25 minute read
The Hon Dr Denis Napthine MP | Premier of Victoria
The Hon Dr Denis Napthine MP
Victorian Premier, the Hon Dr Denis Napthine MP outlines key planned or underway infrastructure projects in Victoria in a wideranging address to the infrastructure sector.
Key points:
• Victoria’s budget reforms see the state able to deploy a record infrastructure programme of $27 billion over the forward estimates. • The focus on urban rail and road projects reflects the substantial congestion and growth challenge. • The privatisation of the Port of
Melbourne is a key focus, with the proceeds to fund new infrastructure. • Privatising the Port of Melbourne means that Victoria must resolve the timing and impact of additional container port capacity. • Major investments in motorways and urban rail will equip Melbourne for growth and prosperity.
We have a very diverse and exciting infrastructure agenda. It’s an infrastructure agenda that’s being driven by the needs of people and families in Victoria. It’s an agenda that is to meet the needs of a growing population, and it’s an infrastructure agenda on which we are keen to work in partnership with the private sector to develop and deliver.
This infrastructure agenda is built on the back of hard work, in terms of economic management, and we’re fortunate, in terms of the 2014–15 Budget, to reaffirm our Triple-A credit rating and also to have budget surpluses in this year, and each and every year of the forward estimates.
We’re the only state or territory across Australia that has that strong budgetary position. And in early September, our Triple-A credit rating was reaffirmed by ratings agency Standard & Poor’s, who cited ‘the state’s very strong financial management, economy and exceptional liquidity’ and our ‘strong budgetary performance’ in a recent report.
But we don’t manage the economy well to get plaudits for economic management. We manage
the economy well so that we can deliver the services Victorians need, and the infrastructure we need to grow the great state of Victoria.
The State Budget
In our May Budget, we were able to provide $15 billion – a record level of funding – for health and education services, and vocational education and training services, as well as a record level of funding for law and order to make sure that we have a safe and secure state.
We’re also managing a $4.5 billion rebuild of our hospital system, which includes the $1 billion Comprehensive Cancer Centre in Parkville; the $630 million Bendigo Hospital, which is also delivering a hotel, conference centre and childcare centre, and is revitalising the heart of that great regional city; the $448 million Box Hill Hospital; $250 million Monash Children’s Hospital; $200 million investment in Barwon Health in Geelong; and redeveloping the Eye and Ear Hospital, just to name a few projects.
And, of course, in our Budget, we announced a number of key infrastructure projects totalling more than $27 billion. In real terms, that is the largest infrastructure spend by any Victorian government since World War II.
In my lifetime, I look back and think of five game-changing projects or pieces of infrastructure in Melbourne and Victoria. They include: the City Loop, when we first had our underground rail; the Tullamarine Airport, when we moved from Essendon to Tullamarine and built the Tullamarine Freeway; the West Gate Bridge; the building of the Thompson Dam, which drought-proofed Melbourne and Victoria; and, more recently, CityLink.
Each one of those projects was conceived and delivered by Liberal governments and I, as a proud Liberal Premier, am pleased that we are continuing
Left: IPA Chairman, Adrian Kloeden; Victorian Premier, The Hon Dr Denis Napthine; and IPA Chief Executive, Brendan Lyon
Above: The Regional Rail Link Source: Regional Rail Link Authority that same level of infrastructure investment to grow and develop this state.
The Leader of the Opposition in Victoria, not long after he was elected to the role, said that one of the reasons that the Labor Party lost the 2010 State Election was because the Labor Party, in 11 years in government, failed to invest in the infrastructure that Victoria needed to meet the needs of a growing population. And we are a growing population.
Recent Australian Bureau of Statistics (ABS) data shows that our population in Victoria is growing at two per cent per year, which is well above the national average of 1.8 per cent, and significantly above New South Wales at 1.5 per cent.
Addressing the demand pressures
It’s vital that we, as a government, meet the needs of that growing population; and one of those clear needs is public transport.
I’m pleased to advise that since we’ve been in government, we now have a public transport system that delivers 10,000 additional tram, train and bus services each week in Victoria, compared to when we came to government three years ago. We’re building 50 new trams, 40 new trains and 43 new V/Line carriages. We’ve also improved punctuality and reliability – for example, on one of our busiest lines, the Frankston (or Bayside) line, reliability and punctuality was at 62 per cent when we came to government. Punctuality on the Frankston line is now over 90 per cent, and across our whole system, we’ve had 28 months in a row of punctuality and reliability well over 90 per cent.
