15 minute read
Dale Connor | Chief Operating Officer – Construction and Infrastructure Lend Lease
Dale Connor
Dale Connor, Chief Operating Officer – Construction and Infrastructure at Lend Lease, outlines the considerable shared opportunities that exist for governments, the community, and the private sector through large-scale urban regeneration.
Key points:
I want to talk about urban regeneration and its associated infrastructure requirements.
Urban regeneration is different to other projects that Lend Lease is undertaking in the infrastructure space, such as roads, tunnels and bridges.
The art of making places is equally as important as inner-city urban regeneration, and it is as important as the role of infrastructure.
To Lend Lease, urban regeneration is an opportunity to revitalise and re-use inner-city areas, some of which are contaminated and have a remediation focus, and to create a more positive legacy for people and places.
This process involves the private sector working with governments to upgrade infrastructure by leveraging the new value that is created to pay for it. This is an ongoing, efficient way to fund innercity infrastructure.
The opportunity for Lend Lease
By way of background, Lend Lease operates in Australia, Asia, Europe and the Americas.
The majority of Lend Lease’s $40 billion of pipeline development is in inner urban regeneration, and our $16 billion construction backlog doesn’t reflect some of the recently announced preferred positions in the infrastructure space.
Lend Lease’s global pipeline of large regeneration projects extends from Australia to Singapore and the United Kingdom.
Large-scale urban regeneration is large-scale, mixed-use redevelopment of inner urban locations, with a minimum development value set for each geography, profit opportunities for Lend Lease, and a lasting positive legacy for people and places.
These opportunities are found in creating medium- to high-density developments, which importantly
• Lend Lease has a global pipeline of large urban regeneration projects across Australia, Singapore and the
United Kingdom. • Major urban regeneration projects in
Australia include Barangaroo South in Sydney, Docklands in Victoria and
RNA Showgrounds in Brisbane. • Urban regeneration provides unique opportunities for the private sector to work with governments to upgrade infrastructure and create better economic, social and environmental outcomes.
include upgrades to the public realm and infrastructure, which are managed and aligned with policymakers.
The solution here is one where our integrated solution approach and our core values around safety and sustainability align to the creation of projects, the product of which is creating great places and improving economic, social and environmental outcomes for people and their communities.
Urban regeneration projects
In Sydney, the Darling Harbour Live consortium is delivering a world-class convention centre, entertainment and theatre precinct. Following a successful Public Private Partnership (PPP), Lend Lease has been able to upgrade a mixed-use neighbourhood in the vicinity of the University of Technology, Sydney (UTS) for Infrastructure NSW and the Sydney Foreshore Authority, and construction is well underway.
On the other side of Darling Harbour, the $6 billion Barangaroo South project is continuing. The project includes construction of three commercial towers, residential works and foreshore upgrades, and will create a new financial centre not only for Sydney, but for the region.
Outside of Sydney, a lesser-known project is the Waterbank development, a precinct near Perth’s WACA Ground. The $1 billion urban regeneration project is proceeding in partnership with the Western Australian Metropolitan Redevelopment Authority.
In Brisbane, in an agreement with RNA Showgrounds, Lend Lease is redeveloping the showgrounds and the inner city area of Bowen Hills. The first stage of infrastructure has been completed, and work is now underway on residential and commercial opportunities as we revitalise what has previously been a dour area of Brisbane.
Internationally, we have similar opportunities and positions with the City of London in Stratford, and the Elephant and Castle precinct – both of which are large-scale £1–£2 billion (A$1.83–$3.67 billion) regeneration projects.
Following that overview, I will focus on the drivers of urban regeneration and why Lend Lease feels that they align strongly to the major cities of Australia.
Infrastructure continues to grow and develop with roads, tunnels and bridges, among other things; however, it is also clear that inner-city urban regeneration represents an important opportunity for the sector over the next few years.
Australian cities are a favourable backdrop for these categories, with constrained areas with firm population growth and economic strength.
There are opportunities readily available to improve land use.
Government renewal plans are in place, and they align to what the improvement of that land use can be.
Everybody knows that investment in infrastructure is required and is a challenge, and the sector should be optimistic that there is great access to capital.
Looking at two case studies locally, I’d like to draw attention to Victoria Harbour, at Docklands in Melbourne, because it highlights some of the key drivers that I’ve been talking about.
Victoria Harbour was once a swampy wetland and an Aboriginal hunting and fishing ground, until it became an industrial area, filled in many times with the river relocated around it.
In the 1980s and 1990s, it was a port, warehouse and industrial area with containerisation requirements, meaning that new facilities needed to be developed. Docklands was abandoned, left as a derelict port area, cut off and contaminated.
Today, we consider the area the jewel in the crown of Docklands. Lend Lease was selected to revitalise the area in 2001. Our area of the project is around 30 hectares: one-third of the size of the Melbourne CBD.
