Infrastructure Report

Infrastructure Tuesday, August 19, 2014

Moving houses Social housing reform is at the top of the Government’s infrastructure list, writes Fran O’Sullivan

● Making progress on issues the Productivity Commission has highlighted in its work on regulatory reform. ● Resource Management Act reforms which still languish in Parliament. ● Managing the State’s commercial assets better. The electricity companies are now under share market scrutiny, but Treasury’s new commercial advisory board is focused on Solid Energy, KiwiRail and NZ Post.

“There is a clear pecking order … and they are all under pressure for different reasons.” ● Working with the Christchurch City Council on its proposal to release capital from commercial assets to reinvest in the city’s rebuild and forming a company to manage its social housing portfolio.

Data the new currency Alexander Speirs

Infrastructure in the 21st century is all about information. The ability to produce, store, move, analyse and create from data is fast becoming an integral part of business, regardless of industry.

Establishing the ecosystems and frameworks that underpin data infrastructure is a key step in positioning New Zealand to make the most of the digital economy. we’ve got to bore in on those.”

Expect a strong Governmental focus on decision-making by councils that affects the supply and cost of

The National-led Government clearly signalled its intentions when Finance Minister Bill English and Statistics Minister Maurice Williamson established the Data Futures Forum.

The initiative brought together a panel of industry experts and thought leaders to consider how to unlock opportunities for New Zealand through greater data-sharing.

The forum produced a host of continued on D13

housing. Highlighting Auckland Council, English says minimum sizes for apartment buildings and forcing builders to add balconies can push

building costs up a further $100,000 and have economic ramifications.

“It will pick up speed because we need to alter the planning process somehow so it takes account of the fact that those decisions have an impact on our interest rates and exchange rates for the whole country and on the Government’s books.’’

Another third term priority is to take forward the recommendations of the Data Futures Forum.

“We’ll be setting out to execute some fairly significant change to improve services and productivity,” says English. “For instance, IRD, ACC and the Ministry of Social Development who have 4 million customers are all going to go through significant operational and service changes driven in part by the IT changes.”

Labour is promising it will change the game on infrastructure if it gets to form a Government after the September 20 election, and break some contracts like the Wiri Prison public private partnership (PPP).

Shadow Transport Minister Phil Twyford says a Labour-led Government would reel in the “inefficient” partnership model in favour of a larger proportion of projects being funded from the Crown’s balance sheet.

“In the case of Wiri Prison in particular, we don’t feel the right outcomes are being produced for New

Zealanders,” says Twyford. “We are fundamentally opposed to privatising the prison system and the power to incarcerate ones fellow citizens.”

“Our commitment on the privatised prisons is that we will get out of those contracts. We are absolutely committed to ending those.”

Twyford confirms PPPs for two schools will also be thoroughly investigated before a decision is made on whether those contracts would also be terminated. “If you look at the numbers of the school PPPs, it’s been an extremely expensive way to fund that infrastructure.

“We think schools and public ownership has worked for over a century and we don’t see any real

Phil Twyford

advantage in rolling out PPPs in the education sector.

“Labour believes in development and in principle, we’re open to PPPs

The private sector is willing and able to play a greater role in delivering infrastructure that will drive New Zealand’s growth. But unlocking this potential will require strategic leadership and certainty for investors and developers - including agreeing, as a country, what infrastructure we need for future success, writes ANZ's David Green.

— page 3

Anne Gibson checks out progress on some of our biggest infrastructure projects.

— page 10

Alexander Speirs reports on New Zealand’s largest infrastructure build — Christchurch — page 14

● Brierley Penn talks to Housing NZ CEO Glen Sowry — page 6

Labour would scrap some PPPs Alexander Speirs and Brierley Penn

Inside

Other infrastructure priorities include:

F

inance Minister Bill English is putting social housing at the top of his infrastructure priorities for a third term in Government.

English — who has Cabinet responsibility for infrastructure — says the Government is setting up an independent transactions unit within Treasury to push ahead with reforms involving Housing NZ’s social housing portfolio.

“Housing NZ is not set up for it,” he says. “It’s not in their DNA.” He highlights the Tamaki Project where the Government wants to realise the development potential of the housing stock, and praises Housing NZ’s work with the Hobsonville Land Company.

“But we need a lot of smaller opportunities like that to meet our social housing needs more efficiently, but also to realise the development potential of a lot of the land in our metro markets, where land is the scarce resource.”

There’s a more fundamental economic driver behind English’s thinking. He notes housing is the “biggest single asset class in New Zealand”, with about $600 billion of houses on the national balance sheet (the single biggest item on it).

“The things that drive its value matter a lot to the economy.

“As house prices rise we come under a lot more pressure to subsidise housing. We’re not driving this, — it is the planning decisions and

Section D

except for prisons and schools. In transport, it’s on a case-by-case basis and that’s all about getting value for the taxpayer.

The Greens – Labour’s most likely coalition Government partner – have proposed reallocating around $10.4 billion of funding from state highway projects into public transport and rail over the next decade.

They have also proposed a Green Investment Bank to partner with the private sector to fund projects ranging from new clean technologies, to renewable energy and biofuel production. ● Government change will move dial on infrastructure — D5

Transpower’s new CEO Alison Andrew tells Grant Bradley why the national grid operator has entered a new phase with its focus on customers — page 22

A fast data communication infrastructure is well under way in New Zealand. Bill Bennett talks to Chorus network strategy manager Kurt Rodgers.

— page 22

D2

nzherald.co.nz | The New Zealand Herald | Tuesday, August 19, 2014

Infrastructure

Delivering on our national aspirations An independent commission should oversee instrastructure says Stephen Selwood

S

ignificant advances in infrastructure planning and investment have been made in recent years to lift the performance of the New Zealand economy and the quality of public assets that underpin it.

Despite progress, executing plans remains vexingly difficult.

It is true that, after many years, large and difficult projects such as the Waterview tunnel are being delivered and delivered well. But building big assets is not enough. Achieving the ultimate objectives of major infrastructure investment is about stimulating long term economic growth, delivering improved liveability and better environmental outcomes.

Strong long term partnerships between central and local government and the private sector are essential.

If local government planning fails to promote effective land use, then a Government transport investment will not deliver national aspirations.

If the market does not like the area served by a big local government project, then it will not provide the investment to justify council expenditure.

In no place is the imperative to link the theory and practice of good infrastructure planning, delivery and associated development more pressing than in the most heavily and expertly resourced of our regions — Auckland.

With regional governance reformed and now consolidated, Auckland Council has developed a single plan for a quality compact city supported by public transport. In theory, this should mean urban development is now being directed towards brownfield areas serviced by rail and other rapid transit.

But an assessment of the Special Housing Areas earmarked by the council and Government for immediate residential development shows this is not the case.

Four out of every five of the 26,000 dwellings identified to date are poorly served by public transport, and only around 5000 or 20 per cent are located close enough to public transport to provide a realistic alternative to the car. The majority of these new, priority homes are dislocated from the enormous investment the city is making in rail and other public transport and reinforce private motor vehicle dependency.

Meanwhile, the notified Unitary Plan allows significant urban intensification in areas not well supported by public transport while imposing height restrictions in town centres and locations adjacent to train stations and bus corridors. A review of the unitary plan shows that almost half of bus and rail stations have weak transport and land use integration.

What signals do these policies send to private investors and Government agencies?

It is not difficult to find further examples of infrastructure planning and delivery misaligned with private sector or wider public policy.

For example, Auckland Council and the Government continue to disagree over urban development and the timing of the nation’s largest public transport investment with a consequential dampening effect on private investment.

Incredibly, in the absence of a National Policy Statement the Government maintains no formalised capacity to influence the Auckland Plan or the unitary plan beyond submitting through consultation, despite

Vision for the future New Zealand’s globally significant mega-infrastructure projects will be in the spotlight at the NZCID’s Building Nations symposium, which gets under way at the Viaduct Events Centre in Auckland this morning.

The two-day symposium will be opened by Prime Minister John Key, and, with the general election pending in a month’s time, is sure to provoke plenty of debate over the future direction of infrastructure investment in New Zealand and discuss the priorities and challenges for the incoming government.

From the $40 billion Christchurch rebuild, the $4 billion Auckland Harbour Crossing, the $3 billion plus City Rail Link, waterfront and CBD development, the $10 billion Roads of National Significance, to the KiwiRail turnaround plan and regional water irrigation schemes, these nation building mega-projects will shape New Zealand’s development for decades.

But what is the vision for these projects? What does success look

Simon Mackenzie and Peter Reidy are among the speakers at the NZCID symposium.

Stephen Selwood suggests creating a body that would link the theory and practice of good infrastructure planning.

Government investment being central to delivering the plan.

Similarly in Christchurch, in the absence of a compelling investment proposition and a unique point of difference, market response to the CBD rebuild has been much slower than anticipated. Across the regions, there remains no cross-party agreement on major inter-generational investment in roads in Wellington, Waikato and Northland and there is opposition from consenting authorities in Wellington to national and local strategic investment.

Something must be done.

Emerging as a key platform of the British Labour Opposition’s policy agenda is an interesting initiative that may help address the problem: an

An independent National Infrastructure commission would enable a shift away from short term politicised debate to long term planning horizons. independent national statutory authority to identify long term infrastructure issues and monitor Government response.

A New Zealand National Infrastructure Commission would be responsible for assessing and publishing national infrastructure needs over 30 years and monitoring regional and

national progress on issues and opportunities.

The needs assessment, delivered every five years, would be tabled in Parliament, as would other ongoing monitoring reports, and be subject to rigorous committee review processes. All future trends and pressures would be analysed — population and demographic change, finances, technology and environmental challenges.

The commission itself would comprise recognised public and private sector experts across planning, project funding and delivery, regulation and procurement and be fully funded by the Crown. Each member would be appointed by the Government for a fixed term and approved by Parliament.

As a statutory body, the commission would possess powers to require information from Government departments and agencies and would maintain capacity to investigate infrastructure issues of national significance.

But it would not formulate solutions, nor propose investments — this role can only sit with the Government. The commission would be restricted to analysis, monitoring and reporting.

Government departments would be required to develop sector plans within 12 months of the commission having undertaken the needs assessment, demonstrating how they are addressing issues raised.

Where councils plan, manage, or regulate for nationally significant

infrastructure, they would have to meet the same requirement.

Much of the work that a national infrastructure commission would undertake has already been initiated by the existing National Infrastructure Unit, but accountability for effective execution of policies and plans remains problematic.

An independent National Infrastructure commission would enable a shift away from short term politicised debate to long term planning horizons, promote crossparliamentary alignment on infrastructure policy and provide independent scrutiny and commentary on the execution of public investment in infrastructure of national significance.

Optimal investment requires strong leadership and governance, long term visionary planning linked to funding, efficient and effective regulation, rigorous project prioritisation and appraisal and advanced procurement and delivery capability.

Independent oversight and direct advice to Parliament by a National Infrastructure Commission on the execution of infrastructure planning, funding and delivery is the logical next step to ensuring that planning, funding and delivery of nationbuilding infrastructure measures up and meets the expectations of all New Zealanders, including current and future generations. ● Stephen Selwood is Chief Executive of the New Zealand Council for Infrastructure Development

like and how should we measure it? Focusing on “Mega Projects: From Vision to Reality”, the symposium will challenge how we think about infrastructure investment in New Zealand and ask are we progressing projects or building a nation?

The symposium will aim to address these questions. It is the premier event on the infrastructure calendar and provides an opportunity for the public and private sector to come together to progress thinking and advance best practice in national infrastructure development.

Among the keynote speakers are Sir John Armitt, the chairman of the London authority charged with building the venues, facilities and infrastructure for the Olympic Games in 2012.

Other prime speakers include Vector CEO Simon Mackenzie on Smart Cities technology and intelligent networks, and KiwiRail’s Peter Reidy on the revitalisation of the national rail network.

The council promotes best practice in national infrastructure development through research, advocacy and public and private sector collaboration. NZCID members come from diverse sectors across New Zealand — equity owners, service providers, public sector agencies, and major infrastructure users. www.nzcid.org.nz

Infrastructure 2014 Executive Editor: Fran O'Sullivan Writers: Bill Bennett, Grant Bradley, Anne Gibson, Brierley Penn and Alexander Speirs.

Subeditor: Isobel Marriner Graphics: Isobel Marriner Advertising: Sandra Evans, Nancy Dudley www.nzherald.co.nz

D3

nzherald.co.nz | The New Zealand Herald | Tuesday, August 19, 2014

Infrastructure

Private sector is willing to engage A

s the key players in New Zealand infrastructure meet this week for the sector’s annual symposium, progress in a number of areas within the sector ensures infrastructure remains high on the national agenda.

The most significant development in the past year has been the Christchurch rebuild, which is now well under way, with a number of muchanticipated projects now either confirmed or under construction.

Sustained investment in energy is bringing more certainty of supply and competitive pricing that will support economic growth.

And our growing demand for data, and the supporting requirement for more networks and services, is driving an increasingly competitive telecommunications landscape and demand for capital.

Our water sector is beginning to benefit from a renewed focus on optimising water-use, with construction now under way on Central Plains Water, a ground-breaking scheme that will irrigate 60,000 hectares of farmland and create up to $1.4 billion in new economic activity.

Transport is enjoying significant growth and re-investment too, across ports, airports, air transport and roading.

The Government’s recent announcement on Transmission Gully opens the way for a roading project that will cut congestion, improve safety and support economic growth across the Wellington Region.

First mooted almost a century ago, the benefits of Transmission Gully will be unlocked through New Zealand’s largest public-private partnership (PPP).

The private sector is willing and able to play a greater role in delivering infrastructure to drive New Zealand’s growth. But unlocking this potential will require strategic leadership and certainty for investors and developers, writes David Green.

Picture / Michael Bradley

And private sector involvement is, to varying degrees, now a feature of many other nationally significant developments. The New Zealand PPP market is well under way and delivering public benefits. Projects such as the Hobsonvillle Primary and Secondary Schools, Wiri Prison and Transmission Gully have brought successful private sector engagement which confirms the potential for bringing forward other critical infrastructure.

All of these projects have been supported by debt and equity providers, and markets have the capacity to support a pipeline of new initiatives.

The Government is looking to apply what it has learnt from the alternative procurement models behind these projects so the advantages of public-private sector delivery can be replicated elsewhere in its activities.

The private sector, for its part, has shown a willingness to play a role in finding solutions for delivering infrastructure.

The advantages to New Zealand are clear: bringing in expertise and capital to secure or bring forward projects whose benefits to the economy and society might otherwise be deferred, or lost.

There is now an opportunity to build further on this success.

In Christchurch and in the health and waste water sectors, in particular, there is significant potential to explore greater private sector involvement in projects which would deliver clear benefits to the community in outcomes, cost and delivery timeframes.

The public-private partnership capability now established in New Zealand, and its growing track-record of delivery, provides decisionmakers an opportunity to assess the innovation and value that new procurement methods would bring towards delivering a new world-class city to the people of Christchurch.

As activity and demand grow across the infrastructure sector, some constraints are beginning to emerge, particularly around the ability to secure supply chains and source skilled labour in the construction sector.

These issues are particularly evident in the Christchurch rebuild, which in itself is the largest infrastructure event in New Zealand’s history.

And the constraints in capacity emerging in Auckland as residential construction picks up to meet demand are adding to the capacity

challenges for the infrastructure sector.

Engaging the private sector in alternative procurement models to deliver infrastructure could help alleviate some of those constraints.

We have seen this through the Transmission Gully project, and the pipeline of further New Zealand Transport Agency projects, in their ability to attract large international players to the New Zealand market providing both capacity and international best practice.

Strategic leadership continues to be a key requirement in securing the development of what will be longterm, strategic assets for New Zealand.

In the lead-up to the general election, the industry will be listening with great interest to what our political leaders have to say about their visions for the future.

Investors from New Zealand and offshore will be looking for a sense of stability, consistency of approach and certainty over regulation. They will be seeking confidence and a shared sense of direction which goes beyond the three-year electoral cycle. The establishment of the National Infrastructure Unit has been a positive development in this direction.

And the long-term strategic plans

of local authorities are providing some welcome certainty at a local level. But at a strategic national level, there remains a need for New Zealanders to decide what infrastructure is important for future success.

This is a discussion which needs to involve a wide range of stakeholders.

The objective should be a longterm vision in which investors and developers can have confidence, regardless of who is in government.

Matched with this is a need for greater clarity, and certainty, over the process for converting projects from aspiration to reality – particularly around consenting requirements for infrastructure related to harnessing New Zealand’s natural endowment.

An environment of stability and certainty will help to secure private sector backing and reduce the cost of capital by allowing would-be participants to plan and invest with confidence on the sort of large-scale, longterm basis demanded by major infrastructure development. In doing so, it could help this country secure development that might otherwise not be possible.

The opportunities across the sector are on a scale never before seen in this country. The private sector participants, from investors, financiers, advisors, construction firms, industry bodies and service providers, are all positioned to deliver into this opportunity, working with local and central Government. The potential is significant — success will help to underpin future growth and prosperity for New Zealanders. ● David Green is Managing Director Institutional at ANZ New Zealand

Helping to build New Zealand’s future.

ANZ has been behind many of New Zealand’s largest and most successful infrastructure projects.

We have the industry experts and global connections to help your business build New Zealand’s future.

Find out how we can help you, speak to Karl Nicholson on 09 252 3492 or John Vetter on 09 252 3485 today.

ANZ Bank New Zealand Limited

ANZ1637_IR

D4

nzherald.co.nz | The New Zealand Herald | Tuesday, August 19, 2014

Infrastructure

Riding the consolidation wave Consulting engineering is unlike other professions, it’s less about process and more about creating unique solutions.

Aecom’s move will transform the engineering industry, writes Bill Bennett

A

ecom, one of the world’s largest suppliers of engineering services for infrastructure projects, is set to get bigger. In July Aecom Technology agreed to buy URS Corporation in a deal said to be worth US$6 billion.