We know that there’s still more to be done, but that improvement was based on fixing the basics – fixing the sleepers, fixing the maintenance and fixing the infrastructure. We also know that as the population grows, you have to do more. You have to build the new infrastructure to meet the needs of a growing community.
And I want to talk about some of our major projects across public transport and across roads, across regional and rural Victoria, and ports.
One of the great projects that we’re undertaking at the moment is the Regional Rail Link. This is a project that is separating our country rail services, V/Line, from our metropolitan services to improve the reliability and punctuality of both so that they don’t clash in competition for slots on the rail system.
This project, since we’ve taken over, has increased in scope, it’s ahead of schedule, and it’s $900 million under budget.
Its budget was $5 billion – it’s now $4.1 billion, and it will deliver increased services. For example, when you separate the V/Line services, and our metropolitan services in the western suburbs and in the north-western suburbs – the Werribee line, Williamstown line, Altona line and even in the northwestern lines like Sydenham – more services can be put on. At the same time, we’ll be able to deliver better, more reliable services, and more services to regional centres like Bendigo, Ballarat and Geelong. And, indeed, in April 2015, when this project is in full operation, there’ll be an additional 140 services per week to Geelong, including an additional 30 peak-hour services.
And with those budget savings, we’ve actually dedicated more than $200 million to remove the St Albans level crossing – one of the most dangerous level crossings in Melbourne.
I’m also pleased to advise that the Regional Rail Link project won Infrastructure Partnerships Australia’s Infrastructure Project of the Year Award in 2014. That’s the sort of project management that we want, and we’re proud to have, in this state.
We announced in the Budget that we would be undertaking the Melbourne Rail Link, including the Airport Rail Link. This is a project of $8.5 billion to $11 billion. It’s about increasing the capacity of our metro system through the City of Melbourne. The City Loop has served us well, and it’s absolutely running at capacity. The Melbourne Rail Link will increase capacity through the city by 30 per cent.
It also facilitates services so that we can have virtually a turn-up-and-go system across Melbourne. We’re already delivering that on the Frankston line and on the Pakenham-Cranbourne line. So, on those lines, under our new timetabling, there are offpeak services every 10 minutes, and during peak times, there are services every two to three minutes. Passengers won’t even have to bother to look up the timetable; the service will be there.
But to do that across all our lines, we need to increase capacity through the centre of Melbourne, and the Melbourne Rail Link will certainly deliver that. It will also deliver a new tunnel from South Yarra through to Southern Cross. It will deliver new stations at Montague, which will service the growing Fishermans Bend area, and at Domain. It will be a massive project.
That project will also include the long-awaited Airport Rail Link. For those who know Melbourne, we’ve been arguing about the Airport Rail Link for over 40 years, but this project, as outlined in the Budget, is fully funded and will commence work in 2016.
The Pakenham–Cranbourne Rail Corridor is a project that we’re delivering through an unsolicited bid process. This will give us a significant improvement in capacity on that line of 30 per cent. It is our busiest rail line, and as part of a total package to upgrade that line, this project will deliver 25 new trains; high-capacity signalling, so we can run the trains much closer together; three new stations; four level crossing removals, or grade separations; and 3000 jobs.
Level crossing removals are a major issue in Melbourne. We have too many level crossings, which cause congestion and are dangerous, and we have a programme to get rid of them. From the last three and a half years, there are 40 level crossings that we’ve removed, that are currently out to tender, or that are in advanced planning of removal. Indeed, we have removed major level crossings in Mitcham, at Rooks Road, Springvale Road and two at Anderson’s Road, and we recently released a package of $660 million worth of tenders for St Albans, Burke Road in Glen Iris, North Road in Ormond, and Blackburn Road in Blackburn.
So, across our public transport system, we’re improving the existing system, and we’re investing in key infrastructure to increase capacity to grow the system as the population grows. But we know that you need the balance between public transport and road infrastructure. We do need to move our goods and services by road, we need people travelling to and from work, and we need people taking their children to the local sports ground, coming into the city, so you need a mixture of road and rail. That’s why we are committed to the East West Link.
East West Link
This proposal was originally put forth by Sir Rod Eddington in 2008, and it was embraced at the time by all sides of politics. It is an absolutely vital project for Melbourne and Victoria.
It will massively reduce congestion, particularly in some of our most congested areas. For example, where the Eastern Freeway joins Hoddle Street, and where CityLink joins the Tullamarine Freeway and Flemington Road.