Our 20-year agreement with the Victorian Government sets out maximum build-outs for residential, commercial, retail and office space. Places Victoria (the Government’s property development agency) retains the ownership of the site until such time as we wish to purchase individual parcels of land. All of the infrastructure within Victoria Harbour
Above: An artist’s impression of Victoria Harbour in 2021 Source: Lend Lease
Above: Artist’s impression of Barangaroo South Source: Lend Lease
Below: Victoria Harbour project overview Source: Lend Lease is provided by Lend Lease development, and has been rolled out well in advance of the built form coming into place.
We then make land payments to Places Victoria based on a percentage of gross revenue – land is acquired on a stage-by-stage basis once stage release requirements have been satisfied.
Importantly, Lend Lease has to hand back to Places Victoria an area for community and human services use.
We are working with the City of Melbourne, Places Victoria and the State Government to come up with a design that creates best value in the best place, aligned with government requirements.
Today, the Victoria Harbour master plan includes development of two distinct precincts: a City Quarter and a Wharf Quarter.
We are trying to leverage the heritage of the wharf area and improve access to Melbourne by extending Collins Street to the full length of the site. The project also provides a civic space between the intersection of Collins and Bourke Streets, which has more frequent public spaces, more points of public interest, and a better proximity and relationship to the water.
This can only come about by striking the right deal with government, and funding the infrastructure through that.
Dale Connor, Chief Operating Officer Construction & Infrastructure, Lend Lease, Australia
Dale Connor was appointed Chief Operating Officer of Construction & Infrastructure, Australia, in February 2013 and is based in Sydney.
Mr Connor joined Lend Lease in 1988 and has held a number of senior roles across Lend Lease. Most recently, Mr Connor was Group Head of Environment, Health & Safety. Previous roles also include Managing Director for the project management and construction business in the Americas region; Managing Director of Lend Lease’s military housing business in the Americas; and Executive Vice-President of Lend Lease’s investment management business in the Americas.
Mr Connor has widespread experience in project management and construction, as well as design, development and privatisation. He has worked extensively in the construction industry across Australia, the United Kingdom, China and the United States, and believes that working incident- and injury-free is a key principle to Lend Lease’s success.
Mr Connor holds a civil engineering degree from the University of Queensland, and is a member of the Association of Defence Communities and the Urban Land Institute.
The University of Southern Queensland (USQ) has been named Australia’s number one engineering and surveying distance education provider1. Combined with the fact that engineering and construction are named among the nation’s top five highest paying industries2, there is no better time to get your foot into the industry.
Studying with USQ means that you have the option to study on campus or online, full-time or part-time, or a combination of these modes. This flexibility ensures that you are able to maintain your work or life commitments while you study.
USQ engineering degrees are fully accredited by Engineers Australia and are recognised worldwide, so they’re perfect whether you’re looking to gain qualifications, upskill or accelerate your career.
Combine this with the fact that USQ is number one in Queensland for graduates in full-time work3 and you will be sure to achieve success in your career.
One specialisation offered at USQ is construction, perfect for whether you’d like to start off your career in building and construction, or if you’re interested in moving into construction management roles, such as a site manager or property developer. With construction job prospects expected to grow very strongly4, our degree will equip you with the knowledge and skills to enter this fast-paced industry.
This degree will give you a strong foundation in engineering principles to tackle problems in the workforce.
USQ also offers other programs in specialist engineering and spatial science areas, such as agricultural, environmental, civil, infrastructure management, computer systems, urban and regional planning, electrical and electronic, mechanical and mechatronics, power and process engineering, as well as in geographic information systems and surveying.
There is a range of degrees available, from associate degree to masters, all designed to meet the changing needs of industry and the busy lives of our students.
Matthew Brennan, a current USQ engineering student, says, ‘I chose to study at USQ because of the wide range of degrees on offer, particularly in engineering.
‘The level of dedication to its students and the facilities were other reasons why I came to USQ.’
USQ also recognises prior learning or work experience in the field, so you could fast-track your studies by receiving credit towards your degree. This could be in the form of a diploma through to TAFE.
So, whether you want to gain an engineering or construction qualification, upskill your award from TAFE, undertake study to gain graduate professional status or just talk to one of the industry’s leading education providers – talk to us!
For more information about studying engineering or construction at USQ, visit usq.edu.au/study/degrees/engineering, call 1800 269 500 or email study@usq.edu.au. 1 Department of Education, 2014 2 Seek Salary Survey, 2014 3 MyUniversity, 2013 4 Job Outlook, 2014
THE BURNING RENEWABLE ENERGY TARGET
With energy demand declining, changing the Renewable Energy Target (RET) has the potential to impact the financing of the Australian renewable market even further.
The renewable energy environment might be changing, but it seems that the Australian Capital Territory Government’s legislated renewable energy target of achieving 90 per cent of energy generation using renewable sources by 2020 is looking to rise above federal policy uncertainty and lead the charge in establishing independent renewable targets. Wind-farm developers have shown strong interest in the Australian Capital Territory’s recent 200-megawatt (MW) wind power capacity auction, with 18 proposals totalling more than 1000 MW of capacity reported to have been received by the Australian Capital Territory Government to date.