The deal is expected to complete in October. Assuming it passes all the regulatory barriers and gets shareholder approval, Aecom will emerge with 95,000 staff worldwide and annual revenues of around US$19 billion.

John Bridgman, managing director of Aecom New Zealand, says the move is part of a wave of consolidation in the engineering profession which in some ways mirrors the mergers between large accounting firms a decade or so ago. Ultimately the change will see fewer, bigger players which, in turn, should lead to greater efficiencies as consultant engineers move further along the project value chain.

“One of the key triggers is we’re seeing a desire from our clients for a more integrated service offering.

Many see benefits from having a supplier who is able to support and finance operations, maintenance and even some build activity. Whole of life integration is really valuable for them. We’re getting more and more demand for this and that requires a bigger balance sheet and a bigger organisation.’’

Scale brings integration. Bridgman says this can mean broadening project scope from “just doing design

services to the delivery side, the maintenance side and even to the point of financing projects.’’

This is especially important when it comes to government contracts which now often use the public private partnership (PPP) model requiring substantial investment from consulting engineers. Bridgman says the goal of a PPP is to get the right connection between the designer and the operator to deliver the best whole-of-life outcomes.

“We get involved in projects like Transmission Gully — we are the designer and yet we are highly integrated with the operator and the maintainer of the design. The current industry consolidation is mirroring the demand for that kind of integration — to optimise the connection between the designer and the longterm delivery.’’

For that project Aecom brought in experience from its earlier involvement in PPP projects in eastern Australia and some expertise on alignment and earthworks optimisation.

Size also helps when it comes to delivering technology. Bridgman says many of his clients are government, federal government or local government, there are also global private sector clients. “All these clients are looking for increased access to the latest technology from around the world. An example of that is the Auckland rail electrification project where the conductor beam technology used at Britomart has only been used once previously in the world. It

John Bridgman

improved the safety of the project.”

Having scale helps Aecom reach around the globe to access innovation technology: “We can locate it and bring it here seamlessly.’’ This is increasingly important, he says as technology and the ability to apply is now often the differentiator between consultant engineering firms.

Engineering has been slower to consolidate than other sectors. Industry watchers have been expecting to see it happen for almost 10 years, yet to date the Aecom-URS deal is the first big acquisition. Others are expected to follow. There’s talk in the industry that five or six consulting/construction giants could emerge.

Why has engineering been slow to consolidate? Bridgman says it’s because the industry is not built around easily repeatable processes. Every project is different and brings fresh challenges. “Consulting engineering is unlike other professions, it’s less about process and more about creating unique solutions.’’

Ultimately, the impetus for industry change seems to be driven as much by client need as by internal considerations. Bigger companies mean customers get to see some cost savings through economies of scale.

Bridgman says larger scale also gives customers more opportunity to select contractors on quality, ability to innovate and execute.

NZCID, NEW ZEALAND’S PEAK INFRASTRUCTURE BODY. JOIN US.

The New Zealand Council for Infrastructure Development is the peak industry body at the forefront of infrastructure thought leadership in New Zealand. The Council promotes best practice in national infrastructure development through research, advocacy and public private collaboration. NZCID’s diverse membership includes infrastructure investors, financiers, constructors, designers, service providers, public sector agencies and major users. Together we share a clear purpose; world class infrastructure for the benefit of all New Zealanders. Join us.

KEY BENEFITS OF MEMBERSHIP INFLUENCE POLICY NZCID’s core business is to lead thinking on infrastructure strategy and policy. Drawing on

your input NZCID ensures that policy makers know about and consider the views of members through constructive dialogue. The Council is invited to and pro-actively participates in government forums and consultative processes to enhance understanding of best practice in infrastructure planning, funding and delivery.

GET IN THE LOOP & LEAD THINKING Infrastructure users, providers and policy makers need their finger on the pulse of what’s happening.

Membership keeps you up to date on an ongoing basis through its forums, media communications, infrastructure research, reports and analysis.

Via email you’ll regularly receive information on upcoming events, seminars, conferences and prerelease media material. Through regular exclusive updates of national and international infrastructure

TO JOIN NZCID CALL US ON (09) 271 4445 OR VISIT WWW.NZCID.ORG.NZ

news you will obtain visibility of emerging issues and access the latest thinking on infrastructure development and market opportunities.

NETWORK NZCID facilitates opportunities for guest visits, member functions, seminars and boardroom functions. Membership provides up to two complimentary seats at NZCID’s annual Building Nations Symposium where you’ll mix with the “who’s who” of the infrastructure industry to discuss and debate the issues of the day.

If you are serious about infrastructure in New Zealand, NZCID membership is a must.

D5

nzherald.co.nz | The New Zealand Herald | Tuesday, August 19, 2014

Infrastructure

A big issue for the voters “D

ecoupling our economic prosperity from environmental damage and resource depletion is the single largest economic and environmental challenge of our time,” says Julie Anne Genter.

The Green Party proposes reallocating around $10.4 billion of funding from state highway projects into public transport and rail over the next decade, aiming to deliver buses and trains every few minutes at peak hours, decongesting city roads and breathing new life into neglected rail networks.

The goal is to provide “smarter” transport, which align more with the needs and desires of New Zealanders.

This will involve a $2.2 billion government investment in seven key public transport projects in Auckland by 2020, including $1.3 billion for the Auckland City Rail Link, to start immediately. Walkways and cycle ways will also be supported, with a 300 per cent increase in walking and cycling infrastructure proposed.

“The Green Party has proposed a suite of measures to help direct capital into clean energy low-carbon infrastructure,” says Genter. “These include establishing a fair price on carbon and a comprehensive tax on capital gains (excluding the family home), and the establishment of a Green Investment Bank that specialises in the financing of new, currently unfunded opportunities in the green economy.”

PricewaterhouseCoopers has estimated that the clean technology sector could be worth between $7.5 billion and $22 billion to the NZ economy by 2015, and the Green Party is seeking to ensure outcomes are at the higher end of forecasts.

The Green Party considers it is

Infrastructure development is set to be a key election issue for the business sector, with the parties balancing ease of use and economic development against environmental sustainability and fiscal conservatism. Transport, roading, water and digital infrastructure are all focus points, with investment in this infrastructure today having a significant bearing on the NZ landscape of tomorrow.

If power changes after the election there will be a profound change in NZ’s infrastructure landscape with the likely partners in a new coalition Government – Labour and the Greens — having quite different priorities to the National-led Government. Brierley Penn spoke to Greens MP Julie Anne Genter to find out what her party will try to influence if it plays a role in the next Government very difficult to commercialise the benefits of infrastructure investment, and believes involving private finance means the project inevitably costs more. For this reason, they are unlikely to finance infrastructure projects through the use of PPPs. “The private sector already competes to design, construct, and maintain our infrastructure. There would have to be very compelling evidence of value for money for us to consider using a PPP to procure new infrastructure.”

A final priority for the Greens is water management, to protect New Zealand beaches, rivers and drinking water. “Increases in extreme weather events, rising sea levels, and aging infrastructure will continue to put more pressure on our ability to protect our beaches and rivers,” Genter says. “We need to ensure there is adequate access to funding for

Julie Anne Genter

councils to undertake the work they need to do.” She suggests that it is important to consider the wider impacts of continual increases in polluting agriculture on our rivers and drinking water. This necessitates investment in source protection.

“There's not a trade-off between sustainability and prosperity – if we don't look after our environment we will not be better off, especially in the long term,” explains Genter.

“Energy efficiency is economic efficiency, and New Zealand's competitive advantage in the world is our clean green brand. By investing in smart, green infrastructure, we can reduce costs and pollution, and create a healthier, more prosperous country.”

Other parties like New Zealand First and Internet Mana could also influence infrastructure policies if

there is a change of government.

New Zealand First agrees with many of the broader aims of the transport policies the Greens are pursuing, particularly around encouraging the use of public transport, with an aim to “balance the roading needs of the main centres with the need to reduce the ever-growing dependence on the motorcar” .

A major policy platform for NZ First is ensuring none of NZ’s railway lines, roads, or other strategic railways infrastructure are privatised.

This is in line with their plan to create a state-owned company to acquire the assets of all state-owned energy companies, and merge their operations.

Re-establishing NZ ownership of key infrastructure is a key policy platform. Alongside this, New Zealand First aims to ensure he whole road

network is properly maintained. This would ensure regional New Zealand does not lose out in favour of the major centres, and would allow farmers to get their produce to ports or processing plants on wellmaintained roads.

With the Internet Mana party emerging as a potential new force in this election, attention has also refocused to some extent on NZ’s digital infrastructure. Currently, a total of 200,000 New Zealand households do not have internet access, either because they are unable to afford it, or because they lack the necessary confidence, knowledge or skills. Cheaper, universal internet access is a focus for the Internet Party, and the goal is to reduce internet costs by 50 per cent.

Achieving this will require the construction of an additional internet submarine cable connecting NZ to Australia and the US, to end the bandwidth monopoly. If this fails to lower prices for New Zealand internet service providers, the Internet Party would call for government purchasing of bulk bandwidth through the use of a PPP. The Internet Party considers the provision of fibre broadband to be essential infrastructure if New Zealand is to become a global leader in the digital age. The current Ultra Fast Broadband programme will deliver fibre to 75 per cent of New Zealanders by 2020, and the Internet Party aims to provide fibre to the remaining 22.8 per cent of households within the Rural Broadband Initiative coverage area. This will require investment by both government and private business interests, potentially in the form of innovate partnership arrangements with $200 million of new government investment needed over five years.

City rail link a priority for Labour Alexander Speirs

Labour’s transport spokesman Phil Twyford says the Auckland City Rail Link will be a priority if the Government changes.

“We’re going to build the City Rail Link as a matter of priority as soon as we’re elected. That’s a huge civil infrastructure project,” says Twyford.

“We’re utterly committed to building the country’s transport infrastructure as a vital part of the export supply chain as well as building modern public transport systems in our cities.

“When you invest in transport infrastructure, particularly in growing cities, you open the door to really significant value up lift. Capturing that value uplift and investing it in infrastructure.

“That’s the virtuous circle for urban development, and I think the city rail link offers huge potential, not only for development of the central city with for example high rise, commercial, and residential development around those railway stations but it’s also a fantastic opportunity for private capital to be fully involved in that whole process.

“The nature of it is perhaps not a classical PPP arrangement in the sense that we’d use it in relation to urban transport project, but never the less it’s a very symbiotic relationship between the public and private sectors.”

The Labour MP is strongly critical of the Transmission Gully Motorway, green-lighted last month, saying the characteristics of a genuine publicprivate partnership are absent from the agreement.

“My fundamental position on Transmission Gully is that it’s a very expensive, disguised private loan to fund a project that should be funded

Phil Twyford says Labour is “ utterly committed to building the country’s transport infrastructure’’.

off the balance sheet of the Crown,” says Twyford. “We think that there is no genuine sharing of risk and on that basis I don’t think it represents value to the taxpayer. It’s an extremely expensive way to fund that project.”

The successful Wellington Gateway Partnership consortium will build and operate the road for 25 years. Where the Transmission Gully agreement differs from more typical transport PPPs is the lack of any patronage risk. The Government will pay back the consortium on the basis of an availability model, where the amount paid is determined by whether the road is open and available to traffic.

In the bulk of international PPP’s for major transport initiatives, the private partner is responsible for collecting tolls as a part of their

revenue stream – shifting a portion of the risk away from the public.

Says Twyford: “The problem with transport projects if that if you’re really realistic about it, the taxpayer always carries the risk. If everything falls over, the taxpayer is there to pick up the pieces, so it’s very hard to genuinely share risk with the private partner.

“Our position is that we are going to look at transport projects on a caseby-case basis, but based on the record internationally you have to be sceptical about whether they deliver significant value to the taxpayer.

“The key questions are; is there a genuine sharing of risk with the private partner and what innovation will arise – can a PPP genuinely deliver gains in terms of innovation and productivity?”

Labour does however see a role for

PPP projects as part of a more detailed and holistic approach to urban planning.

“Where I think there is huge potential for Government-private sector collaboration is on projects focusing on urban development and the kind of property development opened up by investment in 21st century transport infrastructure,” says Twyford.

“When you invest in transport infrastructure, particularly in growing cities, you open the door to really significant value uplift.

“In the whole area of commercial development and property development around transport infrastructure, there’s massive potential if the Government is willing to unlock that potential by planning and investing in that infrastructure in the public space. That can open up huge development opportunities for the pri-

vate sector in terms of both commercial and residential property development.”

Twyford claims the National Government’s approach over the previous two terms has been haphazard, with a select few handpicked projects prioritised over intelligent planning for the long term.

“Our biggest criticism of this Government is that they are a one-trick pony,” he claims. “They’ve sucked funds from all other parts of the transport budget in order to fund a handful of urban motor projects. In doing so they’ve neglected state highway projects, public roads and public transport.

“You will see as much or more infrastructure under a Labour government. Our approach is to build more, and build better. We’re prodevelopment.”

D6

nzherald.co.nz | The New Zealand Herald | Tuesday, August 19, 2014

Infrastructure

A place to call home Community associations are to play a more substantial role in social housing. Brierley Penn investigates how

H

ousing New Zealand is the country’s biggest social housing provider, owning or managing over 68,000 properties nationwide, and providing homes for more than 200,000 New Zealanders.

To put that number into perspective, there are as many tenants under Housing NZ management as there are people in Hamilton.

“On behalf of the Crown, we manage a portfolio worth $18.6 billion,” says Glen Sowry, CEO of Housing NZ. “That’s greater than the combined balance sheets of Genesis, Meridian and Mighty River Power. In Auckland, where we operate 45 per cent of our tenancies, we own 7 per cent of the region’s total housing supply.”

The Government’s long-term goal is to erode the existing dominance of Housing NZ’s role in the provision of social housing by creating a competitive marketplace for social housing provision. In line with OECD trends, community housing associations will play a more substantial role in the maintenance and provision of social housing.

Already this year, the Social Housing Reform Act has seen the assessment of eligibility for social housing assistance transferred from Housing NZ to the Ministry of Social Development. “This transfer of needs assessment to MSD means there is now an independent purchaser in place, whose role it is to allocate the housing of tenants not only to us, but also to other housing providers,” Sowry says.

Scott Figenshow, of Community Housing Aotearoa (CHA), says the goal is for community housing associations to provide up to 20,000 units of social housing by 2020, with around 5000 currently provided by the non-governmental (NGO) sector.

Those homes could come in a range of forms, from the traditional standalone residential house on a section, to units within a housing development or apartment block.

The broadly accepted target for the community-housing sector was to provide 20 per cent of social and affordable housing by 2020. With the current Housing NZ pool sitting at around 68,000 units, Figenshow considers there is demand to expand the total nationwide stock to around 100,000 homes. Child Poverty Action and the Labour Party, on the other hand, believe there are around 200,000 New Zealanders currently living in homes which do not meet their needs, or which they cannot fully afford. On any estimation, it is clear community housing associations can play a large role in meeting this need.

To achieve the ambitious goals set for social housing, innovative solutions need to be considered. The Government is in the process of determining how the existing housing estate can be managed to provide asset transfers to community housing associations, as well as financing the construction of new stock.

Stephen Selwood, CEO of the NZ Council for Infrastructure Development, says current initiatives implemented by private sector bodies are typically small-scale, with developments ranging from 10-30 homes.

“That’s not going to deliver anywhere near the number of houses that are required,” he says.

“What we’re seeing when we look overseas is much stronger partnership between traditional private sector development community and community housing organisations.

They’re building 200-500 homes at a time, and creating whole communities.”

Within these overseas developments, the trend is towards mixed-

Housing Minister Nick Smith (left) and Housing NZ chief executive Glen Sowry look around a Housing NZ redevelopment in Three Kings in March.

Picture / Richard Robinson

use and mixed-tenure community developments, or “salt and pepper’’ communities. The new community may be comprised of one-third social housing, one-third affordable housing, and one-third of homes open to market sales. “The value is that, rather than the traditional state housing communities, where everyone is all at a homogenous level of society, you’re actually creating a community at all levels of society,” says Selwood.

“It’s not clear which is a state house and which isn’t a state house.”

This also encourages residents to take more pride in their home and wider community.

Housing New Zealand’s single greatest asset is the inefficiency of its land and the ability to materially increase the amount of modern, well-designed housing stock on it.

However, perhaps the greatest financial benefit of such initiatives is that open market sales can leverage high land values, while enabling some of the surrounding support services to be wrapped around the more dependent community.

Glen Innes in Auckland is a prime example, with state housing built 50 to 60 years ago being positioned on highly strategic property.

Says Selwood: “The council is now in the process of a unitary plan of zoning that area to be high density, with opportunities to actually build four, six and eight storey apartment

dwellings. So you could really leverage the value of that land and the strategic location not only to the water, but to the railway network, and its proximity to employment in Tamaki and the CBD and create a completely new community.”

The support services required to sustain current social housing developments, including education, social welfare, policing and infrastructural initiatives, typically impose a large, ongoing financial burden on taxpayers.

Reinvesting taxpayers’ money in creating new communities, which are more self-sustaining, and with services which can be operated by community housing associations in the long term, provides opportunities for both financial and welfare gains.

“That could be on the table as a service subsidy, for a provider to come along and provide those services,” Selwood suggests.

However, the Government policy and support for these initiatives needs to be made more clear and consistent.

“There definitely is an appetite in terms of the private sector construction investment community and the facilities maintenance community as well. But there are some policy barriers; the Government hasn’t yet been very clear on how it wants to deliver this at scale,” he says.

Specifically, financial support to incentivise private sector investment into these inherently less profitable developments, and ongoing security for those seeking to invest must be provided.

Figenshow says the implementation of an accreditation framework for providers that satisfies regulatory requirements will also be an important focus for the community housing organisations under the CHA umbrella. CHA foresees the construction of 15,000 new homes, requiring a capital investment of over $5 billion.

This will be structured through $2.5 billion of debt, $1.25 billion of land value currently in the state housing

pool, and $1.25 billion of grants.

