NSW commits to $34m a day infrastructure send

By Paula Wallace

Representatives from state and federal governments outlined their approach to infrastructure planning and spending at a recent conference in Sydney. Along with “bigger picture” presentations from industry analysts and roundtable discussions on investment and construction, there were a number of case studies on specific projects. The Australian Financial Review (AFR) National Infrastructure Summit also featured a snapshot of the next wave of large infrastructure projects across Australia.

The opening address was given by John Della Bosca, NSW Minister for Education and Training, Minister for Industrial Relations, Minister for the Central Coast, and Minister Assisting the Minister for Finance. He was Minister for Finance up until April this year.

Della Bosca outlined how the NSW Government has committed to a record infrastructure spend for the “next ten years and beyond”, including nearly $50 billion over the next four years, or $34m a day.

He suggested that this capital spend will increase the value of the State's physical assets from $183bn to $218bn. The planning strategy arises from a number of key Government documents including the State Infrastructure Strategy, which cater for expected population growth of around 1.5m additional people, around 950,000 extra dwellings and more than 700,000 new jobs over the next 25 years.

“New South Wales is successfully delivering a number of new schools using a PPP model,” Della Bosca said. “Under this arrangement, the private contractor designs and constructs the schools and then provides non-core operational services for a period of 30 years, for the Department pays a monthly fee.”

The NSW Government has also committed a record $5.8bn in expenditure on transport in the 2007-8 budget, in an attempt to sort out Sydney's rail network. Some of these improvements will include building additional tracks, platforms and turnbacks, and removing bottlenecks and junctions.

The Government also plans to undertake a rail expansion program with new passenger rail lines that will be funded through a mix of borrowing, budget funding and private finance.

“We're continuing to assess which parts of the project would be suitable for possible construction as Public-Private-Partnerships,” said Della Bosca.

In relation to freight on the rail network, NSW will be seeking funding (in its submission to the Commonwealth for Auslink 2), to allow capacity enhancement to the corridor between Strathfield and Hornsby, and for the duplication of the final stage of the rail line to Port Botany.

Della Bosca, in closing, said he wanted to clear up “some misinformation about the financing of infrastructure in NSW.”

“There have been some ill-informed critics of the extent of infrastructure investment currently proposed by the Iemma Government,” he said.

Della Bosca suggested that due to a strong State balance sheet and debt reduction over the last decade, debt levels can now increase to fund NSW's infrastructure needs without compromising the State's Triple A rating.

Some questions have also been raised concerning delivery constraints and potential cost increases.

“An agency's capacity to deliver a major project is evaluated both through a Gateway Assessment and in Treasury's review,” said Della Bosca.

“An agency accreditation scheme is in place to ensure that agencies undertake project planning and delivery only to the extent to which they have the resources and expertise.”

Most major projects in NSW are delivered through fixed price design and build contracts, and typically the contractor, not the taxpayer, bears the risk of cost escalation beyond the contract price.

Private financing is now a project delivery option across all sectors of Government, including social infrastructure such as schools and hospitals.

All Privately Financed Projects, or PFP proposals, undergo an evaluation to ensure they are in the public interest. Some examples include the completed $105m development of the Parramatta Transport Interchange, and the new $361m Chatswood Transport Interchange.

PFPs worth about $1bn are currently on the market and the State Infrastructure Strategy lists other projects to be investigated for potential PFP procurement.

Future potential PFPs identified by Della Bosca, include:

. extension of the M4 motorway;

. upgrade of the Pacific Highway;

. the Northern Beaches Hospital and other major hospital projects;

. a number of new water recycling initiatives;

. Department of Housing renewal projects;

. intermodal logistics facilities for Sydney Ports Corporation; and

. TAFE colleges and new schools throughout the State.

On the second day of the AFR National Infrastructure Summit, the Hon Mark Vaile addressed the audience, Deputy Prime Minister, Minister for Transport and Regional Services and Leader of the Nationals.

Speaking of the Commonwealth's AusLink program, Vaile reported that from 2004 to 2009, they will spend $15.8 billion on land transport infrastructure.

“This includes $8.2 billion for some 196 road and rail projects on the AusLink national network. Of these, 88 have been completed, 57 are underway, and the remainder are the in late stages of planning,” said Vaile.

An example of the Australian Government's commitment to expanding export infrastructure, according to Vaile, is the $80 million Sandgate Flyover in the Hunter Valley which opened last year. They claim this has lifted the capacity of the Hunter Valley rail network to 120 million tonnes of coal per year.

It was now a case of the Port of Newcastle, said Vaile, upgrading to carry this additional capacity, with the ultimate aim of reducing the queues of ships off the Port of Newcastle up to 70 at a time.

Getting more freight through the rail network has also spurred the Australian Government to press ahead with planning for an inland rail route between Melbourne and Brisbane.

The Australian Rail Track Corporation will shortly undertake an engineering and scoping study to determine the best alignment for the inland railway, to be completed in 2009.

“Let's be under no illusions though, an inland railway would require significant investment,” said Vaile.

“The project cannot go ahead without private sector involvement.”

Vaile also took the opportunity to mention another potential future rail link between prospective new coal mines in Queensland's Surat Basin and the bulk export port of Gladstone.

The Australian Government will provide a consortium to develop the Surat Basin rail proposal with up to $3.5 million in federal funds.

“Some important planning work needs to take place, and equity issues finalised, before the Government's funding is made available,” said Vaile.

There are almost 200 projects on the AusLink national network. Vaile said that there were a number of significant cost escalations, mainly as a result of poor planning and management by the States and Territories.

The Australian Government has put in place new rules under Auslink 2 to ensure greater accountability and maximize value for money. The State and Territory Governments will be required to contribute to the cost of all new projects under Auslink 2, beginning from mid-2009, and will have to bear any so-called “unforeseen” cost overruns.

Major NSW infrastructure projects

Some of the major infrastructure projects to be undertaken by the NSW Government this year include:

. The $1.76 billion Sydney Water Desalanation Plant; Hunter Water's $298 million Tillegra Dam; and continued implementation of the Metropolitan Water Plan

. In public transport; $56 million to investigate and plan the expansion of the passenger rail network to Sydney's growth areas and continue the $1.8 billion Rail Clearways Program

. $1.7 billion over four years for the Pacific Highway, the Princes Highway, Central Coast roads and the widening of the F3 and F5 Freeways

. The expansion of Port Botany; the $162 million Port Kembla Inner Harbour Expansion; and the $22 million Newcastle Port Expansion

. Almost $400 million for Stage 2 of the Liverpool Hospital Redevelopment; $200 million for the redevelopment of Newcastle's Mater Hospital; $700 million for the redevelopment of Royal North Shore Hospital; and $160 million for Orange Base Hospital

. An additional $833 million over the next four years to reconfigure public housing to better match client needs

. In the electricity sector; $12 billion over the next four years including a new 667 megawatt gas-turbine generating plant at Lake Munmorah and expanding and upgrading distribution networks

. Almost $50m for three new police stations at Bowral, Camden and Leichhardt

. Almost half a billion dollars for 31 major new school projects and 11 new TAFE projects; the Government's capital expenditure in education will total $617 million in 2007-8.