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    TOWNSVILLE EASTERN ACCESS RAIL CORRIDOR

    DETAILED BUSINESS CASE

    November 2017

  • DETAILED BUSINESS CASE

    ABOUT THIS DOCUMENT

    Building Queensland finalised the Townsville Eastern Access Rail Corridor Project Detailed

    Business Case in November 2017. Core elements of the Detailed Business Case are presented in

    this document.

    This document has been publicly released to ensure that stakeholders and community members

    are aware of the outcomes of the Detailed Business Case, and have access to information that

    supports these outcomes. Commercially sensitive information has been removed to protect the

    State’s commercial position during future project stages.

    This detailed business case has been prepared with the support of funding from the Australian

    Government under the Townsville City Deal (2016).

    A glossary is provided following the recommendations chapter.

  • DETAILED BUSINESS CASE

    TOWNSVILLE EASTERN ACCESS RAIL CORRIDOR PROJECT

    PAGE 1

    CONTENTS

    EXECUTIVE SUMMARY ................................................................................................................. 7

    1 INTRODUCTION ................................................................................................................ 11

    1.1 Introduction 11

    1.2 Townsville Eastern Access Rail Corridor 13

    1.3 Project Governance and Management 16 1.3.1 Project Governance 16 1.3.2 Project Management 18

    1.4 Stakeholder Engagement 18

    1.5 TEARC Detailed Business Case 19

    2 STRATEGIC CONTEXT ........................................................................................................ 20

    2.1 Policy Context 21 2.1.1 Smart Cities Plan – Townsville City Deal (2016) 21 2.1.2 Northern Australia Infrastructure Audit & Australian Infrastructure Plan 22 2.1.3 National Priority List 22 2.1.4 Strategic Blueprint for Queensland’s North West Minerals Province 22

    2.2 Industrial Development & Urban Renewal Planning 23 2.2.1 Port of Townsville 23 2.2.2 Townsville State Development Area 25 2.2.3 Townsville City Waterfront Priority Development Area 26 2.2.4 Townsville City Plan 26

    2.3 Mount Isa Line 27 2.3.1 Mount Isa Line Rail Infrastructure Master Plan 27 2.3.2 Mount Isa – Townsville Economic Zone 50 Year Freight Infrastructure Plan 28 2.3.3 Mount Isa to Tennant Creek Proposed Rail Link 28

    2.4 Townsville Eastern Access Rail Corridor 28 2.4.1 Townsville Port Access Study and Port Access Impact Assessment Study 29 2.4.2 Corridor Preservation and Southern Port Road 29

    2.5 TEARC Preliminary Evaluation 29 2.5.1 Preliminary Evaluation Scope 29

    2.6 Reconfirming the Preliminary Evaluation Outcomes 32 2.6.1 Changes to Service Needs and Project Case Scope in DBC 32

    2.7 Conclusions 35

    3 DEFINING THE SERVICE NEED ........................................................................................... 37

    3.1 Introduction 37

    3.2 Factors influencing the Competitiveness of Townsville 39 3.2.1 Economic Contraction 40 3.2.2 Regulatory Issues 41 3.2.3 Supply Chain Constraints at the Port of Townsville 42 3.2.4 Decline in Urban Amenity 43

    3.3 Definition of Problem and Service Needs 44 3.3.1 Existing Freight Rail Configuration Does Not Enable Future Port Expansion Plans 46 3.3.2 Townsville’s Competitiveness is Constrained by Freight Network Inefficiencies 47 3.3.3 Freight Rail Movements through Townsville is Impacting on Liveability 48

    3.4 Overall Benefits of TEARC 51

  • DETAILED BUSINESS CASE

    TOWNSVILLE EASTERN ACCESS RAIL CORRIDOR PROJECT

    PAGE 2

    3.5 Strategic Response 52

    4 DEMAND FORECASTS ....................................................................................................... 54

    4.1 Background 55

    4.2 Demand Scenarios 55

    4.3 Minerals Demand Forecast 56

    4.4 Minerals Rail Demand 57

    4.5 Other Freight (Non-Minerals) 59

    4.6 Total Rail Demand 61

    4.7 Road Demand 62

    4.8 Total Rail and Road Demand 63

    4.9 Additional Future Demand Case 63

    5 BASE CASE, OPTIONS ANALYSIS AND RECOMMENDED SOLUTION .................................... 65

    5.1 Description of the Existing Integrated Transport System 66 5.1.1 Introduction 66 5.1.2 Existing Rail Infrastructure at the Port of Townsville 68 5.1.3 Discussion on Port Rail Infrastructure 69 5.1.4 North Coast Line Improvements 69 5.1.5 Mount Isa and Stuart to Townsville Rail Corridor 70 5.1.6 Existing Road Infrastructure 71

    5.2 Base Case 73

    5.3 Options Evaluation 74 5.3.1 Multi-Criteria Analysis Methodology 74

    5.4 TEARC Alignment Options 75 5.4.1 Assessment and Shortlisting of Capital Investment Options 77

    5.5 Further Rail Connection Options to the Port of Townsville 81 5.5.1 Options A1 and A2 Ross River to the Port of Townsville 82 5.5.2 Options B1, B2, B3 north of Ross River 84 5.5.3 Preferred Connection Option to the Port 88 5.5.4 Supplementary Reference Design Work 88 5.5.5 Concepts for Removal of part of the North Coast Line and Jetty Branch 90 5.5.6 Conclusion 92