Housing NZ will continue to play a crucial role in this new landscape for social housing, and Glen Sowry is under no illusions as to the challenges that lie ahead.

“The changing landscape will place greater emphasis on the way we manage our tenancies and our assets,” he says. “Critical to our success will be the skills and expertise to forecast tenant demand and deliver the right properties, in the right places. “ So what will this look like in practical terms?

The New Zealand that existed 50 years ago, when the bulk of state housing was built, was dramatically different to the social, economic and demographical make-up of today.

The most common household type for Housing NZ nationwide is now one parent, with one or more children, closely followed by a single, elderly tenant. Over half of all applicants waiting for social housing require smaller one or two bedroom, low-maintenance properties. Conversely, in Auckland, large families with many children require four, five or even six bedroom homes. None of these modern realities match the traditional three-bedroom state housing that dominates our current housing pool.

“Housing New Zealand’s single greatest asset is the inefficiency of its land and the ability to materially increase the amount of modern, welldesigned housing stock on it,” says Sowry. “Housing shortages — and the associated challenges of affordability and overcrowding — are among Auckland’s biggest problems.

“Providing homes, particularly for those most affected by these problems, is what we do.”

In this way, Housing NZ can support Auckland’s Unitary Plan, and its goal to become the most livable, compact city in the world. The plan will allow Housing NZ to leverage off its existing strategically located properties to expand the housing pool.

The wrong mix New Zealand’s current pool of social housing is failing to meet the needs of our dependent communities. The stock is no longer fit-for-purpose, with the wrong mix of large and small homes, many of which are poorly located and expensive to maintain.

A significant number sit in strategic locations on largely under-capitalised land. In this context, it is clear that progress needs to be made, but the “baby steps” of current policy do not go far enough to meet growing demand. Huge opportunity remains to scale-up developments in partnership with community housing organisations and private development communities, paving the way for New Zealand to allocate social housing assets more efficiently.

“In its proposed form the Unitary Plan will allow Housing New Zealand to develop up to 19,000 additional dwellings over the next 50 years across its current Auckland land holdings,” says Sowry. “By amending zoning and other residential provisions, we believe we can comfortably push this figure up to nearer 40,000. “ Though these will not all be Housing New Zealand properties, this increased intensification and more efficient land use can allow for expansion at a more financially viable cost.

“Intensification does not mean sacrificing the tenets of community, nor should it be something to fear when done well,’’ he says.

“We have, over the past five years, seen areas of central Auckland, such as Britomart, Wynyard Quarter and Fort St transformed through innovative urban design into pedestrian-friendly, safe, modern precincts — all this while still deferring to the architecture on which the city was founded.

“Housing New Zealand’s future endeavours will be no different.”

D7

nzherald.co.nz | The New Zealand Herald | Tuesday, August 19, 2014

Infrastructure

Housing realism after the quakes Christchurch City Council is poised to form a company to enter the affordable housing market and shake up the provision of social housing services in the earthquake-damaged city.

After Housing NZ, the council is the country’s second biggest landlord with 2600 social housing units. But its current portfolio is no longer financially viable; a problem compounded by the Canterbury earthquakes.

Deputy Mayor Vicki Buck is leading the proposal to set up the limited liability company which will be expected to match current social housing units in the council’s portfolio and catalyse at least 1000 more.

Under the council’s preferred plan — which has already received strong feedback from the city — the ownership of the social housing portfolio will be transferred to the company. Initially, the council will own the company outright and appoint the first set of board directors. But its ownership stake will reduce to 49 per cent after a shareholding partner, or partners, is introduced.

The plan is not the only option on the table. Some councillors prefer the council to gets out of social housing altogether and transfer the ownership of the portfolio to a third party.

The council-controlled company will be able to register as a community housing provider and be eligible for the Government’s income-related rent subsidy. The council says the income stream from this subsidy would hugely improve the financial viability of its social housing stock and allow it to be sustained, improved and grown.

The new company will be able to work with the council's city housing

partners to redevelop some land currently used for social housing — in effect, working in a public private partnership along the lines spearheaded by Westpac in Sydney with its groundbreaking Bonnyrigg project.

The council says that should the company become eligible for the Government’s Income Related Rent Subsidy, most of its current social housing tenants would pay a lower rent than they now do. Rent levels would be set

by Work & Income based on tenants’ income, assets and other criteria.

What is the Housing Accord?

The council and the Government have signed a draft housing accord to increase affordable houses in the city, including social housing. The accord is subject to ratification by the council based on the outcome of future consultation with residents on the council’s role in providing affordable housing.

Who lives in the Council’s social housing?

A wide range of people are eligible for the council’s social housing service, including the elderly, disabled persons, sickness or unemployment beneficiaries and people on very low incomes. In general, all these people have met financial hardship criteria.

They are also some of Christchurch’s most vulnerable residents.

How would the Council’s proposal affect rates in Christchurch?

That will depend on the outcome of reevaluating the council’s role in providing a social housing service in Christchurch. If the council was to decide to use rates income to fund social housing, it is estimated this would require $9 million per year, with an expected rates increase of 2.3 to 2.7 per cent.

Planning processes under the spotlight The rebuild of Christchurch has put public planning and procurement processes under the spotlight. With creative methods of delivery and new approaches to financing becoming more common, marrying infrastructure development with long term urban planning becomes increasingly important says Garry Bowditch, Chief Executive at the Smart Infrastructure Facility.

“There is a pattern around the world where Governments fail to think about the people and the institutions infrastructure developments will serve,” says Bowditch. “Infrastructure is so much more than just a project — it’s about the way the project connects to the infrastructure around it and how the development can best extract the synergies of the precinct and existing infrastructure.

“Good infrastructure comes from good planning. It’s just not possible to deliver good infrastructure in any jurisdiction without good planning. But when you’re developing a master plan, at all times it is essential to be conscious of what the actual problem being solved is.

“The master plan needs to relate back to expressing at project inception, exactly what the customer service outcomes are desired from the investment. It’s really off the back of those outcomes that the design and project specifications should flow.”

Outcome-based procurement and evidence based design are becoming more prevalent worldwide, as Government agencies work under increased pressure to deliver valuable infrastructure on a constrained budget.

There’s still significant room for improvement though and both need to be more commonly used tools in the public sector arsenal, Bowditch says.

“What we’ve seen around the world with Governments is that they will

Garry Bowditch

Top, an artist’s impression of the Avon river precinct; the Bus interchange.

often be very headstrong about completing a project. The real issue though is that they will have rushed the initial project inception element and devised a solution that may not be the best option and could well have been achieved in a more cost-effective manner.”

A more open public consultation process and better signalling from Government around their intentions and the desired outcomes from assets, are the first steps in working to address widespread issues with infrastructure development.

“In the early stages of project development, transparency around de-

fining the problem at hand and the analytical tools available can be used together to better inform the public why Government’s have chosen the particular intervention they have.

“These are fundamental basic issues that seem to be systematically overlooked by many Governments around the world. There is a significant lack of transparency particularly around project selection choice, and that can be very distortionary to getting good decision-making.

“Too often these choices become subject to political pork-barrelling instead of a proper assessment of what is good for the nation. “

Building communities

For more than 80 years we’ve earned our stripes building the spine of New Zealand’s roading network.

Today our teams are also making their mark with advanced construction and roading projects across Australia and the South Pacific.

With current projects like State Highway 16 (pictured) strengthening links between Auckland and its West, and the Tauranga Eastern Link connecting the city with its region, we’re not just building roads, we’re helping builder stronger communities.

Phone 09 831 0107 www.fultonhogan.com

D8

nzherald.co.nz | The New Zealand Herald | Tuesday, August 19, 2014

Infrastructure

Watershed for longstanding firm “F

Fran O’Sullivan

amily’’ pride was writ large on the faces of the 72 current and former Fulton Hogan directors, management and staff when they turned up to Auckland’s Langham hotel earlier this month to see the company’s late founders honoured with their admission to the NZ Business Hall of Fame.

It can’t have been easy launching a roading company in the Great Depression. But Jules Fulton and Bob Hogan took the plunge and formed their own quarrying and asphalt surfacing firm in 1933.

Eight decades on the company that Fulton and Hogan started has cemented its place in NZ’s infrastructure industry with a $3.5 billion turnover and 5550 staff working on civil infrastructure projects throughout New Zealand, Australia and the Pacific Islands.

Robert Jones, who is Fulton Hogan’s chief operating officer for infrastructure within New Zealand, says it was really “quite amazing” to see the founders honoured.

Jones had been attracted by Fulton Hogan’s “family values” when he left his role heading up Leighton NZ’s operations.

“When I first came here 10 years ago to build the Northern Gateway we were in a joint venture with Fulton Hogan,” he recalls. “I saw it was a company that was growing and learning to operate in the big company space but whose family values were obvious and when I decided it was time to move on and Fulton Hogan approached me, I felt our values aligned and I’ve certainly not regretted it.”

Jones feels Fulton Hogan is now at a “bit of a watershed”.

He says the company is looking to expand its operations through controlled growth without taking a major step away from core business. It’s been a player in Australia for some time, but is now looking further overseas and is pursuing a contract, in a joint venture with Fulton Hogan’s Australian arm, to upgrade an airport in Brunei which is being funded by the Sultan.

“We’ve not been that far afield before,” says Jones. “We’re testing the water for where we want to go next.”

The company has prospered as a

Robert Jones likes the ethos of Fulton Hogan — a firm with family values that is facing the future positively.

member of the Scirt Alliance rebuilding Christchurch’s horizontal infrastructure, and nationwide is engaged on a number of roading and water infrastructure projects.

Importantly, Fulton Hogan is also diversifying its business.

Jones is clear it is not totally reliant on the roading space which makes sense given National’s Roads of National Significance programme is expected to be curtailed if the Government changes next month. “We’ve made quite an effort to develop our skills into the rail and water irrigation sectors over the last 18 months.”

He says that means a different focus as bidding and designing projects in the irrigation space is a long game. It can take 18 months or more before the project is lined up and the first holes are dug. But having a major contracting company sitting alongside the farmers gives banks the confidence to lend money.

The Central Plains water irrigation scheme is now well under way. It’s another string to our bow,” says Jones.

In the rail sector, the company has formed a joint venture with John Holland of Australia which supplies the rail expertise for work done for KiwiRail.

Fulton Hogan ● Established in 1933 in the Great Depression by Jules Fulton and Bob Hogan. ● The non-listed public company employs about 5500 people many of whom are shareholders. ● The company is vertically integrated across engineering and construction, owning and managing quarries, producing asphalt and emulsions and high quality pre-casting services. ● It is very active in the re-build of Christchurch through its participation in the SCIRT alliance and in Auckland where Fulton Hogan employs around 1000 people. Its current involvements include a number of road maintenance contracts such as Lincoln Road, Te-Atatu Road and State Highway 16 Causeway piling and ground improvements. ● A number of water projects on the go at Puketutu Island Biosolids, BnR Earthworks and the Hunua 4 Watermain.

Jones says Fulton Hogan was recently awarded a contract for putting base isolation into the Christchurch Art Gallery; in essence separating the building from its current foundations and putting new ones in.

“We’ve taken our civil capabilities and teamed up with an international company that has done this throughout the world,” he says.

There is strong commercial potential to use this approach as the Government and councils move to strengthen their building stock to meet new earthquake standards. Sometimes there is a tendency to jump to the last resort quickly, when there is actually work that could be done to bring them up to standard in a cost-effective way.”

In the public private partnership (PPP) space, Fulton Hogan has found it difficult to play in more than one PPP at a time. “The cost of bidding is enormous,” says Jones. “You look at the international players. We have to be quite selective and truly believe if we go into it we have a chance of winning and not just be there to make up the numbers.”

Jones says the company gave the Transmission Gully bid a good shot and has learnt from that the necessity of teaming up with an international

player (‘who has done it all before”) if it has another go at a very big contract.

He picks that there will be an increased trend for European infrastructure players — who can get much better margins on funding from the European financing industry – to join alliances bidding for major projects here. “We’ve seen real interest on the Puhoi to Warkworth highway project with three Spanish players all intending to team with locals and to bid that project. All are experienced in PPP market and are operating in Australia and see NZ as a natural extension of that market.”

Across the Tasman there is increased bundling of major projects. Jones believes the Waikato Expressway (Hamilton Bypass) with an estimated $800 million cost will also attract international interest.

But back to those family values that attracted Jones.

He says they come to the fore during the inevitable conflicts that can emerge in lengthy projects.

“We work through issues and resolve them without having to resort to legal recourse. We might be 5500-strong with a $3.5 billion turnover but the company is still run along the lines of a family company.”

Spring start for long-awaited roadworks Work starts this spring on the country’s biggest new infrastructure job.

The $1 billion Transmission Gully got final sign-off on July 29 when a statement was issued by several of the parties involved.

But the real job of creating the country’s biggest new motorway in some of New Zealand’s most challenging terrain will begin when the ground dries out enough in late spring or early summer.

Then the big diggers and scrapers needed for earthworks preparation will be brought to the steep, hilly sites and the real job will get under way.

“Preparatory work will commence in the third quarter of 2014 and at its peak the construction phase will employ approximately 700 people,” according to information at www.tg.co.nz.

The public-private partnership project is for the financing, design and construction of a 27km express standard motorway north of Wellington, with a 25-year operations and maintenance contract.

The new motorway will bypass the existing State Highway 1 coastal route and aims to increase road safety and improve network reliability with high levels of seismic resilience. It is also picked to be a catalyst for economic growth in the Wellington region.

Transmission Gully ● 27km of road works on a

greenfields site, to build a fourlane expressway ● Three grade-separated interchanges ● 30 bridges with a total combined length of 1.17km ● One 270m bridge at Cannons Creek ● Annual average daily traffic: 22,300 vehicles north of SH58 and 20,000 vehicles south of SH58 in 2026 ● Design accommodates 11 geological terrains and must ensure seismic resilience ● Project highly complex, with difficult and steep terrain requiring large-scale earthworks ● Construction will begin late this year ● Motorway scheduled to open to traffic in April, 2020 ● 25-year operations and maintenance phase [Source: www.tg.co.nz] The work will be carried out by the Wellington Gateway Partnership and the project is New Zealand’s first state highway to be delivered as a PPP.

Under that arrangement, the partnership will finance, design and build the motorway, and then operate and maintain it from 2020 till 2045.

Leighton Contractors is the specialpurpose vehicle manager for the partnership, has a majority role in the design and construct subcontract with JV partner HEB Construction, and will perform all the operations and maintenance subcontract.

Equity investors in the project are the Leighton Group, InfraRed and ACC. BTMU is financial advisor with funding from local and international banks.

Leighton Contractors is a whollyowned subsidiary of Leighton

Holdings, one of Australia’s biggest contracting and project development groups, with more than $13 billion of work on and employing about 14,000 people here, in Australia, Papua New Guinea and Africa, working in the infrastructure, telecommunications, civil construction, industrial, energy, health and services sectors.

HEB Construction is one of the biggest privately-owned civil construction companies in New Zealand, employing more than 700 people. It was founded about 35 years ago.

HEB says it “brings a range of essential services to the Transmission Gully project such as structures, roading, drainage, landscaping, temporary

traffic management, surfacing and precast concrete element capability”.

Its current roading projects include Wellington’s Memorial Park Alliance, the Waikato Expressway’s Cambridge Section, Tauranga Eastern Link joint venture, and Auckland’s Greville Road Interchange.

InfraRed Capital Partners describes itself as “a leading global investment manager focused on infrastructure and real estate, creating real value for its investors, project partners, communities and end users’’. It manages US$7 billion of equity capital in specialist funds investing in infrastructure and real estate which it develops and operates.

Infrared says it has “invested in over 50 development projects with capital expenditure of about US$25 billion. Its 100 staff are deployed across offices in London, Hong Kong, New York, Paris and Sydney.’’

The Bank of Tokyo-Mitsubishi UFJ is Japan's biggest bank and one of the world's largest, with offices in 40 countries. It has been in New Zealand since 1972.

ACC is an equity and debt partner in the Wellington Gateway Partnership and a major institutional investor in a range of businesses throughout New Zealand, many listed on the NZX.

D9

nzherald.co.nz | The New Zealand Herald | Tuesday, August 19, 2014

Infrastructure

Making a big contribution Bill Bennett talks to McConnell Dowell CEO about the firm’s major undertakings

NZ and Pacific Projects

M

● Christchurch infrastructure

cConnell Dowell managing director Roger McRae says his firm has played a role in three of New Zealand’s largest infrastructure projects: the $500 million Te Mihi geothermal power plant for Contact Energy; the $1.4 billion Waterview Connection project and the Christchurch horizontal infrastructure rebuild.

Last week Deputy Prime Minister Bill English opened the Te Mihi plant near Taupo. It is New Zealand’s largest geothermal station capable of generating 166 MW of renewable energy.

Eventually it will replace the ageing Wairakei Power Station.

McRae says the original plan was to build two generating plants, but that is on hold as there is not enough demand to justify the investment at present.

Te Mihi was built as a EPC (engineering, procurement and construction) project, this means the consortium building the plant had to hand over a functioning power station to the client, Contact Energy.

McRae says it was completed in a tight time-frame given the complexity of the job.

Though the handover took place in May, McConnell Dowell still has maintenance obligations at the site.

The Waterview Connection project is being delivered by an alliance of seven partners including McConnell Dowell and Fletcher Construction for the New Zealand Transport Agency (NZTA). Officially

rebuild (SCIRT) Waterview connection — 2 x 3-lane tunnels. 2.4kms long. A NZ first and the largest tunnel boring machine ever in Australasia — $1.4b ● Lower Hatea River crossing Whangarei. First bascule road bridge built in NZ in the last 50 years ● Rosedale Ocean Outfall Auckland — 3km tunnel and marine outfall for Nth Shore City Council — $105m ● Hobson Bay Tunnel, Auckland.