The huge response to the Australian Capital Territory auction is largely driven by the limited new offtake opportunities that are currently available for wind farm developers. The Australian Capital Territory auction process offers a 20-year feed-in tariff (FIT) and a high-quality offtaker backed by the Australian Capital Territory Government, which has also enabled much-needed certainty for investors and financiers.
On 23 September 2014, the South Australian Government announced its own state target to achieve 50 per cent renewable energy in its electricity mix by 2025, although this is only if the Federal Government maintains the current Renewable Energy Target Scheme arrangements.
Changing renewable environment
The development of renewable energy generation in Australia was supported by government policies in response to concerns about climate change, energy independence and economic stimulus. The Renewable Energy Target (RET) was increased in 2010 to 41,000 gigawatt-hours (GWh) per annum, encouraging a wave of projects that were being developed across the country. Banks geared up for significant growth in renewables financing, based on longer-term offtake contracts, increasing bundled power prices and a stable market for the large-scale generation certificates (LGCs) that would be regularly traded by finance and energy houses. By the end of 2013, 11 per cent of total electricity production in Australia – 19,088 GWh – was generated by renewables. As a market leader in renewable debt financing, ANZ financed more than $1.9 billion in total loans for eight wind farms during 2013.
As we reach the end of 2014, Australia’s power sector continues to face policy uncertainty, as the current government removed the carbon tax on 1 July 2014 and is preparing to amend the national RET again. At the same time, demand in the National Electricity Market (NEM) has declined significantly, with further falls expected before stabilising at lower-thanhistoric levels (see graph 1). Decreasing demand has been largely driven by falling electricity usage in energy-intensive industries (such as recent aluminium smelter shutdowns at Kurri Kurri and Point Henry), the impact of energy-efficient programs, and the growth in rooftop solar photovoltaics (PV). Significant investment in new renewable generation capacity has also added to the competitive pressures faced by the incumbent fossil-fuel generators, some of which have been mothballed or curtailed.
The Australian Government’s independent expert panel review of the RET scheme was released in August 2014, and presented a range of possible amendments to both the Large-scale Renewable Energy
Declining National Electricity Market (NEM) demand (graph 1)
Target (LRET) and the Small-scale Renewable Energy Scheme (SRES). These included capping the RET at current generation levels, or linking the RET to electricity demand growth, with only 50 per cent of any increase available to renewables. This would put the RET at a ‘true 20 per cent’ of electricity production by 2020, which was the scheme’s original intention. The SRES would be either abolished, or reduced so that the size of eligible solar energy systems moves from 100 kilowatts (KW) to 10 KW.
Bank financing considerations
The potential outcome of the RET review may increase concerns around sovereign risk in Australia, particularly given the ongoing uncertainty associated with the various renewable schemes, declining demand and low energy/LGC prices. New and current development projects dependent on the RET are likely to face further delays, as they wait for the government’s decision and the time when the proposed changes (if any) are incorporated and successfully passed into legislation.
In the meantime, many existing projects continue to benefit from longterm power purchase agreements (PPAs) sought by owners, which were critical in securing financing commitment from banks. Historically, wind farms in Australia have had long-term PPAs – typically up to 15 years. Over the past few years, however, tenor has reduced to 10–12 years due to energy prices and RET uncertainty, with financing arrangements being much shorter – usually around five years.
There are a large number of wind farm projects due to refinance in the next few years. While there is a dearth of supply of new opportunities, any competitive tension that this situation would normally be expected to generate will need to be considered against the increased uncertainty on the price path for uncontracted merchant risk beyond the offtake period. Capital structures may need to be altered to counteract the risk of lower merchant prices being received once existing PPAs expire.
One area of opportunity for electricity retailers and financiers (if the SRES is only reduced to 10 KW) is in the rooftop solar PV market, where technology is improving panel production rates and reliability, and lowering up-front costs to the point where subsidies are no longer required for consumers to gain a positive financial pay-off. This, in turn, is enabling new market entrants to gain the first-mover advantage, led by international solar players and domestic retailers. The International Energy Agency forecasts that rooftop solar in Australia will more than double over the next four years, with Australia to have 5 GW of installed rooftop solar capacity by 2018.
Over several years, banks have developed a favourable understanding of renewable technologies and appropriate funding structures, and have had substantial appetite to fund the sector, with significant competitive tension seen for each renewable opportunity. Developers and sponsors have shown a willingness to invest equity in these long-term assets, with significant development opportunities presently sitting in abeyance, and equity sponsors showing strong competition to secure the right
asset at competitive investment returns within the right regulatory environment. The Australian Capital Territory has taken leadership and shown willingness, desire and capacity to increase its generation mix towards renewables. In the absence of similar action, other states’ ambitions require a consistent federal direction to provide lenders, developers and sponsors with sufficient regulatory certainty to pursue further investments in this important global sector. We note, however, that federal considerations need to balance the desire for new generation from any source in an oversupplied market with other factors, such as impact on cost of living, sustainability and environmental targets, and community concerns around long-term composition of fuels used to provide our nation’s electricity.