It will deliver, in the western section, a vital second crossing of the river for Melbourne and Victoria. Currently, we only have one significant river crossing, the West Gate Bridge, which currently carries about 200,000 vehicles a day. All you need is for a taxi to break down – a minor incident – and the whole of the West Gate system, our M1 system, is absolutely crippled, causing congestion and chaos. Each and every morning, if you’re coming in from the west, you wait back to Laverton or Werribee to get on, and on the Western Ring Road, back to the Deer Park Bypass.
We are determined to build the East West Link, both Stage One and Stage Two, which will improve transport productivity and efficiency, with better access in and out of the Port of Melbourne and taking trucks out of suburban streets, taking trucks off the West Gate Bridge, and improving the economics of our transport system. It will create 6200 jobs, and it will certainly make a game-changing difference to Melbourne and Victoria.
We’ve announced that the East West Connect consortium is the preferred tenderer for Stage One, and we expect to sign the contracts in the next few weeks [Editor’s note: Contractual close reached in September]. We will build East West Link – it is absolutely vital for Melbourne and Victoria, and it is absolutely irresponsible for anybody to suggest that these contracts shouldn’t be honoured.
I also want to talk about Tullamarine Airport. One of the reasons that we need the Airport Rail Link is because over the next 10 to 15 years, Tullamarine Airport will go from 30 million passengers in a year to 60 million, and perhaps even higher. So, you desperately need that Airport Rail Link. But you also need to improve the road to the airport. We’ve done a deal with Transurban, so that there is an $850 million expansion of Tullamarine Freeway from the end of Flemington Road right through to Essendon Airport, and that will guarantee to reduce travel times to Tullamarine by 16 minutes, even in peak hour.
Those projects are vital for Melbourne and Victoria.
Of course, it is also important to invest in infrastructure in regional and rural Victoria, where I come from.
One of the major projects that we’re undertaking is the $220 million upgrade of the Murray Basin Rail Project. This will standardise the rail gauge from Mildura, down to the ports of Portland, Geelong and Melbourne, and link Mildura, finally, into the national rail grade.
This will make a real difference in transporting cereal grain and mineral sands, and will create opportunities for the future of linking north, from Mildura, to the key Sydney–Perth rail line. At the same time, we’re increasing capacity by 15 per cent, from 19 to 21 tonnes per axle.
On roads, we’re doing a $500-million expansion of Princes Highway west, duplicating Winchelsea and on to Colac. On Princes Highway east, we’re moving a duplication from Traralgon through to Sale. The Western Highway, another $500 million project, we’re duplicating from Ballarat through to Ararat and on to Stawell. In Bendigo, we’re spending $86 million fixing the Calder Interchange, the most dangerous intersection in Melbourne, which is also vital for transport productivity and efficiency.
We’re also upgrading the Great Ocean Road and putting in place the Koo Wee Rup Bypass.
Growing the state’s port capacity
We know that with the growth of trade, and imports and exports within a decade, the Port of Melbourne will be absolutely full. The Port of Melbourne is the largest container port in Australia, with 37 per cent of all containers going through there. There’ll be no capacity for growth, so we’re undertaking a project at the Port of Melbourne, at a value of $1.6 billion, to open up a third container terminal in Webb Dock East and, of course, to relocate our automotive trade to Webb Dock West.
So, when you drive over the West Gate Bridge and you look towards Tasmania, just lower your eyes
Below: Port of Melbourne. Source: Port of Melbourne Corporation
a bit and you’ll see that magnificent work going on at the moment, employing up to 3000 people, both on and off the site.
Despite that work, by 2030 to 2035, the Port of Melbourne will be full and there will be no room for further expansion. If we’re going to be the freight and logistics capital of Australia, and if we’re going to be a number-one port in Australia, then we need the next generation of port.
That’s why this Government has provided $110 million to start work to build the Port of Hastings – a natural deepwater port – close to Melbourne, and close to the fast-growing areas of Melbourne. We desperately need to build Port of Hastings by 2030 to 2035 to cater for growth and opportunities.
I’d also like to mention some of the urban renewal opportunities in Melbourne and Victoria. They are right across the state: E-Gate, near Docklands; Fishermans Bend in Melbourne; or the East Werribee Employment Zone, these are great opportunities for urban renewal.
And in country Victoria, in Junction Place where the rail line has been removed, we are opening up that part of Wodonga. In Ballarat, the Ballarat West Employment Zone, near the airport and near the major highways in one of our large regional cities, is another urban renewal opportunity.