3km long tunnel — $120m ● Mercer to Longswamp Motorway Waikato ● Te Mihi Geothermal Power Station — for Contact Energy, $500m ● Cook Islands Port Authority’s $24m Avatiu Port Redevelopment ● KiwiRail’s $9m Bridge 298 Replacement ●

Te Mihi, contact Energy's newest geothermal power station in Wairakei.

In recent years there has been a trend towards ever bigger projects.

They’re not just getting bigger, they are also more complex.

Roger McRae

the project is due to complete in March 2017, McRae says it’s on target to open before the end of 2016.

With a value of $1.3 to $1.4 billion it is the largest road project ever undertaken by the NZTA.

“The size is a sign of the times, in recent years there has been a trend towards ever bigger projects.

They’re not just getting bigger, they are also more complex.

“We see that as one of our advantages, McConnell Dowell is able to deliver large-scale projects around the world. We have the relationships with technology providers, de-

signers and contractors worldwide and can bring their expertise to our projects.”

The business certainly has scale.

Globally McConnell Dowell has revenues of A$3 billion and 800 employees. New Zealand makes up about 1700 of that and accounts for $500 million.

McConnell Dowell was one of the five founding members of Scirt, the Stronger Christchurch Infrastructure Rebuild Team which is responsible for rebuilding the city’s horizontal infrastructure — roads and water networks — that was damaged in the 2010 and 2011 earthquakes.

The team was set up after the first earthquake and its role was

escalated after the 2011 earthquake.

McRae says Scirt has been one of the city’s success stories and the alliance of engineering and construction companies has worked well.

He says the team has done a good job mobilising resources. One of the key features of Scirt is that the infrastructure rebuilding work is moving ahead even while the networks are still being designed.

Today the project is halfway to completion.

McConnell Dowell constructs large integrated transport network projects safely connecting communities and supporting the economic and social development of New Zealand.

Te Matau a Pohe bridge for Whangarei District Council. Awards include: Winner - (McConnell Dowell | Transfield Services JV) NZCF & Roading NZ Hirepool Awards 2014 Supreme Award - Master Builders Commercial Projects Awards 2014 Judges’ comment: “Creative procurement, inspired design, and superbly managed construction.”

www.mcconnelldowell.com

D10

nzherald.co.nz | The New Zealand Herald | Tuesday, August 19, 2014

Infrastructure

Gearing up for top prospects F

letcher Building’s Graham Darlow is optimistic about the New Zealand blue chip’s prospects in nailing a number of the major construction projects up for tender in coming months.

Darlow, who is chief executive of Fletcher’s construction business, released a list of the company’s top prospects to the Herald (see adjoining table).

Fletchers already has an order book worth more than $2 billion — in essence work that has been won but has yet to be built.

“It’s a long time since Fletcher Construction had so much opportunity,” he says. “It’s a great industry to be in at the moment.”

Top of Fletcher’s prospect list is the NZ International Convention Centre that SkyCity plans in Auckland. “We are really excited about this project because its the first really decent sized vertically constructed project

that’s been had in Auckland for a long time,” Darlow says.

“I know that SkyCity are taking a little bit of time to make sure everything’s right before it goes to market.

But they’re telling us before Christmas we’ll be in a process for that.

“There's some international competition for that but we’ll be going pretty hard for it being locals.”

SKyCity recently revealed it had dramatically increased the scope of its planned Auckland convention centre, announcing plans for a five star hotel and a 50 per cent increase in spending on the new project pushing the cost up from $402 million to more than $500 million.

Next on Darlow’s list is the redevelopment of the Auckland Downtown Centre site owned by Precinct Properties. This includes a tunnel so that the city rail service can extend beyond Britomart.

Then there is the Central City Rail

Graham Darlow

Link itself — a 3.5 km double track tunnel — extending from Britomart to the Mt Eden railway station. Says Darlow: “That’s a really good engineering project we’ll be chasing hard.”

Other potential projects include the new Christchurch Hospital which

is attracting strong international competition and the PPP for the PuhoiWarkworth motorway which has to pass through “really tricky geology and geography and is a quite a tough job from an engineering sense.”

Darlow believes the uplift for the sector is well within the NZ construction industry’s scope as it has been under capacity for a long time.

“We’ve already had one recruiting trip to the UK in the early 2000s when we recruited some fantastic people who are still with us now — engineers, quantity surveyors and planners.

“They’re very, very good and proven to be really valuable employees since they arrived 10 years ago.

“We are anticipating the need to travel overseas again.”

He notes that firms may need to team up with others — including international players — to build the mega-projects.

Alice’s adventures underground Anne Gibson

Alice, the world’s 10th largest tunnel boring machine, is due to finish half her journey next month. Steve Mutton, NZ Transport Agency’s acting highways manager, says the first tunnel will be finished soon so the massive machine can begin the second tunnel.

“On her arrival at Waterview in September, Alice will be turned around over the following three months and re-launched on her southbound journey early next year, building the second (northbound) tunnel as she goes,” NZTA says.

On August 4, John Burden, project manager for the Well-Connected Alliance, gave an update on progress of the tunnel boring machine. “The TBM is about 1500m or two-thirds of the way to Waterview and approximately 750 tunnel lining rings in place.”

The agency says construction of the two tunnels will be finished at the end of next year, when they will be fitted out with the services needed to operate them.

“These include ventilation fans, communication systems and fire protection. Sixteen cross passages — one every 150m — connecting the twin tunnels will also be built. The entire project, which includes the motorway connections either end of the tunnels, is due to be opened in early 2017.”

The Waterview Connection completes Auckland’s Western Ring Route.

The alternative to the SH1 Southern and

The machine called Alice in the Waterview Tunnel.

Northern Motorways will be 47km long between Albany and Manukau. The Western Ring Route will improve city and regional transport connections, and is identified by the Government as a Road of National Significance because of its importance to New Zealand’s economy.

The Waterview Connection project

is being delivered by the WellConnected Alliance which includes the Transport Agency, Fletcher Construction, McConnell Dowell, Parsons Brinckerhoff, Beca Infrastructure, Tonkin & Taylor and Japanese construction company Obayashi Corporation. Suballiance partners are Auckland-based Wilson Tunnelling and the Spanish

tunnel controls specialists SICE. Herald readers asked if there were any plans to open at least the first tunnel once it was finished, rather than waiting for both.

But they were told that as much as NZTA would like to be able to deliver some of the benefits of the Waterview Connection project early, it was not possible for a number of reasons, including that ramps and connections between the Northwestern and Southwestern motorways, and other improvements along the Northwestern Motorway, need to be completed as part of the huge job.

Rory Bishop, construction manager of McConnell Dowell Constructors in the Well-Connected Alliance says speed underground depends on many different factors including the density of the ground being dug, sharpness of the teeth on the tunnel borer or whether equipment such as cables needed to be changed.

McConnell Dowell has a $400 million share of the job and Gwyn Jones, McConnell Dowell’s Melbournebased tunnel and underground project manager, says Alice is fast compared to the far smaller tunnel-boring machines that built the new Singapore Downtown Line 2 MRT where he has worked.

Progress on that A$3.6 billion, 16kmlong, 6.6m diameter train tunnel was around only 140m/month in extremely hard conditions but even in soft conditions, only 250m/month.

City Rail Link buy-up over half complete Auckland Transport has spent $55 million on 38 properties it has bought for its $2.4 billion City Rail Link, forging ahead to secure the route in the first phase of the ambitious scheme.

Carol Greensmith, Auckland Transport’s City Rail Link communications manager, says that is more than 50 per cent of the total needed.

“We’re ahead of schedule in terms of our purchases and bought a significant proportion of what’s needed in the Eden Terrace area.

“Negotiations are going on for the Life Church,” she says of one of the biggest and most complex purchases for the property on Mt Eden Rd. No new land is needed around the Mt Eden Station. “We’re upgrading that within the same footprint so we don’t need to buy any more land there,” she said.

In the first week of August, Greensmith gave an update of the purchases, saying three new property purchases had been settled in the past few weeks.

By May, the council controlled

organisation had bought 35 of the 73 surface properties it then planned to buy, although an announcement was made on August 1 that the scheme had changed and no Newton underground station would be built so the number of properties to buy had been cut by six, down to 67.

Mayor Len Brown says that change will reduce costs by 20 per cent, from $2.86 billion to $2.4 billion.

“A significant part of that cost reduction is an Auckland Transport decision to redevelop the existing Mt Eden Station and connect it to the CRL rather than build a new underground station at Newton.

“That design change will save more than $150 million, improve the reliability and journey time of train services, minimise construction disruption and reduce property purchase requirements. The other significant saving is a decision that additional electric trains will not be required as part of the core CRL project, saving more than $330 million.”

As of June, Auckland Transport

had bought about $45 million of inner-city property on the designated CRL route. About 42 property owners were in “active negotiation” with Auckland Transport.

The organisation is now also buying about 200 subterranean properties: because New Zealand property law stipulates property ownership goes all the way to the centre of the earth, purchases are necessary for the route to be secured and the project to go ahead. New Zealand law contrasts with that of some European countries where ownership extends only metres below ground.

Greensmith says the lines will run under private properties and anywhere the tunnels would be dug below, purchases had to be made by Auckland Transport.

But often only a portion of any one property might be needed.

Valuers calculate the amount needed to secure these purchases, she says.

“Acquisitions will be based on the compensation provisions of the Public Works Act,” says Auckland Trans-

port. “Compensation is based on before and after assessment. Compensation generally relates to the degree to which the subterranean purchase impacts on surface use.”

Owners' reasonable valuation and legal costs will be reimbursed.

The subterranean properties involve about 88 negotiations on about 200 titles or pieces of land.

Greensmith says Auckland Transport might sell some of the properties it has bought but no longer needed as a result of the Newton station being removed from the plans.

“The question is now if we’ve bought any we don’t need around Newton. We might dispose of one or two,” she said. Subterranean purchases were now due to start next year.

CRL is now at design phase on its most northern or waterfront sections.

“We went out for expressions of interest for a design tender for the Britomart area, out under lower Queen St, lower Albert St and Customs St. They close on August 6,” Greensmith said.

Fletcher projects Top projects – August 2014 ● Fletcher EQR. Total Value of Repairs $2.5 billion — Contract with the Earthquake Commission to manage the repair of 70,000 homes plus install heat pumps (17,000) and do emergency repairs (47,000). ● SCIRT Fletcher Share $500 million — Fletcher is a participant in the Alliance to repair the horizontal infrastructure in Christchurch along with McConnell Dowell, Downer, Fulton Hogan and City Care. The owner participants are Christchurch City Council, CERA and the NZTA. ● Wiri Prison PPP Fletcher Share $275 million — A design and construct project for the 850 bed Wiri Men’s Prison for the Secure Future Consortium who has a 25 year PPP contract with the Department of Corrections. ● MacKays to Peka Peka Fletcher Share $400 million — An Alliance contract with the NZTA to plan, consent, design and build a 23km long expressway in the Kapiti Coast with partners Beca and Higgins. ● South Pacific Games – PNG Fletcher Share $120 million — Construction of the aquatic centre and the main athletics stadium for the 2015 South Pacific Games. ● Waterview Tunnel Fletcher Share $430 million — ● A $1.3 billion Alliance contract with NZTA to build the Waterview Connection including a 2.5km long twin tube, 3 lane (13.9m diameter) tunnels.

Partners include Beca, Tonkin & Taylor, Parson Brinkerhoff, Obayashi and McDonnell Dowell. ● Fonterra Head Office Fletcher Share $90 million — development with Goodman to design and build the new head office for Fonterra in Wynyard Quarter. ● Auckland University Science Block Fletcher Share $140 million — Demolition, upgrading and construction of the new science block for Auckland University. ● Rangiriri Bypass Fletcher Share $80 million — Contract with NZTA to design and construct the bypass of Rangiriri on the Waikato Expressway. ● Justice and Emergency Services Precinct $240 million — Construction of the first anchor project in Christchurch as part of the Canterbury Rebuild.

Top prospects - August 2014 ● New Zealand International Convention Centre — Construction of 3500-seat convention centre in Auckland adjoining SkyCity. ● Downtown Development — Redevelopment of the Downtown Centre in Auckland by Precinct Properties. ● Central Rail Link — Construction of electrified, double-track rail tunnel underneath Auckland’s city centre running approximately 3.5km. ● Christchurch Hospital — Redevelopment of the Christchurch Hospital for the Canterbury District Health Board. ● Puhoi to Warkworth — Construction of a 18.5km four lane motorway between Puhoi and Warkworth for the NZTA. ● Huntly Bypass — Construction of a new 15.2km of four lane expressway between Rangiriri and Taupiri as part of the Waikato Expressway for the NZTA. ● Hamilton Bypass — Construction of 21.8km of four lane expressway between Ngaruawahia and Tamahere bypassing Hamilton for the NZTA. ● Mangere Treatment Plant Upgrade — Major upgrade of Watercare’s Mangere Sewerage Treatment Plant to increase capacity. ● Auckland Motorway Widening Projects — widening of several sections of the Auckland motorway network to relieve congestion for the NZTA.

D11

nzherald.co.nz | The New Zealand Herald | Tuesday, August 19, 2014

Infrastructure

A billion-dollar business H

Bill Bennett

awkins Group CEO Geoff Hunt expects to see revenues of around $700 million this year and says the figure should hit $1 billion within three years. That’s on the back of a market rich with opportunity, with $1.7 billion worth of construction projects in Auckland and Christchurch out for bids between now and year end.

Hawkins Group started life as a construction business and today Hawkins Construction accounts for the bulk of group revenue and is NZ’s second largest construction firm behind Fletcher.

Hunt says Hawkins deliberately focuses on maintaining a balanced work portfolio with a mix of small, medium and large projects. The smaller projects are largely in provincial New Zealand, particularly in the central North Island.

The construction division’s more complex projects include Christchurch Airport, earthquake damage remediation at Canterbury University, Middlemore Hospital and Waikato Hospital. Hawkins will shortly begin building the new theatre for the Auckland Theatre Company and is currently constructing the $60 million Gemini data centre for Spark (formerly Telecom) at Takanini.

Among standout projects are two state schools at Hobsonville Point.

Hobsonville Point Primary and Hobsonville Point Secondary schools are Public Private Partnerships (PPPs) between Learning Infrastructure Partners (LIP) and the Ministry of Education. Hawkins is part of Learning Infrastructure Partners along with HRL Morrison and PFM Project Facilities

Geoff Hunt (above).

Hawkins projects include the MIT campus at Manukau and the Wanganui waste water plant (left).

Management. The PPP is structured so the school buildings are constructed, maintained and managed separately from the school management.

Hunt says this means the teaching staff and school board can focus on educational goals, rather than the dayto-day management of the site. LIP is paid a monthly lease covering all costs, including energy, on the basis of specified outputs. The deal is for 25 years; after that time the buildings will be handed over to the schools.

Hunt says one of the advantages of the PPP is the way it changes building economics. He says normally, clients look to contractors to focus on the lowest possible construction cost. This might make short-term sense, but generally leads to the highest costs when spread over the entire life of a building.

If you’re looking for a smart team, MWH Global provides award winning services and systems for your water, energy, natural resource and transportation infrastructure challenges. With some of the sharpest minds in the business, MWH works with clients to deliver costeffective solutions to meet the needs of today and beyond.

CORE SERVICES: PROGRAMME MANAGEMENT AND CONSULTING ENGINEERING AND DESIGN PLANNING AND ENVIRONMENTAL MANAGEMENT CONSTRUCTION SUPERVISION

SMART.Results

When the builder has to maintain the site for an extended period, there’s an incentive to ensure a long life and that means designing from the ground up.

When the builder has to maintain the site for an extended period, there’s an incentive to ensure a long life and that means designing from the ground up. Among other things, the Hobsonville Point schools have exceptional energy efficiency. The design also makes it easy to quickly and cheaply replace things that tend to wear out, such as carpets.

Hunt says the focus is on delivering long-term value and the schools are full of the latest technology. The Hobsonville Point schools have proved so successful Hawkins is on the short list for a $200 million project to build four more schools — the Aranui community school and Rolleston secondary school in greater Christchurch, Wakatipu High School in Queenstown and a new school in Auckland that has yet to be announced.

Hawkins Infrastructure is about to wrap up work electrifying Auckland’s rail network and is now looking to work on the city rail expansion. The division has built the Grafton Gully cycleway running alongside the motorway and is responsible for the land remediation on the open spaces in Auckland’s Wynyard Quarter.

There’s a strong focus on water projects including the Wanganui Waste Water Treatment Plant and Hawkins is the preferred bidder as a joint venture partner for the Ruataniwha Water Storage project in Hawke’s Bay. Internationally Hawkins has worked on a $70 million flyover in Port Moresby, Papua New Guinea that is due to open next year. In Fiji Hawkins has worked on a huge modernisation project at Nandi airport.

D12

nzherald.co.nz | The New Zealand Herald | Tuesday, August 19, 2014

Infrastructure

Mobile data — viva the revolution E

David Havercroft

ach year Spark New Zealand invests more than $400 million on building, expanding and strengthening our networks — representing one of NZ’s largest ongoing private sector investments in infrastructure.

We do this to stay ahead of the increasing demands placed on the Spark Network, especially as home, business and mobile data traffic is growing rapidly — demands driven by far-reaching changes in the way we live our lives using technology every day.

I was lucky enough to see The Boss at Mt Smart in Auckland earlier this year. That Bruce Springsteen gig represented the first time at a major event in New Zealand our network had more data being uploaded than downloaded – previously it was mostly about downloads. With more and more of our customers using the likes of Snapchat, Instagram, Twitter and Facebook to upload photos and videos to share with friends and family, it’s having a big impact on our thinking as we configure our network to ensure the best possible experience.

The trend to more mobile data is a universal one. Global mobile data traffic is almost doubling every year and is now measured in exabytes – that’s a billion gigabytes. Last year global mobile data alone reached nearly 18 exabytes; compare that to the year 2000 when the entire internet represented just one exabyte, of which mobile would have been a tiny fraction. It’s mind-boggling.

