National PPP Summit June 2014Victorian PPP Project Pipeline – Updates & Lessons Learned

An Nguyen, Assistant Director

Partnerships Victoria

Department of Treasury & Finance

Agenda

• 2014-15 Budget – Infrastructure Investment and Key Metrics

• Current Victorian PPP projects

• PPP project pipeline – what is on the horizon

• Approach to PPPs – implementing reforms & lessons

• Future challenges

Government Infrastructure Investment

0

1

2

3

4

5

6

7

1999-2000 2001-02 2003-04 2005-06 2007-08 2009-10 2011-12 2013-14 2015-16 to 2017-18

$ b

illio

n

Cash funded infrastructure investment Debt funded infrastructure investment

Residual cash to repay debt Net infrastructure investment

2014-15 Budget - Key fiscal aggregates

Source: Department of Treasury and Finance

General government sector

Unit of measure

2012-13 Actual

2013-14 Revised

2014-15 Budget

2015-16 Estimate

2016-17 Estimate

2017-18 Estimate

Net result from transactions$

million316 935 1327 3030 3183 3330

Net debt $ billion 19.8 21.5 23.4 18.5 19.0 19.5

Net debt to GSP per

cent5.9 6.1 6.3 4.7 4.6 4.5

Government infrastructure investment

$ billion 5.4 5.2 7.5 7.1 6.4 6.4

Current PPP projects in Victoria• There are currently 23 PPP projects in Victoria worth around

$12B

• 20 are in operation - Bioscience Research Centre, Peninsula Link and Desalination Plant all

reached Commercial Acceptance

• 3 are in construction- Hopkins Correctional Centre, Victorian Comprehensive Cancer Centre and

New Bendigo Hospital

• In addition to the 23 contracted projects- Ravenhall Prison and East West Link (Eastern Section) are in tender

Current projects in market

East West Link – Eastern Section• Availability PPP

• State to retain toll revenue risk, at least initially

• Contract close by end 2014, construction completion end 2019

Ravenhall Prison• Availability PPP

• Full service offering including custodial, health, programs

• Contract close by end 2014, construction completion end 2017

Unsolicited proposal framework• Two projects being negotiated for contract close by end 2014:

– Cranbourne-Pakenham Rail Corridor; and

– CityLink-Tulla widening

CityLink – Tulla Widening• Unsolicited proposal under negotiation - agreement in

principle

• Estimated value of $850 million

• Project fully self-funded through a combination of:• traffic uplift, associated tolling revenue, increases in HCV multipliers and

a one year concession extension.

• Benefits:• 30% increase in capacity, reducing congestion

• Travel-time savings of up to 16min between Melb Airport / West Gate

• Taking 3000 commercial vehicles off local roads

• Subject to VFM test, contract close by end 2014

• Construction completion in 2017

M80

M1

M3

M79

Extra lane in each directionUpgrade subject to Commonwealth funding

CityLink-Tulla widening

M80

MANAGED MOTORWAY TECHNOLOGYSpeed signs, variable message signs,

stop-and-go signals for on-ramps, CCTV to monitor for incidents.

BOLTE BRIDGEExtra lanes on the Bolte Bridge and a

section of the West Gate Freewaybetween Bolte Bridge and Power Street.

MORE LANESExtra lanes in each direction between theBolte Bridge and the Tullamarine Freeway

north of English Street, Essendon Fields

Cranbourne – Pakenham Rail Corridor

• Unsolicited proposal in negotiation - commitment deed

• Estimated value $2 – 2.5 billion

• Project scope:• 25 next-generation, high-capacity trains

• high-capacity signalling on the Cranbourne and Pakenham lines

• removal of four level crossings & planning for another four

• new power substations to support the high-capacity trains.