The reason that we can do all of these things is because we have a Triple-A rated economy. We do have a strong budgetary position and, indeed, the recent ABS statistics show that State Final Demand in Victoria in the June quarter grew 1.2 per cent, compared to the national average of 0.4 per cent.
Over the year, growth in Victoria was 2.5 per cent, compared to the national average of 1.4 per cent. The unemployment figures that came out in early September 2014 showed that in the past month, there were 26,000 new jobs created in Victoria and, in the three and a half years that we’ve been in government, there have been 108,000 more Victorians in employment.
We have strong figures on building approvals, retail sales, consumer confidence and business investment. Victoria is also superbly placed in the growing Asian Century, where there are great opportunities in food and fibre, education, tourism and hospitality, financial and other services, advanced manufacturing, and biotechnology and scientific research.
This Government is about getting on with the job of building the infrastructure that we need for a growing population. Infrastructure that we need for a growing economy. Infrastructure that we need to create jobs, and grow new jobs in our community. We’re about building a better Victoria.
The Hon Dr Denis Napthine MP, Premier of Victoria
Dr Denis Napthine was sworn in as the 47th Premier of Victoria on 6 March 2013. He is also Victoria’s Minister for Regional Cities and Racing.
Dr Napthine was born on 6 March 1952, and grew up on the family farm in Winchelsea. Before entering Parliament, Dr Napthine attended Winchelsea State School and Chanel College in Geelong. He is a graduate of the University of Melbourne, with a Bachelor of Veterinary Science (BVSc) and a Master of Veterinary Studies (MVS). He also holds a Masters in Business Administration (MBA) from Deakin University.
A qualified vet, Dr Napthine held the positions of District Veterinary Officer, and Regional Veterinary Officer, and ultimately became Manager of the Hamilton complex of the Victorian Department of Agriculture and Rural Affairs.
Dr Napthine was elected to the Parliament of Victoria in the October 1988 State Election, representing the seat of Portland in the Legislative Assembly.
NEW FUNDING FOR PRODUCTIVE INFRASTRUCTURE
We know that infrastructure is the key to Australia’s competitiveness.
However, Australia’s infrastructure base is inadequate to meet our future needs, with the Organisation for Economic Co-operation and Development recently stating that ‘Australia’s infrastructure falls short of current demand…’1 .
Furthermore, the Australian economy is transitioning from a period of heavy investment in the resource sector to a period of production and output.
This new production phase will continue to make a significant contribution to the Australian economy. However, it is vital that we invest, and stimulate new infrastructure investment across the country, both to ensure that we support new jobs in the short and medium term as the resource investment boom tapers off, and to have the productive infrastructure in place to build a stronger economy for the future.
This is why the Australian Government is committed to building the infrastructure for the 21st century.
Since coming into government 12 months ago, the government has placed a heavy focus on working with state governments and the private sector to implement an infrastructure agenda that will drive the next wave of economic growth.
We are doing this in three ways.
The first step was to implement a strong pipeline of projects for the next six years. We did that in the budget by investing a record $50 billion in vital infrastructure projects across the country. Our budget measures will leverage over $125 billion of investment, and add one per cent to gross domestic product once the projects are completed.
Importantly, we will deliver many of these projects sooner than expected by using innovative financing models. This includes WestConnex stage two, which, through a $2-billion concessional loan to the New South Wales Government, will be delivered 18 months ahead of schedule. This means that stage one and stage two will be delivered at the same time.
Another example is in Perth, where we are partnering with the Western Australian Government to deliver the long-awaited Perth Freight Link under a public-private partnership. This will be the state’s first major infrastructure project delivered with a contribution from the private sector. The project will deliver a freight route directly to the Port of Fremantle, ensuring that produce can get to market more effectively and efficiently, and reducing congestion on local arterial roads.
Importantly, we are building on this pipeline of projects by establishing the $5-billion Asset Recycling Fund. It has been clear for some time now that, while private investors are reluctant to invest in new ‘greenfield’ infrastructure projects, they are willing buyers of stateowned assets. The initiative encourages the states to sell existing assets to private investors and recycle the proceeds of those sales into new, productive infrastructure. This fund will secure the viability of many new exciting projects, like an airport rail link for Melbourne and another harbour crossing for Sydney.
The second step in our infrastructure agenda was to reform institutions. We have already delivered important reforms to Infrastructure Australia, which will allow it to play a vital role in planning the next 15 years of Australia’s infrastructure pipeline.