A typical smartphone generates 29 times more data traffic than a traditional mobile feature phone. Here in New Zealand, smartphones already make up around 60 per cent of the

The trend to more mobile data is a universal one. Global mobile data traffic is almost doubling every year.

David Havercroft

market, and this percentage will continue to grow. Our customers are installing more great apps to make the most of their smartphones – such as music streaming service Spotify, which has seen a four-fold increase in takeup since we included Spotify Premium on our selected plans earlier this year.

But with the demand for data comes the demand for speed. Everyone’s patience is now tested with any type of buffering. That’s why the move to 4G technology by all New Zealand’s mobile network operators is so important.

4G is many times faster than 3G, with customers experiencing speeds of up to 150 megabits per second. And technology continues to push the envelope: in test conditions we recently set a new

Spark New Zealand record of 293.38 megabits per second download speed using a new technology called “carrier aggregation’’.

We are investing today to stay ahead tomorrow. Spark New Zealand paid $158 million to secure the largest block in the Government’s recent auction of the 700 megahertz (MHz) spectrum (the old analogue TV spectrum). This is “beachfront property” for the spectrum landscape and will provide significant benefits to customers in terms of the potential speed and capacity of Spark’s 4G mobile network.

Because we have acquired more spectrum bandwidth, the Spark Network over 700 MHz will run faster, and be able to carry more data traffic, than

our competitors’ network on a like-forlike basis. You can think of it as a busy motorway where we will have extra lanes to better manage the speed and flow of traffic.

Because the cellular signal can cover a much larger area than most other spectrum, 700 MHz is especially important for less densely populated and rural regions of the country. It puts Spark New Zealand in a prime position to deliver a very high-performance 4G mobile network for the whole country.

Our country is beautiful, but it’s also elongated, hilly, wet and sparsely populated – which all mean the economics of mobile infrastructure investment are very tight to give New Zealand what it needs, at prices that are

affordable to customers. Studies have shown that despite these challenges, New Zealand is well served when it comes to mobile networks.

Catering for the growth in demand, while delivering the service New Zealanders expect, is a huge challenge — given the prices we charge for services continues to reduce while the value we deliver for customers increases.

What a customer gets on our entrylevel Ultra Mobile $49 plan today would have cost $542 per month in 2009 – a massive decrease in just five years. That’s great news for our customers, but part of the ongoing challenge for our industry when it comes to financing ongoing investment in our networks.

The mobile data revolution is just one part of our integrated communications network. Alongside 4G mobile, we are rolling out Ultra Fibre broadband in more places than anyone else, along with more than 1000 WiFi zones nationwide (free for our customers).

We’re building big new data centres, cloud computing services, and partnerships with some of the world’s best technology companies. It’s all linked at the speed of light, thanks to our worldclass optical transport network and globally connected by the Southern Cross Cable.

When you think about this integrated data network you can understand the need to hang-up on the old Telecom name and become Spark New Zealand. The debate about whether New Zealand has good data networks should be over — because we do. It needs to shift to how businesses can unleash their potential by taking advantage of this technology revolution to succeed in the new world. ● David Havercroft is Spark New Zealand’s Chief Operating Officer.

Welcome to your future.

Your business is in the midst of a technology revolution. How you’ll connect with customers tomorrow is almost inconceivable today.

You can achieve anything – if you have a network that delivers on your potential.

The future of 4G mobile data is the 700MHz spectrum and on the Spark Network, you’ll have more of it. You will have access to Ultra Fibre broadband in more places, along with more than 1000 WiFi zones nationwide. And across New Zealand, you have robust connectivity and speed-of-light communications thanks to our world-class optical transport network.

That’s why we’re investing hundreds of millions in ours.

All this to bring you the future, faster.

Of course, what matters most to your business is how you can take best advantage of this integrated network.

That’s why we’re building big new data centres, cloud computing services, and partnerships with some of the world’s best technology companies.

Unleash your potential. sparknz.co.nz

SNZ2230

D13

nzherald.co.nz | The New Zealand Herald | Tuesday, August 19, 2014

Infrastructure

The game changer

Vital role in economic future

Spark’s new offshoot aims to revolutionise how we manage and use data, reports Alexander Speirs

S

park’s new big data venture, Qrious, is setting out to change the game around how New Zealanders manage and use data. It will provide a way for organisations to manage, pool and correlate data to unlock insights that would have previously been difficult or impossible to find.

“There are some big trends changing the way societies operate,” says Spark’s Head of Public Affairs, Conor Roberts.

“The increasing power of analytic tools and increasing information storage capacity are revolutionising the way businesses, government departments and other organisations understand the world around them, “Spark has established Qrious to build expertise in analysing big data and to provide innovative insights into the different kinds of data sets that are out there. New Zealand’s technological expertise and the links we have between businesses, government and other organisations means our country is uniquely placed to take advantage of this new world.’’

Qrious Managing Director Cyrus Facciano spells out the vision for Qrious — as “the go-to place for data analytics for New Zealand.

“We wanted to develop a fully integrated and featured platform which has all the tools and capabilities,” he explains. “Our vision is for the Qrious platform to consolidate all the bit-parts used for working with data and bring them together in one place.

“There are others doing elements of what we do. The likes of Amazon provide a platform with tools, storage and computing power, but you still have to assemble things into something that is useful and fit for purpose. No one has the tightly coupled grouping of capabilities in one package we are bringing to market.

“Whether we export the capabilities within Qrious is up for discussion, but our key focus in on New Zealand and NZ Inc. We want to help domestic businesses unlock value and create valuable intellectual property.”

The service will unlock the potential of data and improve the accessibility to a broader range of users by using a Software-as-a-Service model. Businesses will pay a monthly fee to access the Qrious system, with all their individual information, insights and tools stored online in the cloud.

The Software-as-a-Service model removes many of the impediments previously so restrictive to many businesses. Assembling the processing

power and systems that underpin a proprietary data system starts in the millions of dollars — an impossible prospect for many businesses.

“At the moment most businesses in New Zealand are deriving very little, if any value from their data because of those capital barriers in place,” says Facciano. “The total cost of ownership of our offering is about 50 per cent of a traditional business intelligence implementation. That’s a big part of what we’re trying to achieve — improving the accessibility, then working with businesses to derive new and further value.

“The other major part is macro-level implementations, working with the Government and public sector to address issues in transport, health, even the rural economy. A lot of those larger, more sector-oriented public cases can

If the forum’s recommendations are followed we will see New Zealand lead the world in this space. The potential gains are limitless, including the ability to tackle immediate and real social problems.

More than connected

John Whitehead, chairman Data Futures Forum

The internet has fast become the essential infrastructure of the 21st century. But getting connected is only one element of establishing high quality data infrastructure.

The hardware to store and process the data and the software to analyse and draw value from it are equally important components in the broader data landscape. be addressed at the same time, but run in a very different cadence.’’

Qrious is working with the public sector to open access to a wider pool of data and unlock the value for both public and private sector applications.

Statistics New Zealand maintains an open dialogue with Qrious, while Government continues to formulate its position on creating open and accessible data infrastructure. Says Facciano, “They’ve got interesting data that is useful to other people, whereas today’s method for delivering that data as a product is quite rudimentary. That’s a key concept, effectively establishing a data marketplace for people to trade and drive revenue out of their data.”

With the current constraints on our data infrastructure, particularly the shortage of people trained to work with data, collaboration is an essential part of driving value and innovation.

“Qrious is being set up with the idea that by centralising data and surrounding it with the computing power and analytical tools required to work with it, the community of analytics specialists, data scientists and enthusiasts will be

able to work together to produce more value from that data,’’ says Facciano.

“Collaboration — especially in a market like this where talent is extremely in short supply — is absolutely the best

way to extract the maximum value.

“Qrious will provide the environment conducive to collaboration and offer the opportunity to work on multiple projects at the same time.”

The potential for data to play a significant role in the New Zealand economy has long been recognised by the Government.

The first steps were taken in 2011 with the approval of new principles for managing the data and information held by government departments under the Open Government Data and Information Programme.

The strongest signals of the importance of data were sent at the end of last year, with the establishment of the Data Futures Forum to guide New Zealand’s use of data into the future and establish the necessary infrastructure.

“New Zealand has a real opportunity here. If we can create an ecosystem for data, we can unlock huge value, but to do this we need to treat data as a national asset,” says Data Future Forum Chair John Whitehead.

“The New Zealand Data Futures Forum has come to the conclusion that best solution for any country in navigating the data revolution is to use data at the same time to derive economic, social and personal value.”

The forum brought together thought and industry leaders for a period of six months to articulate possible data futures and explore the opportunities, benefits and risks associated.

“The potential for New Zealand to unlock the value of data driven innovation and build on strong foundations of inclusion, trust and control is unlimited,” Whitehead says.

The key to capitalising on the potential is recognising the inherent value of data and establishing frameworks and policies to exploit it. There is no silver bullet solution to this – rather it is a process which would require co-operation between government and the private sector.

The report says that: “in order to get value from the data we hold collectively, now and into the future, we recommend that in conjunction with businesses and communities, government develop a set of strategies to ensure all of New Zealand is best placed to use and benefit from our data-use ecosystem”.

The foundations for New Zealand’s data infrastructure should be formed on the basis of four driving principles according to the Forum’s recommendations; value, inclusion, trust and control.

“The way this data-use ecosystem works is relatively simple. If people trust how institutions manage data, see benefits for themselves derived from data-sharing, and feel they have some control over how personal data is used, they are likely to support and actively contribute to collaborative data-sharing initiatives. The latent value of data is unlocked.” continued on D22

Training scientists to deal in the new currency continued from D1

recommendations and guiding principles for the development of New Zealand’s data infrastructure.

They see the potential for data to make a material difference in the performance and efficiency of both the public and private sectors.

But the biggest obstacle still to be overcome is the severe lack of talented personnel to drive the new data focused business environment.

Industry has been vocal about New Zealand’s inability to produce top quality personnel capable of working with data.

The majority of our domestic data scientists are trained in-house, with tertiary qualifications only being introduced in the past two years.

Sector-wide there are big shortages says Cyrus Facciano, General Manager of Qrious — Spark’s new spin-off company focused on data and analytics.

“Based on the industry research we’ve done both here and internationally, we estimate that New Zealand will face a shortfall of data scientists by as many as 1200 next year,” he says.

Spark is working to bridge the gap, establishing a data science academy through Qrious to improve access to the training businesses are crying out for.

Opened earlier this year, the academy offers a unique opportunity for aspiring data scientists to learn some of the theoretical background required, while getting hands-on,

Cyrus Facciano

practical experience in forging a pathway into a career in big data.

“The academy is not just the training required to learn the new skills and tools,” says Facciano.

“That only takes about five weeks.

The next 12 weeks are spent working on real cases as part of an internship with a seasoned data scientist.

“Those in the programme will be working on real business problems for real customers and gaining the experience and exposure needed to deliver results.”

The academy is open to all and offers a number of pathways to acceptance, including employer sponsorship, personal entry and sponsorship offered by Qrious themselves.

“There is a cost to attending the academy, training materials and the

like, but we’re very keen to work with government and other parties to work on making this more accessible.”

Facciano says the biggest impediment he sees to drawing large numbers of applicants is the 17 weeks it will take to complete the course.

“To that end we are exploring the potential of doing a one-week exposure course where people can come in and have a look, get a feel for what this is all about.

“That makes it much more accessible to a broader range of people.

“We are anticipating a healthy mix of both students and professionals contemplating a career change.

“This isn’t just a way of generating talent for us, it’s about increasing the talent pool for all of New Zealand.”

D14

nzherald.co.nz | The New Zealand Herald | Tuesday, August 19, 2014

Infrastructure

Alexander Speirs reports on progress on New Zealand’s largest infrastructure build — Christchurch

Recovery on track, says CEO G

rowing impatience characterised the mood in Christchurch earlier this year, with business leaders and the public growing increasingly frustrated at the lack of progress within the central city.

However, Cera (Canterbury Earthquake Recovery Authority) chief executive Roger Sutton says despite the rhetoric, everything is right on track.

“The Metro Sports facility has slipped maybe six months or so behind schedule, but as far as time — in broad terms, we’re about where we expected to be,” he explains. “The big anchor projects now are under way and will start coming out of the ground this year. The worries about the CBD not coming back — I think those have almost entirely dissipated.

“The Christchurch City council still has lots of hard things to do, they’ve got financial issues that they’re going to have to face up to. That’s going to have significant challenges which come with it.”

Christchurch City Council — which is co-funding some anchor projects — has a potential crisis on its balance sheet.

The council faces a funding deficit projected to be as high as $883 million by 2019, according to a report commissioned by mayor Lianne Dalziel.

The final amount required will in a large part come down to the cost of the anchor projects and the continuing infrastructure redevelopment.

As belts continue to be tightened across the region, the anchor projects and the procurement process have come back under the spotlight.

The Convention Centre development drew particular criticism, with only a single interested party vying for the project rights after four of the shortlisted five groups withdrew their applications.

However, Sutton remains confiden the procurement process for the anchor projects is producing the best results for Christchurch.

“We’ve had competitive bids on most projects we’ve got so far … there’s been a lot of competition,” he says. “All of the other projects, we’ve had a very competitive process with lots of people fighting to be a part of it.

“The Convention Centre is a bigger and more complex project, and we actually want to work with a partner who has real expertise in doing that sort of thing. There actually aren’t many who have that level of expertise required to drive a project of this nature.”

The Convention Centre will be

Christchurch is bouncing ahead of New Zealand

4.9%

Growth in economic activity in Canterbury region in year to March 2014 (compared to 4.3 per cent in Auckland, 4.1 per cent nationwide) Source: ANZ Regional Estimates

14870

Net business creation since September 1 2010 (as at March 2014).

Source: IRD

22,559

Number of businesses that have been registered in Canterbury with the IRD since September 1 2010 (as at March 2014).

Source: IRD

7689 As belts are tightened in Canterbury, anchor projects like the Metro sports centre have come under the spotlight.

developed by a consortium formed

by Plenary Conventions, Ngai Tahu Property and Christchurch’s Carter group. The Crown has committed $284 million to the project, including buying the land for the precinct. The next step will be for the consortium to formally enter into a master planning and development phase, where the group will work with the Crown on the detail of the precinct.

Construction is due to begin next year, with the centre open for business in 2017. The venue will be run

by French hospitality giant Accor, which will also be involved in the development.

Minister for Canterbury Earthquake Recovery Gerry Brownlee defends the drawn-out process for selecting the consortium, saying “there is a very good reason for this; we needed to ensure we followed a thorough, fair and considered approach to find the best possible development consortium and operator, and this process is ongoing.

“I’m confident the end result of this work will be a vibrant, world-class Convention Centre Precinct that attracts conference and convention visitors from all over the world, and delivers significant economic bene-

Roger Sutton: in his own words Roger Sutton has no idea what he’ll do when his contract is up. The Canterbury Earthquake Recovery Act expires in April 2016 and it’s not clear what the new governance structure for the rebuild will be.

“I have a five-year contract, and I don’t know what I will do at the end of that five-year contract.

“I may still be involved in Christchurch, or I may decide I need a big holiday somewhere.

“Personally it’s been difficult trying to get yourself out of the detail — getting away from trying to fix people you know who are living in difficult squalid conditions and stay on the big picture; making sure I keep myself well; staying positive with people who haven’t always been happy with

things happening down here.

“It is a hard job. It has been busy.

It is stressful.

“I try and manage myself; while I work long days I try to keep the weekends to myself. I enjoy the outdoors here — that wellness stuff.

I do actually sit down every week and my PA makes me fill out a table of how many times I actually had proper exercise, how many pages of a novel have I read and how many proper interactions with friends have I had.

“That’s to try to ensure that I am making sure I am doing things that I know are fundamentally important to keeping myself well.

“I have to work trying to make sure the rest of my organisation is mindful

fits for the Canterbury region.”

Following the Convention Centre, the last major project left to get under way will be the new Christchurch Stadium — although the success of the temporary AMI Stadium isn’t doing much to force the Government’s hand to pick up the pace.

“That stadium is the last anchor project we need to get going,” says Sutton.

“At the moment we’ve done very little work towards it because other projects are a priority. We’ve had the temporary stadium which is operating extremely well in the interim — I believe the crowds at Crusaders games have been the highest of any of the New Zealand franchises this winter. I think the stadium is for later, not for now.”

Though the major developments have started to turn the corner, there’s still a long way to go before the blueprint for the new CBD is close to being realised.

Cera is approaching the end of its initial five-year mandate, after which the special powers granted to the organisation under the Canterbury Earthquake Recovery Act will expire.

The Finance and Expenditure Committee has tasked Cera with advising

on its proposals for future governance — an important issue for the city that needs to be addressed sooner rather than later.

“What we’ve been asked to do is see what Cera will look like going through to when our special powers cease in 2016. We’re just continuing to think about what functions and how big Cera needs to be post-2016,” explains Sutton.

“The final result need not necessarily be Cera either — it’s a matter of establishing what functions central Government needs to be keeping in Christchurch. We’re doing a lot of work on that and we’ll continue to work with Government agencies and our minister on what that looks like.

“Come 2016 there will still be big anchor projects that aren’t finished.

There will be a whole lot of infrastructure that will still be unfinished.

We’ll be working — with community organisations — with people whose lives have been made more difficult after the earthquakes; there are still a number of significant functions we need to do.”

Progress is being made on developing that solution, but Sutton doesn’t expect preliminary findings will be available for at least six months.

Number of IRD registered businesses in Canterbury that have ceased trading since September 1 2010 (as at March 2014).

Source: IRD

9.1%

Growth in consumer spending in Canterbury in May 2014 compared to the same month a year prior (compared to 8.7 per cent for NZ.) Source: Paymark (which processes 75 per cent of all electronic transactions in NZ)

$71.1m

Value of commercial building consents in May 2014.