• new depot at Pakenham

• Benefits include: • increase network capacity by 30%

• reduce congestion & journey times

• improve train reliability through high-capacity signalling

• Subject to VFM test, contract close by end 2014

• Delivery in stages from 2015 until 2019

PPP project pipeline

Construction Period Estimated Value

New Schools package2015-2017 $191 million

East West Link – Western Section- potential packages 2015-2023 $8-10 billion

Melbourne Rail Link - potential packages 2016-2026 $8.5-11 billion

New Schools package

• 11 new schools to address demand in growth areas

• $191 million estimated value

• Built on the successful model in the Partnerships Victoria in Schools project

• Benefits include:• Innovative design with potential for third party asset utilisation

• Locked in whole of life asset management / condition

• Frees up school principals to focus on education

• Project development underway

• Schools to be delivered by 2017-2018

East West Link – Western section

• Complete the East-West Link, to provide connection from Eastern Freeway to Western Ring Rd

• Estimated value $8 - 10 billion (including $1.5 billion Commonwealth contribution)

• Likely to be procured in packages - potential for PPP

• Benefits include: • alternate route to reduce reliance on West Gate Freeway

• ease congestion and reduce journey times

• improve reliability of transport network

• Construction 2015 - 2023

Eastern section

Port Connection

Western section

CBDSWANSON DOCK

WEBB DOCK

M1

M3M80

East West Link

Melbourne Rail Link

• Project scope:• Rail tunnel from South Yarra to Southern Cross

• Two new underground stations at Domain and Fishermans Bend

• Construction of Airport Rail Link at the back end

• Estimated value $8.5 - $11 billion

• Benefits include:• increases capacity of Melbourne rail network by 30%

• separates rail lines to improve reliability

• mass transit option to the airport

• frees up Tullamarine freeway

• Detailed project development underway

• Staged delivery, early works from mid-2016

• May include PPP DBFM package

TOORAK

CBD

DOMAIN

YARRAVILLE

FISHERMANS BEND

Melbourne Rail Link

PORT MELBOURNE

Existing network

Existing station

Proposed underground rail tunnel

Proposed underground station

Urban renewal area

RICHMOND

PARKVILLE

MONTAGUE

SOUTHERN CROSS

FOOTSCRAY

TRAM-TRAIN INTERCHANGESSouthern Cross, Domain, Montague

and South Yarra stations

SOUTH YARRA

TRAM AND BUS IMPROVEMENTSParkville precinct

URBAN RENEWALFishermans Bend will become a newresidential and commercial precinct

Approach to PPPs – implementing PPP reforms and lessons learned

Reduce bid costs • Deferred certain requirements to preferred bidder

• Streamlined and standardised contract (including builder insolvency protections)

• Number of short-listed parties

• Reimbursement of bid costs for specific projects

Improve value for money• Modified financing structure - capital contribution

• PSC as affordability benchmark / scope ladder

• Independent review of PSC to increase assurance

• Expanding scope of services

• Interim submission of commercial departures

Alternative Financing Strategies for PPPs

Developments

Global Financial Crisis- Reduced funding sources - Increased funding costs

Quick response for projects in market-Desalination Plant (2009) - VCCC (2011)

Policy Response- Consultation Paper: Future direction of Victorian PPPs - Market Response - Policy release

Project contracted- New Bendigo Hospital (2013)

Projects currently in market:- Ravenhall Prison - East West Link

Policy response - Future direction of Victorian PPPs

• A range of alternative financing structures assessed against the traditional PPP model using a set of evaluation criteria

• Looking at structures that enhanced potential liquidity and value for money

• Partial capital contribution identified as preferred approach

• Key considerations for a capital contribution:

‒ Timing

‒ Quantum

‒ Certainty

New Bendigo Hospital (2013)

New Bendigo Hospital (2013)

Future challenges

• Governance• Program approach for transport projects

• Dedicated offices for EWL – Western & Melbourne Rail Link

• Central agency involvement

• Resourcing• Attract and maintain the ‘A-team’ bidders & advisers

• Coordination• Commonwealth contributions

• Planning approvals

• Interface between projects

© State of Victoria 2014

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