    5.6 Recommended Solution 99

    5.7 Reference Project 101 5.7.1 Rail Infrastructure 104 5.7.2 Road Realignments 109 5.7.3 Allowance for Future Staged Infrastructure Upgrades 117

    5.8 Site Investigations 118 5.8.1 Geotechnical, Survey and Groundwater Investigations 118 5.8.2 Hydraulics 119 5.8.3 Public Utilities 122

    5.9 Land Acquisition 122 5.9.1 Cluden Y-Junction 123 5.9.2 Port Precinct 126 5.9.3 Corridor Protection 128

    5.10 Cost Estimation 131 5.10.1 Project Capital Costs 131

  • DETAILED BUSINESS CASE

    TOWNSVILLE EASTERN ACCESS RAIL CORRIDOR PROJECT

    PAGE 3

    5.10.2 Operating Costs 132

    5.10.3 Stakeholders 132

    5.10.4 Implications of Not Proceeding 133

    5.10.5 Future Activities 135

    6 RISK MANAGEMENT ....................................................................................................... 136

    6.1 Introduction 137

    6.2 Methodology 137 6.2.1 Initial Risk Workshop 137 6.2.2 Risk Identification, Analysis and Evaluation 139 6.2.3 Second Risk Workshop 139

    6.3 Project Risk Criteria 140

    6.4 Project Risk Register 140

    6.5 Key Findings 140 6.5.1 Summary of Key Project Delivery Risks 144 6.5.2 Cost Risk 145 6.5.3 Project Planning 145

    6.6 Strategic and Other Risks 146

    6.7 Conclusion 147

    7 ECONOMIC ANALYSIS ..................................................................................................... 148

    7.1 Introduction 148

    7.2 Approach 148

    7.3 Methodology and Assumptions 149

    7.4 Costs 150 7.4.1 Capital Costs 150 7.4.2 Ongoing Costs 152

    7.5 Benefits 152 7.5.1 Rail Benefits 153 7.5.2 Road Users Benefits 155 7.5.3 Residual Value 157

    7.6 Cost Benefit Analysis Results 158

    7.7 Sensitivity Testing 159 7.7.1 Future Scenarios Not Tested 160

    7.8 Scenario Testing 161

    7.9 Productivity Gains 162

    7.10 Jobs Supported during the Project 163

    7.11 Quality Assurance Review 163

    7.12 Conclusion 163

    8 FINANCIAL AND COMMERCIAL ANALYSIS ....................................................................... 165

    8.1 Approach 166 8.1.1 Sources of information 168

    8.2 Assumptions 169 8.2.1 Timing assumptions 169 8.2.2 Financial assumptions 170 8.2.3 Accounting Treatments 171 8.2.4 Cost Assumptions 171

  • DETAILED BUSINESS CASE

    TOWNSVILLE EASTERN ACCESS RAIL CORRIDOR PROJECT

    PAGE 4

    8.2.5 Revenue and Funding Source Assumptions 173

    8.3 Financial Net Present Value (Financial NPV) 174 8.3.1 Approach 174 8.3.2 Raw Capital Costs 174 8.3.3 Raw Ongoing Cost (Whole-of-Life) 175 8.3.4 Revenues 176 8.3.5 Analysis Summary 176

    8.4 Risk-adjusted Financial NPV 177 8.4.1 Capital costs risk adjustments 177 8.4.2 Ongoing costs risk adjustments 178 8.4.3 Risk-adjusted project costs 178

    8.5 Public Sector Comparator 180 8.5.1 Approach 180 8.5.2 Applicability 181

    8.6 Independent Financial Model Peer Review 181

    8.7 Conclusion 181

    9 DELIVERY MODEL ANALYSIS ............................................................................................ 182

    9.1 Assessment Methodology 183

    9.2 VfM Assessment 184 9.2.1 High Level Assessment of PPP Suitability 184 9.2.2 VfM Assessment Evaluation Approach, Criteria & Scoring 185 9.2.3 VfM Assessment Outcomes 186

    9.3 Market Feedback 188

    9.4 Packaging Assessment 188

    9.5 Traditional Delivery Model Assessment 188 9.5.1 Evaluation Approach, Criteria & Scoring 188 9.5.2 Traditional Delivery Model Options (Long List) 190 9.5.3 Traditional Delivery Model Options (Short List Detailed Assessment) 192 9.5.4 Traditional Delivery Model Assessment 194 9.5.5 Preferred Traditional Delivery Model 196

    9.6 Conclusions and Recommendations 197 9.6.1 Packaging 197 9.6.2 Delivery Model Assessment Results and Recommendation 197 9.6.3 Outcomes of the VfM Assessment 198

    10 MARKET CONSIDERATIONS ............................................................................................. 199

    10.1 Market Sounding Objectives 199

    10.2 Market Sounding Approach 200 10.2.1 Documentation 200 10.2.2 Participants 200

    10.3 Market Feedba