(242 per cent higher than the monthly average in the year prior to September 2010)

3.3%

Unemployment rate in Canterbury as at March 2014.

(Compared to 6.2 per cent for NZ)

I have to work trying to make sure the rest of my organisation is mindful that this is a long event. that this is a long event.

“I think I’ve learned lots of lessons, and I’d be happy to share those lessons in another role.

“But I don’t know what I want to do next.

“I want a proper holiday. Be a better father, husband and son when I finish here.” ● Roger Sutton is the chief executive of the Canterbury Earthquake Recovery Authority (Cera)

D15

nzherald.co.nz | The New Zealand Herald | Tuesday, August 19, 2014

Infrastructure

A centre of excellence ¯ NANGA WHARE RU A world-class Convention Centre — funded by the Government to the tune of $284 million — is expected to attract business, events, and conferences to Christchurch and help grow the region’s economic base. The Convention Centre Precinct will have hotel and residential accommodation, food and beverage outlets, retail, office spaces and parking. The centre will be designed from the ground up to be walkable, close to public transport, and provide good access to key transport routes for service vehicles.

Who‘s building it?

Plenary Conventions New Zealand — a consortium of proven international infrastructure firm Plenary Group, and experienced local firms Nga¯i Tahu Property and The Carter Group — has been selected as the preferred consortium for the master-planning and development stage of the project.

Leading international convention centre and hotel operator Accor has been selected as the preferred operator.

The Convention Centre Precinct will be jointly developed by Cera, the Ministry of Business Innovation and Employment, Te Ru¯nanga o Nga¯i Tahu, Christchurch City Council and the private sector. Plenary Conventions NZ has produced a “fly thru’’ and images to demonstrate its vision of what the Convention Centre Precinct might become.

The exact design and layout of the Convention Centre Precinct is still to be finalised but these concept drawings demonstrate the exciting possibilities in front of Christchurch.

Where — in the heart of Christchurch The Convention Centre will be on the block defined by Armagh St, Oxford Terrace, Worcester St, and Colombo St. Gloucester St will become part of the Centre itself, but will allow for retail use and public access.

Connecting the Square, Pua¯ri Pa¯, and ¯ ta¯karo/Avon River, the Te Papa O precinct will meld with daily city life, featuring ground-level shopping and several nearby hotels.

Victoria Square will provide a space (a¯tea) for conference guests to enter and receive a cultural welcome (po¯whiri).

When — open for business in 2017.

The project remains on track for construction to begin in 2015, and for the centre to be open for business in 2017. It will be able to host several events at the same time, starting with space for up to 2000 people, and will complement facilities in Auckland and Queenstown.

Opportunities International conferences bring global business connections to Christchurch. These will help open new markets and foster economic growth.

Pictured: Concept images of the Christchurch Convention Centre and its precinct.

Filling in the doughnut As the rebuild turns its focus to the CBD, more and more businesses are returning to central city positions

F

ollowing the Christchurch earthquakes, substantial numbers of CBD businesses relocated to the peripheral suburbs while the Red Zone cordon remained in effect, sparking concerns that the slow pace would render it a “doughnut city”.

Business leaders and stakeholders have been vocal in their critique of the process to date. NZCID research revealed serious concern from those involved in the rebuild.

Speaking to 71 stakeholders from across local and central Government, as well as industry, it found confidence in the leadership, vision and blueprint for the CBD sliding.

Fears of the rebuilding stalling are becoming less commonplace, as visible evidence of progress in Christchurch, particularly in the central city emerges. The excitement and positivity inherent in the early stages appeared to give way to concern and doubt about whether the CBD would return.

“Everyone is blaming everyone else. The hub will be recreated over 20 years — it is not a sudden build.

Council should have put a moratorium around building the doughnut,” says one respondent.

But as the fourth anniversary of the first major earthquake in Septem-

ber 2010 nears, it’s clear there has been a marked shift away from the disaster recovery and emergency remedial phase to a real focus on the CBD’s future.

“I understand why people could look at the city and say ‘that has been a problem,’’ concedes Warwick Isaacs, Director of the Christchurch Central Development Unit — an entity established within Cera with a mandate to rebuild the CBD. “However I don’t for one moment accept that we’re going to have a doughnut city. I think that myth has been debunked now. A move back into the central city was always going to take more time because these buildings take longer than some of the others to develop, design and then find tenants for.”

Isaacs believes the development schedule has enabled businesses whose needs were previously not best met with central city sites to develop more “natural fits”.

“What we’ve found is that the central city would never meet all the requirements all of the tenants across the whole city have,” he says. “You need a range of office blocks, not just A-Grade tenancies. I think it has just been a matter of people seeing an opportunity and grabbing it — and good on them for that, we need as

Clearing the way Warwick Isaacs’ (pictured) role in the Christchurch Rebuild began the day after the February 2011 earthquake, when he led a Civil Defence team in the devastated city.

He donned his hard hat again taking responsibility for Cera’s deconstruction programme in the CBD. The programme is said to have set new international benchmarks for the speed achieved clearing the way for recovery. But the rebuild has been problematic. many businesses back on their feet as possible. It really isn’t an impediment to the central city.”

“As the central city continues to develop over time, I fully expect there will be a movement of some of the tenants currently in the outer rim of the so-called doughnut. The commercial uptake in the central city is certainly accelerating in a way, there’s no question about that now.”

Though Cera Chief Executive Roger Sutton would prefer to see as much of the business community as possible relocate to the new city

centre, the reality is many will now remain in their new homes on the outskirts of Christchurch.

“Some guys who were in the CBD and went to the suburbs are going to stay out there and there’s no point in fighting that,” says Sutton. “Most of the major tenants are returning to the core of the CBD or those areas around the periphery, which is great.”

Getting the commercial sector excited about the opportunities that the new look city will provide has been a major part of that process says Isaacs.

“The one I perhaps didn’t fully understand was the need to communicate the same belief that we were going to deliver what was said we would. That was never a question in my mind, but we had to tell that story and give confidence to the commercial sector that this wouldn’t be a promise that isn’t delivered on.”

Fundamental to that story has been the development of the anchor projects – the set of major infrastructural developments being led by the Crown and Christchurch City Council.

These projects will lay the foundations for the city, framing the CBD for future development and attracting people back.

“Most of the anchor projects start coming out of the ground this year and I’m proud of the fact the we have got on with building some of those gutsy developments,” said Isaacs.

The pace with which the developments have moved along has drawn widespread critique from those who want to get in and get on with it, but Isaacs remains confident that the process followed will produce the best outcomes for the future of Christchurch.

“Some of the areas for these large continued on D16

D16

nzherald.co.nz | The New Zealand Herald | Tuesday, August 19, 2014

infrastructure

The opportunities of a lifetime F

or Craig Price it has been all about dealing with the consequences and effects of the earthquakes while striving to draw positives for the city of Christchurch.

“We’re not looking past the tragedy.

None of us are, but it’s happened — so now it’s our responsibility as business leaders to make sure that we are working to produce the best outcomes for Christchurch, says the South Island general manager for the NZ-based engineering consultancy.

Price has led Beca’s South Island team throughout the rebuild.

“From a business point of view, there were multiple challenges. During the initial periods of the most disruption, our clients wanted and needed our support while at the same time we are trying to manage our business continuity. With all of the infrastructure that goes alongside running a business of our size, getting us back in a state to be able to help those most in need was the top priority — but a huge job in itself.”

Prior to the earthquake, Beca Christchurch was based out of the PWC Tower downtown, right in the heart of

The demand Christchurch’s rebuild has placed on engineering services has seen businesses flock to town. Beca’s Craig Price tells Alexander Speirs the consultancy has faced substantial challenges and emerged a stronger, more robust firm for it The dynamic nature of the market, and I’m not talking about the earth moving, has been one of the biggest challenges down here.

Craig Price

the red zone. “We were shaken out of that building and have since set up shop in a number of locations. Like a lot of the city and the communities, the earthquake really galvanised people into action and knitted them together; there was a real camaraderie.

“I can recall once we found a motel and set up a headquarters of sorts, two

packed station wagons arrived from Auckland — full of laptops, hard hats, safety boots, some stationery and all those sorts of things just to get us up and running. The support we were able to derive through that internal network was certainly something that was important to us.

“For the first nine months, we were in hotels and motels, portacoms, even a Transpower sub-station. It was all about improvising and making the best of the situation,” he recalls. “ Christchurch City Council granted us permission to place four portacoms at a waste water treatment plant, it gave us somewhere to house 30 staff while they got 30 engineers on tap who can help out.”

Having those specialised staff on site proved to be a coup for Council,

which has faced the same difficulties with the labour market as most of the other businesses in the region. Structural engineers, technical engineers and project managers were in high demand in the early phases of the rebuild. With commercial buildings proceeding, mechanical and geotechnical engineers are in high demand.

“The dynamic nature of the market, and I’m not talking about the earth moving, has been one of the biggest challenges down here,’’ says Price.

“There are a lot of new players in the market, new clients, new people and it’s hard to predict precisely what is happening and going to happen.

“We’ve had to deal with resourcing on a number of levels and we’ve grown the business in what we see as a steady and controlled manner. Six months

following the earthquake, estimates of the rebuild job were around the $15 billion figure. That figure has crept up and now the number typically being quoted down here is $40 billion.”

At the time of first earthquake in September 2100, the local Beca team was made up of 170 people — that has ballooned to almost 300 staff working out of a handful of temporary dwellings until a larger and more permanent solution comes along. “There has been a lot of stop-start going on and that has been managed and supported by our resourcing strategy. We’ve used a mixed model where we have recruited and grown the business with a combination of people from other parts of Beca and further afar.

“The bigger story has been the response of our people and their ability to step up when called upon. That has been the biggest success for us during this period. Many people would say, ‘why would you want to go live in Christchurch?’ but if you’re an engineer, it’s actually why wouldn’t you want to live in Christchurch? There are the career opportunities of a lifetime down here, those which for a number of people will define their careers.”

Craig Price: in his own words

The Promenade will create a broad pedestrian area along the east bank of the river from Lichfield St through to Victoria Square.

Filling in the doughnut continued from D15

projects take substantial time to demolish and involve a huge amount of design work. These developments start in the tens of millions of dollars and it takes a long time to develop those ideas, get costings done and then tender the work. That’s before anything starts actually getting built, but we’re moving onwards and upwards.”

As the commercial rebuild kicks up a gear, a stronger focus is also turning to residential development.

The Government has a long-term vision for more than 20,000 CBD residents — a substantial increase from the 7000-8000 people who called the central city home prior to the earthquakes.

“What we’ve done is look at the reentry impediments that might have existed or could still exist around the redevelopment of the central city,” says Sutton. “We’ve looked at factors such as height restrictions and urban design regulations.

“In the city there had been a num-

ber of specially amended areas where you had to build in a particular way.

That may have been really good in the past but it’s not entirely conducive to a larger population living in the central city, so we’ve looked at those and around tweaking those rules.”

The Christchurch Central Development Unit (CCDU) released the Draft Residential Chapter of the Christchurch Central Recovery Plan last month. A Livable City outlines the vision and framework for residential developments within the central city, featuring a revised planning outline and initiatives to stimulate development.

“It’s crucial that we attract people to live in the central city to add vibrancy to what will be a modern, world-class environment, and the residential chapter is about providing a pathway to this,” says Isaacs.

“We knew we wanted to do more work around residential regulation that would drive the development community to get involved in the central city.”

Christchurch City Council is also actively pursuing a higher concentration of residential space within the central city.

A $10 million fund was established last year to provide rebates to developers building accommodation within the CBD to help mitigate development risks.

The Central City Development Contributions Rebate policy was adopted by the Council in the June 2013 Three Year Plan to encourage well-designed multiple dwelling units in the central city, explains Alan Bywater, Strategic Policy Unit Manager for the Christchurch City Council.

The inner city is challenging for both potential residents and developers with poor amenity, dust, noise and disruption cited as major barriers to living there.

Developers see increased risk due to lower potential returns, fewer interested buyers, high development contributions and restricted access to finances for unit title developments.

“The intent of the policy is to attract early residential development

in the central city and result in more people living in the central city, with the flow-on benefits of a livelier, more vibrant centre supporting more retail activity, and workers who can walk to work,” says Bywater.

The fund will be available until 30 June 2015 for qualifying developments within the central Four Avenues of Christchurch.

Developers are required to build at least one more additional residential unit than had been on the site prior to the earthquake to quality for the rebates. One year in, about $8.5 million of the $10 million fund remains available.

“In essence, it is first come first served for residential development,” explains Isaacs.

“Developers may be able to have a full or partial rebate for their contribution to the development. It’s a fantastic boost to the market to be able to get on with it and start some developments. It’s about council putting up a financial stimulus to assist what the government is trying to achieve.’’

“As a Cantabrian, we can be pretty parochial, pretty one-eyed and I am inherently optimistic and positive about the future for the city of Christchurch and the region. It’s early days to start feeling like we’ve accomplished too much yet, there’s still a lot to be done.

“One of the real constraints of this post-quake environment is cost.

“Money doesn’t grow on trees and we’re seeing almost every project having to address the cost constraints that go along with it.

Constraints drive innovation however and one of the most exciting opportunities to arise has been the chance to use this as a catalyst to do the kinds of things that aren’t run of the mill.

“Low damage design, base isolation, resilient infrastructure it’s not necessarily new ideas but implementing them in ways that haven’t been widely used before.

From a sustainability point of view too, the people of Christchurch cried out for a green city and a number of technologies are being adopted to provide buildings that will have a lower operating cost and environmental cost over their lifetime.

“It feels as though we’ve turned the corner the last couple of months down here in Christchurch.

“We’re starting to see the fruits of our labour. We’ve been doing a lot of investigation and analysis, but it seemed like all we’ve been seeing around us was demolition.

Now we’re seeing buildings that we’re involved with starting to come out of the ground.’’

D17

nzherald.co.nz | The New Zealand Herald | Tuesday, August 19, 2014

Infrastructure

Committed to partnership Alexander Speirs talks to two key NZ players to get their perspectives on why the Government favours the PPP model

T

he National Government made a commitment back in 2010 to explore alternate procurement methods for major infrastructure developments. Expanding the scope of traditional publicprivate partnerships, Treasury set out to develop a framework for exploiting opportunities for the private sector to become involved in asset procurement.

“The Government’s priorities at the time were better capital asset management and better public service, so we worked to formulate and tailor our model to achieve that,” said Fiona Mules, former head of Treasury’s public-private partnership programme.

“Assets don’t exist just as boxes, they’re built to facilitate the provision of public services. The driving principle was that assets should perform over the long term and they should be paid for over the long term. If the assets don’t perform over the long term, then they shouldn’t be paid for.”

The New Zealand PPP model is innovative – even by international standards. The transfer of risk from the public to the private sector is done so using a whole-of-life approach. What this essentially entails is the Government outlining the specifications of the asset required; essentially the outcomes the asset must deliver and the length of time they must be available for.

“We weren’t in this to pay as little

for an asset as possible or to solve issues in the procurement process around budget or timeliness,” says Mules.

“We were in this to try to produce better social and economic outcomes over the life on an asset. The Government is going to pay the same for an asset as they would in any other event, but using the PPP model we can remove some of the risk from the taxpayer and ensure that the assets are producing the desired outcomes over their entire lifetime.”

After successful tenders were awarded for a range of social infrastructure projects, the Government stepped up the scale and will use the PPP model to deliver the Transmission Gully motorway.

Payment for the $1 billion project will be made over 25 years, during which time the private partners will be responsible for running and maintaining the road. The amount of the payments will be determined based on an availability model — taking into account how often the road is open for public use in addition to a number of other KPI’s such as travel time.

“One of the key objectives of the programme was to introduce private sector efficiencies in a very transparent way, so that the public sector could learn from them. We are trying to apply the learnings from PPP and take them into more traditional procurement processes.

New framework The NZ Treasury developed a new framework for public private partnerships after the National Government decided to explore alternate procurement methods for major infrastructure developments in 2010. Expanding the scope of traditional PPPs, Treasury developed a framework for exploiting opportunities for the private sector to become involved in asset procurement.

It's possible the PPP framework will change if the Government changes after the September 20 election.

Fiona Mules

“Making use of whole of life asset management and costing practices, and learning how the private sector approaches that was a major factor, so the different departments could then take those learnings and multiply the effects across their portfolios.

“The objective was never to use the PPP programme for delivering everything or have the PPP programme exist on its own,” says Mules. “This was always just designed to be one tool which can be used for procurement under the appropriate circumstances.”

Fletcher Construction CFO, Carl Munkowits was a driving force behind the Secure Future Consortium – the

successful bidders for the Wiri Prison PPP – the first prison to be outsourced to the private sector. He says the PPP framework is a big plus for driving future public infrastructure development.

“Accepting the premise that the Government can’t afford to pay for everything that’s needed right now — the PPP framework is a good model in terms of a funding mechanism, because it brings together participants who want to play in this space for the long term.

“The really clever bit was the fact that, apart from the availability model, it was an outcome-focused approach.

That was quite unique, and I think even the UK participants in the PPP market didn’t quite get that either.”

The construction of Wiri Prison was the first of the PPPs to get off the mark, Cabinet giving the stamp of approval to initiate the process back in 2010.

Munkowits says it’s been a positive

98% New Zealand owned.

experience for all involved so far, but keeping a steady flow of opportunities for private sector involvement will be key from the perspective of the private sector.

“We always said we would participate in this game, but it’s all about deal flow when you’re spending millions of dollars to put together a bid. You can’t afford to keep losing bids; if you’re not winning two in three or at least one in three, it’s going to get pretty hard to take,” he says.

“It certainly was a concern from a Fletcher perspective, because PPPs are very hungry on resources. When you’ve got the risk profile of a hard money bid, you really have to put a lot of time and effort into understanding the deal.

“There are not many players in a market of this size that can do that, and keep doing that. There are not many players in the Australian market that can keep doing it either.”

