong consortium
Form consortium early; best of class; give consortium a face and identity
― Understand the client
Listen to and address the State’s needs and concerns including community concerns
― Be flexible
Deals are rarely won the way initially anticipated; adapt to changing environment
― Bid differentiators
Look for and create “silver bullets” in bid to distinguish from competitors
― Innovation
Lead the market with new ideas and concepts
― Winning bid characteristics in Victoria
― Competitive D&C pricing
― Short construction program
― Clean risk allocation
― Responsive to State concerns
― High quality design, construction and operation
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 Consortium: Experienced best-of-breed contractors with strong security packages
 Financing: Innovative financing structure provided certainty and allowed financing volume
― Financing package adapted to volatile market conditions during bid
― Contingent State support facility
 Construction: Great design, competitive price and early delivery
 Structure: Robust contractual framework to ensure best practice in corporate governance, equilibrium of power, and risk allocation
 Risk management: Financiers comfortable that material risk appropriately mitigated
 Nature of asset: Critical infrastructure asset with stable availability payment cashflows
 Counterparty: Sophisticated, reliable and creditworthy State government counterparty
 State interaction: Productive interaction with State to enhance project outcomes
 Power supply: Guaranteed green power
Outcome:
― Largest availability payment PPP project in Australia
― One of the largest PPPs completed globally in last 5 years
― Fully financed deal on Financial Close during the global financial crisis.
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3.

Project
Parkville
Comprehensive
Cancer Centre
Description
$1 billion comprehensive cancer centre will include 194 in-patient beds, 110 same-day treatment places, eight medi-hotel beds, six radiation therapy bunkers, and more than 30,000 square metres of research space capable of accommodating up to 1,400 cancer researchers
Status
RFPs submitted
Financial Close expected 2011
WestLink First stage: Tunnel linking Dynon Rd and Footscray Rd in the Port of
Melbourne precinct with Geelong Rd and Sunshine Rd in West Footscray.
Includes upgrades to Sunshine Rd,
Dempster St and Paramount Rd to complement the road tunnel
Second stage: Longer-term connection to the Western Ring Rd
Planning study in progress
EOI release expected 2011
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Project
Victorian
Advanced
Resource
Recovery
Initiative
Description
Development and construction of 2
Advanced Resource Recovery
Technology facilities across the
Melbourne metropolitan region as part of a Victorian Government initiative aimed at improving household organic waste recovery
Status
EOI release expected late
2010
Bendigo Health
Redevelopment
Victorian Government has committed $55 million for the first stage of redevelopment of Bendigo hospital
Redevelopment will feature additional hospital, psychiatric and critical care beds, radiology machines, theatres, oncology chairs and emergency department spaces
EOI release expected late
2010
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Project
Regional Rail
Link
East / West
Road Tunnel
Description
$4.3 billion major new rail line running from west of Werribee to
Deer Park, and then through to
Southern Cross Station
The project expected to free up capacity for more trains on the
Werribee, Sunbury (Sydenham) and
Craigieburn lines and provide more services for Geelong, Ballarat and
Bendigo
Status
Construction expected to start in 2011
$5 billion road tunnel connecting the
Eastern Freeway to the Tullamarine
Motorway and West Link
Feasibility stage
(not on IA’s priority list)
Melbourne
International
Freight Terminal
Western
Interstate
Freight Terminal
Development of a new $260 million freight terminal in old market site close to Swanson Dock in Port
Melbourne
Development of a $2.3 billion freight terminal at Donnybrook in
Melbourne’s north
Feasibility stage
(on IA’s real potential list)
Feasibility stage
(on IA’s real potential list)
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