In an effort to promote further competition and sustained interest, the Government is understood to be offering avenues for recovery of costs for unsuccessful bidders. That’s an important factor, says Munkowits, who says Fletcher will continue to compete for PPP deals.

“We were a bidder for the Transmission Gully project and will bid in the Puhoi to Wellsford PPP. Now that we’ve actually gone through the process of bidding we can see value in the model — and I think that being a significant player in the industry we can see the benefits for all. We would certainly be interested in pushing up the value chain a bit further, ultimately as an equity participant as well as a designbuild contractor.”

100% committed to more than one million New Zealand customers.

APROPOS 29919R

Vector provides the energy solutions to meet our customers’ needs in homes and businesses in Auckland and New Zealand, now and into the future.

www.vector.co.nz

D18

nzherald.co.nz | The New Zealand Herald | Tuesday, August 19, 2014

Infrastructure

Life returns to the Four Avenues Scirt is now ramping up the infrastructure rebuild to underpin Christchurch’s new CBD anchor projects, reports Alexander Speirs

Vote makes no difference

M

uch of Christchurch’s initial remedial works took place on the outskirts of the city as the Scirt rebuild team prioritised getting residents back in their homes and restoring vital services such as sewerage.

But Scirt general manager Duncan Gibb says the organisation has now switched focus to the central city where it has had 45 active crews within the Four Avenues between March and May this year.

“We’re aiming to be 90 per cent complete in the central city by October/November,” says Gibb. “The rest of the work will happen in the New Year, after some of the anchor projects under way have moved past milestones in their construction.”

Scirt has had a strong mandate for value and efficiency — both from the clients and the five major contractors comprising the alliance. A large part of that has been managing staff numbers — particularly with the peaks and troughs of the post-earthquake Christchurch labour market.

“We need to make sure we keep working effectively, and if things change dramatically with the reviews that are going on at the moment, we then need to resize the organisation and react appropriately,” says Gibb.

“We are already sending a number of people back to their parent organisations to get back on with life. It’s quite a big change for us.”

Making sure that the right people are in Scirt and continuing to produce at a high level is essential says Gibb.

“It’s now over three years into the rebuild and in my view, it’s time in some instances to rotate people out and give them a change. That’s been happening internally, the delivery team in particular have been consciously rotating people out, giving those people different opportunities while getting new people in, fresh blood, fresh focus.”

“It gives people a chance to do different jobs, to grow and ultimately I think as a leader you should be developing your people to the point where they can take a new job over and go. That’s success.’’

Gibb says his own role will also be affected. “Ultimately the time is coming for a couple of potential successors to step into my role. It won’t happen for a little while, but that change will definitely be made

Scirt’s Duncan Gibb has appreciated the chance to “do something meaningful’’ in the Christchurch rebuild.

Scirt is working in with central Government and council to ensure the national elections don’t bring progress on the rebuild grinding to a halt.

“When you get to an election, there comes a point in time where there are no more decisions made throughout Government departments,” says Duncan Gibb.

“Those departments tend to come and go with ministers, so there’s a strong mandate to set guidelines to see us through that period so we can continue to operate, because you do need to keep operating.”

Gibb says that means identifying which work needs to be approved and getting that through in a timely fashion.

“In some instances, that has meant challenging and changing our design to make sure the correct solutions are identified and approved.

“Cera for example have been working with the minister to identify things they need to do to keep things running. A lot of what we’re going through at the moment with these conversations is about what we and our clients need to be doing to make sure everything continues smoothly. I’m not expecting any bombshells.”

SHOW OF STRENGTH The Stronger Christchurch Infrastructure Rebuild Team (Scirt) is an alliance formed by City Care, Downer, Fletcher, Fulton Hogan and McConnell Dowell.

Scirt is responsible for the $1.7 billion programme of new horizontal infrastructure being built in Christchurch after major earthquakes in 2010 and 2011 severely damaged the city’s water supply, wastewater and sewerage systems.

before we finish in December, 2016.

“I’ve been in construction for 30 years; initially I approached this as a construction project, in reality there’s a twist to it. This disaster recovery puts a whole new dimension to it,

puts more focus on community and how you need to work with them because you’re working for them.

“It’s just an opportunity to do something meaningful, it’s actually quite good for your soul to do something

meaningful. Like rebuilding a city, we’re all doing our best to do the best job we can for Christchurch. You leave a bit of a legacy, that’s good — it feels good.”

The initial phase of Scirt’s pro-

gramme was an emergency response phase — fixing pipes, fixing damage and getting key infrastructure back in operation.

“We started with the highest priority assets first — sewerage, main transit lines and replacing pump stations which had been hanging on by a thread,’’ says Gibb.

“These were the big gutsy, ballsy and high-cost projects. When those costly projects wrapped up in November of last year, we transitioned into the smaller projects.

Once you’ve reestablished security of the bigger parts of the network, it enables work on the smaller parts to be carried out.”

There’s no ‘raw prawn’ here, mate Australian Treasurer Joe Hockey was blunt in his assessment of the opportunities afforded to Australian construction firms in the Christchurch Rebuild when he visited the city last month.

“I don’t think ‘Canterbury first’ is going to do it because the task is much bigger than the capacity of Canterbury only businesses,” Hockey was quoted as saying. “I think [Canterbury parochialism] is to the disadvantage of Christchurch because you know you want to get on with things and the faster you can move, taking all the resources of the world to rebuild your city, the better.”

Hockey revealed Australian businesses had been lobbying their Government to step in and shake a “Canterbury first” mindset they claimed to have encountered. But Cera chief executive Roger Sutton, is quick to defend the rebuild process, saying “I don’t think you can give what Joe Hockey said much credit.

“As a Government we aren’t discriminating where people are from. I think there are local developers who have long-term relationships with local builders, where they are maintaining those relationships.

“Clearly there is a lot of work on. I think there’s clearly work for Austra-

Joe Hockey

lians, Chinese, and all nationalities.”

Australian construction firms have already secured a number of works within the public sector, with designers Woods Bagot contributing to the formation of the Blueprint for Central Christchurch and BVN Donovan Hill leading the consortium involved in the master planning of the Health Precinct.

“There are a number of Australian firms in Christchurch who are providing construction services.

“They’ve done well through the tendering phase and they have got not only our work in the bus exchange but also a number of private sector jobs,” says Christchurch Central Develop-

ment Unit director Warwick Isaacs.

The $53 million bus exchange precinct was awarded to local firm Southbase in conjunction with Australian engineers Thiess.

The reconstruction of Christchurch’s Burwood Hospital has been awarded to a consortium headed by Australia’s Cockram Corporation, in association with Leighs Construction.

Says Isaacs: “I’m sure there are a number of other Australian firms around and I’m sure they would always like to have more work, but by and large, Australian firms seem to be doing pretty well.”

— Alexander Speirs

D19

nzherald.co.nz | The New Zealand Herald | Tuesday, August 19, 2014

Partnership takes a new road Transmission Gully marks a fresh approach to financing large road projects, reports Bill Bennett

W

hen the Transmission Gully motorway gets under way later this year, it won’t just be breaking new ground north of Wellington. It will also mark a fresh approach in the way Government finances large road projects.

Australia-based MWH general manager John MacKillop oversaw MWH’s role as the New Zealand Transport Agency’s technical advisor for the project. He says the billiondollar project to create a safe and reliable alternative route for traffic between the capital and the rest of the North Island will be New Zealand’s first Public-Private Partnership road delivered under the new availability model.

For a long time PPP was a popular approach overseas when it came to building large infrastructure projects where there is potential to generate revenue. In the case of roads, that meant tolls. However MacKillop readily admits the PPP approach went out of favour after a number of high-profile Australian PPP road projects failed. He says they went wrong because the incentives weren’t structured properly.

MacKillop says Transmission Gully is different because it is being set up as an “availability PPP’’. In essence the Government pays the private company for the road’s availability. Payments continue so long as the road remains safe and travel times remain reliable. If there are lane closures or, say, the road isn’t reopened fast enough after an earthquake,

John MacKillop (above) and the proposed James Cook interchange near Waitangirua.

the private company is penalised.

MacKillop says this approach removes much of the risk: “I don’t see that this road is going to fail. There’s not going to be a problem if the tolls aren’t there to pay for it. The top priority is safety and the deal is structured to give users a great, motorway standard road.”

Under the traditional road PPP model, a private company would get the rights to collect tolls for a set period. This can work, but success is largely down to accurate traffic projections; if the expected number of vehicles doesn’t turn up, the road builders are left out of pocket. Mackillop says this happened with two roads in Sydney and two in Brisbane.

Availability PPPs are all about the project outcomes. As technical adviser on the Transmission Gully project MWH’s job was to work with NZTA to develop the outcome specifications. MacKillop says this involved geotechnical work and a lot of interaction with the legal advisors and commercial advisors also appointed by NZTA. MWH was appointed to the role over a year ago, but MacKillop says the main work took place over just three months as his team prepared the request for proposal (RFP).

For him the most challenging part of the process was the geotechnical investigations programme. He says New Zealanders do this in far more

depth than Australians — perhaps that’s not surprising given how close the road is to a major fault line.

MacKillop says though most of the work was done locally by MWH New Zealand staff: “they have the right skills and local expertise”; he was brought in from Australia because there is little PPP experience in this country. This was only the third PPP project in New Zealand. He says the first thing he did in New Zealand was to hold a PPP workshop.

One advantage of the availability PPP approach is that the project is all about what is delivered, not how it is delivered.

MacKillop says this gives contractors freedom to innovate. How they

design and build is left to them.

He says the lessons learnt from Transmission Gully helped MHW win a contract to perform a similar role in Queensland. The state Government is building the Toowoomba Second Crossing, which runs across the Great Dividing Range bypassing the city and relieving an existing road that is now close to capacity.

Governments usually look to PPPs because they don’t have to outlay capital, but there can be other reasons. MacKillop says another PPP project MWH carried out was when the New South Wales Government decided to sell its desalination plant to raise capital it could invest elsewhere, in schools and roads. By taking the plant off the balance sheet, the state Government raised capital without affecting its credit rating. He says this is another current trend in PPP projects.

In the case of the Sydney desalination plant, MWH worked for one of the bidders handling the due diligence for its bid. This meant working out the condition of the asset and estimating the cost of likely upgrades and operations.

MacKillop says working on PPP projects boosts everyone’s skills: “We make sure we transfer our expertise to clients as part of the deal.” He says he and his team learnt a lot from working on their first availability PPP: “You have to think differently about things when you’re focusing on the project outcome rather than just getting it done. Those are skills we’ve already applied elsewhere.’’

D20

nzherald.co.nz | The New Zealand Herald | Tuesday, August 19, 2014

Infrastructure

Prison breaks traditional mould Alexander Speirs visits the new public-private prison under construction at Wiri

Wiri Prison

T

● The new Wiri Prison — a 960 bed

he first of NZ’s new breed of public-private partnerships (PPPs) to build and operate prisons is less than a year from opening its doors to the first intake of inmates.

The new Wiri Prison — a 960-bed facility nearing the end of construction in South Auckland — will be built and managed over the course of its 25-year life by a private consortium led by Serco in conjunction with Fletcher Construction and other key partners.

“Our perspective is that the transfer of risk to the private sector under the PPP model generates better value for money outcomes,” says Carl Munkowits, general manager, investments at Fletcher Building.

“Having partners that are united as a team is the key to success. Knowing what risks we can and should take together will produce the right solution, and a positive outcome for the client,” he says.

“You get problems if the partners aren’t up to speed. Failure to understand the risks and the required outcomes for the client compromises the deal — and that is fundamental for successful PPPs.” Working under a new model the Government devised for public private partnerships (PPPs) has been a learning process for Fletcher Building.

The consortium behind the Wiri Prison project is the first to truly test the new Treasury model, requiring them to take an approach which differs from their previous experience.

“This project was slightly different for us — in the case of major roading projects, Fletcher have been the ones who tend to lead the consortium,” points out Munkowits. “In the case of Wiri we needed an operator led solution given a key outcome for the client was to reduce recidivism.

“We believed that with the right operator generating an appropriate design brief we could design a facility that would align with the operating solution.”

Serco — the private operators presently running Mt Eden prison — will face stiff financial penalties over the term of the contract if their performance isn’t up to scratch. They’ll be assessed on criteria like recidivism rates, escape numbers, positive drug tests and prisoner management, and they know full well that the Government means business.

Serco failed to meet 40 per cent of its initial performance targets in their first year of running Mt Eden prison — resulting in a more than 60 per cent reduction in end of year profit.

Munkowits explains, “The penalty regimes for the operator are significant, although overall the risks are shared with all the participants. We don’t take any of the operational risk, but it’s no different to any other contract — you finish it, you generally have a 12-month defects liability period and a 10-year warranty period effectively within the normal building code requirements.

“We’re not worried how they look after prisoners, we certainly have to make sure that building stands up to what a prison does, what prisoners do. We’ve always got that exposed, that’s nothing new — we don’t have anything exposed to the operating model.

“A PPP is a commercially sophisticated hard money contract — so it’s a tough environment. But it also promotes collaboration through structured engagement with the client to ensure the right outcomes are achieved.”

Fletcher has to ensure the construction of the prison is complete by February 15 next year, initiating a three-month handover period after

facility nearing the end of construction in South Auckland — will be built and managed over the course of its 25 year life by a private consortium. ● The $900 million project is being led by Serco — the private operator presently running Mt Eden Prison — in conjunction with Fletcher Construction, infrastructure investor and developer John Laing, ACC and Spotless. ● The group is responsible for the full design, construction and financing of the prison.

Carl Munkowits (top ) and Donal Lynch

Designed to promote rehabilitation Standing at the gates of Wiri Prison, you’d be forgiven for thinking a new school campus was under construction. The bright colours and weatherboards form the shell of a modern-looking facility, with the typical dressings required of a prison cleverly disguised in the architecture of the buildings.

“It’s an innovative design throughout,” says Donal Lynch, project manager at Fletcher. “We want to rehabilitate prisoners so that they can re-enter society as productive citizens. This isn’t about locking people up and throwing away the key.”

The operation and design of the prison breaks out of the traditional mould. But with an incentive-laden contract for operators Serco, an innovative approach is required if they’re to reap the financial rewards

from the programme — a significant amount of which is tied to curbing re-offending rates.

Inmates will have computers in their cells, with free-to-air television available in addition to educational resources to complement the various up-skilling programmes on offer.

There are a range of health and education centres as well as an industries hall, where Serco hopes to attract private businesses to set up operations and provide new pathways and work programmes for inmates.

The facility’s design is intended to mirror a prisoner’s journey towards release, with new inmates assigned to one of three medium security housing blocks at the far end of the grounds.

As the inmates make progress they are awarded increased

We’re all here at the table, our thinking is happening up front and we’re running with what is an agreed design.

Donal Lynch

freedoms, working towards a place in the low-security residences.

The residences closely resemble student flats, with prisoners living in small housing units with their own bedrooms, a kitchen and a lounge.

Each of the residences is equipped with water and power meters so tasks like paying bills become ingrained as part of an everyday routine.

The inmates will live and cook together and will be allowed a high degree of autonomy. Some of the inmates at this stage will be leaving the prison to take up jobs on the outside before returning to the grounds at night.

“It’s about putting the inmates in a position to succeed once they leave Wiri — equipping them with tangible skills that will hopefully see them not returning,” says Lynch.

— Alexander Speirs which Serco will take the reins. That’s a quick turnaround time for all parties involved. The signing of the contract only took place in September 2012 — giving the consortium 2.5 years to deliver on a substantial infrastructural development.

“There’s certainly incentive for all parties to be smart about how we deliver the project as efficiently as possible so it’s successful for all of us involved,” says Donal Lynch, Flet-

cher’s manager for the Wiri Prison project.

“During a traditional tendering process, consultants complete their design, subcontractors then price it and pick the bones out of it before coming back with alternate solutions. The consequence is that the timing can frustrate and delay a project, “ he says.

“Doing the Wiri PPP Project, there is a different relationship that is established. We’ve got the operator, the consultant team and the building contractor on day one to work with the designers, so we’ve got a deeper understanding of the design from the get-go. We’re engaging the designers, the consultants, some of the key primary subcontractors long before we get on site.

“We’re all here at the table, our thinking is happening up front and we’re running with what is an agreed design.’’

Getting the right people around the table from the early stages has proved to be a coup for all of the parties involved. This had paved the way for the efficiencies and innovative approaches to delivering infrastructure that were mooted from the outset of the new PPP model.

“Having a bit more up-front foresight and information around how the project is going together and sharing information early can pay dividends later in the game,” says Lynch.

“One of the real advantages of the model is the opportunity for subcontractor input in design.

“Some of the usual issues you expect in a traditional contract, where subbies are looking to clarify and rationalise the design, a lot of that can be resolved before we start work.

They’re working closely with us throughout the process and that’s helped in getting a more positive result going forward.”

D21

nzherald.co.nz | The New Zealand Herald | Tuesday, August 19, 2014

Infrastructure

Change is coming swiftly T

Fran O’Sullivan

hink Auckland’s future energy development. Think power stations and networks of lines and cables criss-crossing the city to deliver electricity to a rapidly growing city.

Think again, urges Vector chief executive Simon MacKenzie, as he talks about what the future entails in a world where rapidly changing technologies will put the customer — or consumer — at the heart of technological choice.

“The biggest mistake we could make in Auckland is doing these traditional-type developments,” says Mackenzie. “We’re heavily engaged with developers to broaden options and thinking.”

He points to the convergence (a “puzzle”) of three major platforms.

There’s the world of existing traditional networks — that’s the power lines and substations; then there are the new hardware solutions — solar power and increasing battery storage capabilities that are already providing consumers with distributed power options; and finally the new software solutions which allow those same consumers to manage control.

“We see a world where all of a sudden the traditional providers are competing with the hardware solution providers and the disrupters in the control space.”

It’s a world where for a major network company like Vector getting the wrong emphasis could result in stranded assets in four to five years time, if customers move ahead of strategy, and, on the consumer side the potential for social issues if

We should be looked at as the innovation and creative centre of the world.

Simon Mackenzie, Vector CEO

people cannot afford new hardware like solar panels or whizz-bang apps.

Hence, Mackenzie — and Vector — are engaged in all three components.

There’s an element of commercial sensitivity to some of the work Mackenzie has under way, supporting small companies to innovate in New Zealand and thinking through how that can be leveraged with international partners in the US, for instance, to create whole new industries in the weightless economy space based from here.

Here’s the thing. The company’s San Francisco partner recognises New Zealand has a pool of skilled people who are have experience in

a world where globally there is a shortage of emergent technology capability.

“They look at New Zealand and see we are very pioneering in this space,” says Mackenzie. “They recognise there is a real talent pool here and from our perspective we have been utilising this pool.

“We should be looked at as the innovation and creative centre of the world. They are thinking of setting up down here to take advantage of the tech pool we have.”

One factor driving this is US pay scales. Graduates with three years’ experience in computing technology can crack US$250,000 a year

within three years of graduation.

Mackenzie reckons there are plenty of opportunities for NZ firms to be pathfinders.

For instance, Nest — a US company (“two guys out of Apple”) — has developed customer focused energy management solutions which are as simple as a thermostat control with smart technology embedded in it.

“We’ve been developing similar technology with local people here. But in the US you can access capital and a market more easily.

“There’s a whole lot of talented people in the space if they could be facilitated into a bigger market.”

Already in Germany, 75 per cent

of energy is produced by either customer-owned or communityowned solutions through solar and wind.

In Queensland, there is now 20 per cent penetration of solar power in the market.

The big question is whether solar can be built on a scale that will meet the bulk of the world’s electricity needs.

Mackenzie instances other technological sectors like computing, the internet and telecommunications.

All three were dominated by huge, centralised technologies. But all three industries have been turned upside down by new “distributed”, or hand-held devices.

“The same thing will happen in electricity”.

Electric vehicles are part of the major disruptive changes that lie ahead in New Zealand. Mackenzie points to a situation where batteries will initially be used in cars then moved to provide home storage systems after 8-10 years of driving use. Driving an electric car will save an average driver more than $2000 per year on petrol costs.

Batteries are forecast to drop from $1000 per kWh today to as low as $200 per kWh in the next five years (or sooner as massive manufacturing plants are being constructed).

The point is, the future is already here.

“We are going from big centralised power plants to decentralised generation, to decentralised storage, and to decentralised distribution,” says MacKenzie.

“It is just a matter of policymakers understanding this and making regulations appropriately.”

They’re not playing THEY’RE MAKING THEM WHAT WILL YOU BE WITH UFB? In 2011 over 15,000 New Zealand students graduated with a creative or tech degree. We have the talent for a world leading creative economy. Just imagine what would happen to it if we fired up one New Zealand town with the fastest internet in the Southern Hemisphere.

Welcome to

Driven by

.nz

gigatown.co

GIGA010

D22

nzherald.co.nz | The New Zealand Herald | Tuesday, August 19, 2014

Infrastructure

Power up the next stage A

lison Andrew studied chemical engineering at Auckland University. After graduating, she worked at the gas to gasoline plant in Motonui when it was being built in the early 1980s. She went to Britain for four years and worked in Europe for a US chemical company.

‘I then decided that I didn’t want to be a nuts and bolts engineer all my life — I was more interested in the commercial things.”

She did an MBA at Warwick University, joined Petrocorp and had roles in energy, gas reticulation, oil and gas exploration, petrochemicals, and power generation.

As part of the wider Fletcher group she had senior roles in the forest and paper divisions before joining Fonterra in a range of roles including its e-commerce business, called Fencepost.com, just before the dotcom bubble burst. In another case of unfortunate timing, Andrew moved to head a (private equity owned and highly indebted) signage business, Lexicon, just before the global financial crisis hit and credit dried up. “It ended up being too difficult to carry that debt so that business went and I learned really interesting lessons around cash flow management.”

Her most recent role was global head of Chemicals for Orica and she was a director of Genesis Energy for a year before her Transpower appointment. She lives in Remuera, and is married with two sons, 17 and 20.

Q: What interested you most about taking on the Transpower job?

It’s an essential service for New Zealand and I’m a Kiwi at heart, everyone uses power, so to be part of something that has such a proud legacy and such an important role is a unique opportunity. Transpower has a lot of diverse and unique stakeholders — land-owners, farmers, distribution companies, major customers — we interface with it and it’s interesting to manage such a diverse mix. The board painted a picture of taking Transpower to the next stage — the challenge is how to reposition the organisation for the next stage of the journey. It’s in good shape but we need to do some different things. I really like leading smart people and driving change.

Q: Describe your own management style.

I like to build good teams of people.

I’m only as good as the people I’ve got working with me. Part of my role

Alison Andrew has taken over as Transpower chief executive as it finishes a $2 billion upgrade.

She tells Grant Bradley why the national grid operator has entered a new phase with its focus on customers

in the Transpower component as we commission assets and pay for them.

From next April there will be a 1.5 per cent increase — below inflation. The Transpower price is about 9 per cent of an average residential bill. Our focus is to be as efficient as possible and working smarter, it’s not about ripping costs out.

is to get the best people you can on your bus and going in the right direction with you. We have smart people, being clever is helpful but how do you inspire people and get them to follow you? As an engineer I’m very much trained in logic but I’ve done a lot since then and a lot of the soft stuff is about people.

Q: Achievements you’re particularly proud of: I’ve signed up for lots of tough challenges which is where you learn the most. I love winning — the Fonterra days we had lots of great results. You can build good diverse teams, in Orica we built a management team of 50 per cent men and 50 per cent women. Orica also won supplier of the year for Fonterra and its operation here was the top globally based on revenue.

Q: What now for Transpower?

Demand has been predictable. It’s gone up steadily for a couple of decades, but we’re looking at quite a lot of uncertainty around major users Tiwai and Norske Skog — there are some big things that can come off that would put us in excess. We’re going to be spending between $300 million and $400 million a year maintaining and refurbishing assets.

Now we’ve got this robust system in place with a lot of investment, how do we keep prices down for consumers? Rather than build new things how do we find smart solutions to make sure consumers get what they want — the power on? How do we sweat our assets harder and make sure we direct our maintenance dollars in the right place. Consumers demand reliable power but with pressure on pricing how do you balance that reliability — if you want 100 per cent reliability it’s unaffordable.

Q: How confident are you that Transpower outages can be avoided?

I would never tell you there will not be a power outage because of the nature of our business. We have built a lot more resilience into the system.

The customer only cares about reliability, but resilience for us is acknowledging that from time to time you will have incidents and the key is how fast you can get them back up and running. We build assets for 70 years — you don’t want to make those investments too soon because of the costs but if you make them too late the power’s off and you’re never forgiven.

Q: What proportion of a power bill is the Transpower component?

We do recognise the fact that we contribute and residential prices is where the controversy is. Over the past years there has been an increase

Q: Do New Zealanders pay too much for power?

Every power system is unique, New Zealand’s is a long, thin system. New Zealand domestic consumers pay about 25c a unit which is in the middle of the pack. Domestic power prices are up because the cross subsidy for domestic customers has been removed. It’s a controversial issue but if you benchmark it internationally, we’re not wildly out. It’s important for the New Zealand economy that we don’t make industrial consumers pay too much. We need power in the future and don’t want to end up in a situation where there’s no incentive to invest.

Q: Power company executive pay has been under the microscope; any views?

I’m not qualified to talk about chief executives’ pay, I’m not an expert.

People go out to boards who approve salaries against comparable roles and salaries. There’s a whole industry of people who are experts in that area.

We make sure the job is properly sized and in a market you don’t want to underpay because you’re giving them an incentive to leave.

(Andrews’ own pay will be disclosed in Transpower’s annual report, later this year).

Data’s vital role in our economic future continued from D13

“Far from being trade-offs with achieving desired benefits, high trust, high inclusion and greater control are critical enablers for value creation through collaborative data-sharing.”

The forum strongly advocates the Government legislate for the proactive release of open government data, in order to extend information sharing beyond central government. It sees getting the rules of the game right as the first step towards creating pathways for such further use and exploitation.

A broad review of legislation guiding the use of information and data topped the agenda of recommendations to emerge from the forum.

“We think legislation is required to get traction within government. Although open data is supported by government, progress would be sped up by introducing legislation that has a set date by which open data release must be in place. This includes removing barriers to the opening of key government data (health, education, tax energy), such as regulation and contractual arrangements.”

In a submission to the forum, Spark called for strong Government regulatory support to create an environment that would ensure New

Zealand remains on the vanguard of data.

“There has been considerable international thinking on how to manage Smart Data but so far there have been no actual regulatory implementations. We can build on this thinking and seize the initiative. By contrast to other countries, New Zealand can move quickly and flexibly to implement a new regime. The current New Zealand regime is recognised internationally and we can leverage this reputation as we move forward,” it said in its submission.

To complement its call for an increased openness, the forum has proposed the establishment of an independent data council which would be responsible for guiding the thinking, advising government and data users, and developing best practice procedures.

“The time may have come for an independent body to promote the ethical and safe use of data,” says John Edwards, New Zealand’s Privacy Commissioner. “Promotion of the more effective use of data raises a range of questions about infrastructure and capability that are not as yet part of any organisation’s mandate.

“There is also an important distinction between privacy and ethics in data use, and there is no body charged with providing advice on what constitutes ethical practice.”

How we can use it The DFF produced examples of applications and services which could be enabled: ● Structural health: monitoring vibrations in and material conditions of buildings, bridges and historical monuments. ● Intelligent transportation systems: smart roads and intelligent highways with warning messages for unexpected events like accidents or traffic jams. ● Forest fires: monitoring combustion gases and pre-emptive fire conditions. ● Air pollution: monitoring CO2 emissions of factories, pollution from cars and farm gases. ● Smart grid: energy consumption. ● Water flow: in water transportation. ● Meteorological network: studying weather conditions in fields for forecasting. ● Energy and water use: consumption monitoring for advice on how to save. ● Smart lighting: intelligent and weatheradaptive street lighting. ● Waste management: detection of rubbish levels in containers to optimise collection. ● Noise urban maps: sound monitoring in bar areas and places people congregate.

The proposed council would effectively serve the role of an ombudsman focused on data, but would also play a part in promoting data to New Zealanders and encouraging them to get involved and help to build the data ecosystem.

While the frameworks for wider implementation of data-driven solutions are being established, the forum has recommended the creation of a number of catalyst projects and endeavours to illustrate the economic and social outcomes which can be achieved.

It proposes Government and business develop a set of clearly defined collaborative catalyst projects that demonstrate value by tackling real problems.

In its final report, the forum suggests “new transformational projects can be identified and existing work accelerated. The learnings and developments from the projects should feed into longer term strategies that look across sectors to make the best use of data in the longer term.’’

Whitehead says if the recommendations are followed: ”we will see New Zealand lead the world in this space. The potential gains are limitless, including the ability to tackle immediate and real social problems’’.

D23

nzherald.co.nz | The New Zealand Herald | Tuesday, August 19, 2014

Infrastructure

The fibre route to smart cities A fast data communication infrastructure is well under way in New Zealand, writes Bill Bennett

C

horus network strategy manager Kurt Rodgers says a by-product of New Zealand’s fibre network roll-out is an opportunity to create smart cities and towns.

Smart cities are places where digital technologies are used to create better places to live and work.

Sensors, intelligent networks and applications combine to connect, monitor and analyse information in order to make the city work more efficiently. This can mean making transport run smoother; providing cleaner, more efficient energy, making people safer and delivering essential government services such as health and education more effectively. At the last count there were 288 smart city projects around the world including Seoul, Glasgow and Barcelona.

Rodgers says a fast data communication infrastructure is the jumping-off point for any smart city project. That’s already well under way in New Zealand in the shape of the Government-supported UltraFast Broadband (UFB) network being built by Chorus, NorthPower, Enable and Ultrafast Fibre.

He says we are now a third of the way into the project, which is scheduled to complete in 2019.

Significantly the Government committed at the project’s outset to build fibre networks in 33 cities and towns. Rodgers says that’s important because: “It does away with one of the barriers to creating smart cities.

“Knowing that the network will arrive and will stretch down every street gives council planners and civic leaders a degree of certainty to plan smart city initiatives. In effect the Government has taken away any doubt about whether the infrastructure and capacity will be there to deliver smart city services.”

Rodgers says New Zealand is fortunate because the ultrafast broadband project was designed to make it easier to build smart cities.

The UFB will cover 75 per cent of the population. By the time the network is complete, there will be fibre down every street in each of the 33 UFB areas. The goal is to connect all schools, hospitals, offices and homes: “But once it’s built we can go beyond that connecting traffic lights, bus stops, wi-fi hotspots and just about anything else”.

Knowing that the network will arrive and will stretch down every street gives council planners and civic leaders a degree of certainty to plan smart city initiatives.

Kurt Rodgers

Take street lights as an example; the fibre will run past every urban street light in the country. Hooking them up to the network will cost little, digital sensors are inexpensive.

Once connected the lights can be controlled so they are turned off and on when needed and used more efficiently, saving money and reducing the need for electricity. The lights will also be able to report on

their condition if they fail.

Rodgers says cities can install meteorological sensors, flood warning devices and CCTV cameras wherever the might be useful. “Fibre means they can report information in real time. It also means they can move beyond basic yes-no on-off telemetry and report richer information including video. So, for example, you can install CCTV

cameras to check traffic flows.”

There’s more to creating a smart town than technology. Rodgers says leadership and public engagement are essential.

He says Chorus’ Gigatown promotion has done much to stimulate the debate in towns around New Zealand: “It means people are starting to think about the social and economic benefits they would get

from fibre; that’s the first step to creating a smart city. There’s a bottom-up groundswell effect. Some of the people involved in Gigatown are development specialists or civic leaders, but a lot are just average Joe punters and small business people who can see the potential”.

Rodgers says it’s still early days for New Zealand’s smart cities.

Christchurch is already committed to becoming a smart city as it rebuilds from the earthquakes earlier this decade, while Wellington has developed its own vision and he says some good ideas have surfaced in Auckland. However, Rodgers thinks the potential is also there in the regions.

He points to Chattanooga in Tennessee which was the inspiration for Chorus’s Gigatown competition. It was a dying town before installing a city-wide fibre network.

He says young people were leaving; now it is one of the fastestgrowing cities and has enjoyed economic revival.

Volkswagen recently established a new plant in the city. Rodgers thinks something similar could happen in South Island towns facing depopulation.

Designing for an uncertain future Recent natural disasters, climaterelated hazards and human-influenced catastrophes, both in New Zealand and globally, highlight that we are living in a world where the “knowns’’ and “unknowns’’ happen more frequently and with more severity.

The UN has reported the global costs of natural disasters since the turn of the century to be US$2.5 trillion.

Despite their impact, there’s little evidence to suggest we are better prepared or better able to cope with these events than we were 100 years ago. Add to this our increasingly complex and interconnected cities and systems, coupled with our unwavering demands for uninterrupted infrastructure services and we may have created a perfect storm (excuse the pun); one that is beating a path towards us, with consequences we are only just beginning to understand.

And one thing is certain in the midst of this: getting to grips with these interconnected issues requires new thinking, challenging some of the old ways

How do we build the infrastructure for tomorrow that can deal with this new normal, and the new, new normal after that?

James Hughes

of doing things, and asking provocative questions of our decision-makers.

With much of our existing infrastructure designed for “yesterday’s conditions’’, how do we build the infrastructure for tomorrow that can deal with this new normal, and the new, new normal after that? Where do we prioritise our efforts? In our built environment? In our communities? Do we mitigate for short term shock

events, at the expense of the slowburning, corrosive changes we are facing as cities, such as sea-level rise, or an ageing population? Can we afford to do both?

Fortunately, the outlook is not entirely gloomy. Many city leaders both locally and internationally are proactively considering these complex issues, and striving to build more resilient and sustainable cities – with

New York, Copenhagen and Christchurch each providing useful examples.

Central to any effort towards resilience is the urgent need for integration, which will create the focus required to decide and act. The many levers available to our city planners need to be better understood, and positioned on the same machine, moving in the same direction – to maximise benefit for all. A business-as-usual or silo-style approach won’t work.

Designing sustainable and resilient communities requires fresh thinking, and a recognition that eventually, failures will occur. Cities must incorporate “safe-to-fail’’ solutions, with city operators that have planned for the risks they face, and communities that are aware of and know how to respond to adversity. We need to think about fostering communities that are cohesive and neighbourly, so when the unknown “black swan’’ event occurs, people can turn to each other for support. Perhaps people need to be

accepting that the lights will go out and transportation will grind to a halt during unforeseen events, and that they themselves need to be well prepared.

Our land-use planners and cityshapers must also play a central role in all this. Each land use, policy and infrastructure decision must consider adaptation and resilience attributes, along with the obvious urban design principles, plus the wider impacts on sustainability and ultimately, liveability.

Today’s city-shaping investments need to service the 22nd century, and be informed by all the learnings, progress, and mistakes we have made over the last 100 years. A balance needs to be struck to ensure we can respond to whatever comes our way, and bounce “forward’’ when the next hurdle appears, rather than returning to an old “business as usual’’ approach. ● James Hughes is principal consultant, Aecom

D24

nzherald.co.nz | The New Zealand Herald | Tuesday, August 19, 2014

Major new infrastructure For the new New Zealand WATERVIEW CONNECTION

MACKAYS TO PEKA PEKA EXPRESSWAY (ON WELLINGTON NORTHERN CORRIDOR)

CHRISTCHURCH JUSTICE AND EMERGENCY SERVICES PRECINCT

AUCKLAND MANUKAU EASTERN TRANSPORT INITIATIVE – PHASE 1 PANMURE

FONTERRA NEW HEAD OFFICE, AUCKLAND

UNIVERSITY OF AUCKLAND SCIENCE REDEVELOPMENT

WATERVIEW CONNECTION