Under our reforms, Infrastructure Australia will undertake a comprehensive audit of Australia’s future infrastructure needs, and develop, in partnership with state governments, a 15-year infrastructure pipeline.
The priority list will provide investors and the construction industry with a higher degree of transparency and certainty about what, where and when infrastructure projects will come to market.
The third step is to reform the infrastructure system.
There has been a growing concern among industry leaders and the community that the delivery of public infrastructure in Australia was inefficient and expensive, and that we were not using private sector investment to the best of our ability.
Upon coming to government, we tasked the Productivity Commission with undertaking a comprehensive review of infrastructure delivery and financing. Simply, the Commission’s findings show that the system is broken and in desperate need of reform.
The Commission’s report identifies that no single reform will address the infrastructure challenges facing Australia, but rather that comprehensive reforms to project financing, selection, governance and planning will be required.
The implementation of many of these reforms will be critical to building a strong infrastructure base at less cost to taxpayers.
I am currently consulting with state and territory governments on these reforms, and the Australian Government will respond to the Commission’s recommendations later this year.
Some of the areas we’re looking at include better selection of projects and the manner in which we plan projects; the transparency involved; how we better procure projects and reduce costs in this area; and how we better use and collect data to guide selection and execution of contracts.
We’ve said from the very beginning that we didn’t want the Productivity Commission to just be another report to sit on the government bookshelf. We wanted an action plan on how we can deliver projects quicker and at less cost, so that we can get better outcomes for the Australian people and Australian businesses.
If we can make the right infrastructure choices today, we can build a stronger economy and a better Australia for tomorrow.
TRENDS IN GLOBAL CONVERGENCE
Globally, infrastructure finance is enjoying a long renaissance as governments continue to seek economic stimulus and long-lasting competitive enhancements, while the private sector, ranging across developers, contractors, investors and financiers, values the stability and longevity of the asset class.
An accelerating theme of the infrastructure market is the global convergence of transaction participants and approaches. While the physical asset may be immoveable, the intellectual and financial capital supporting these assets has become truly global. Commonwealth Bank has responded with teams based in Sydney, Melbourne, London, New York and Houston, and is ranked number one globally for infrastructure project financing by Dealogic for the first half of 2014. Commonwealth Bank’s Infrastructure Project Finance experts Tracey Gibson and John Russell comment on some of the geographic trends that we are witnessing:
Investment capital
Pension and infrastructure funds no longer seek investments in their home markets; with increased allocation to infrastructure/ alternatives, business models that embrace third-party mandates and sophisticated foreign currency management allow a global outlook. Markets and countries with stable legal and regulatory profiles, along with deliverable transaction pipelines, have become preferred investment destinations. The Canadian Public Private Partnership market exemplifies this trend; it is now an established international market with more than 200 transactions closed, and domestic capital complemented by investors from the United States, the United Kingdom, Europe and Australia. Similarly, regulated utilities are global enterprises measured by the diversification of investors and lenders from all corners of the globe.
Governments
Governments are natural beneficiaries of the global trend. For greenfield projects or privatisations, attracting offshore investment or contractor capacity significantly increases competitive tension – to the ultimate benefit of the taxpayer. Australian governments have been particularly adept with direct engagement of offshore parties. The end result has been Canadian, European and United States funds opening investment offices, and contractors from those countries, plus Asia, now bidding for major greenfield projects. The one area in which governments remain somewhat parochial is risk allocation; while uniformly seeking transfer to the private sector, priorities vary notably by country and jurisdiction.
Tracey Gibson, Executive Director – Infrastructure, Project Finance (Australasia)
Contractors
The combined efforts of government entreaty and the advent of mega projects are drawing contractors together. Domestic competition and balance-sheet diversification make domestic and foreign contractors more natural allies. This has provoked the greatest reflection on transaction structures, and global experiences are applied to specific geographies – at times contrasting with the outlook of investors. A desire for harmonised terms to align with the head office location is apparent; although, with governments guiding risk allocation, this aspect of global convergence remains a work in progress.
Financiers
Financiers as a collective have been both proactive and reactive towards global convergence. During the global financial crisis, members of the global bank community recessed with Commonwealth Bank and other remaining active lenders filling this void. Cross-border bank volume has powerfully returned, and more interesting is the arrival of dedicated infrastructure debt funds, raising investment capital, and pension/life funds hiring inhouse expertise. In addition to capital mobility, lenders continue to add to global convergence through support of national champions, while also importing house practices perceived to give competitive advantages. Witness infrastructure debt funds focus on tenor and documentation, banks highlighting construction expertise, and the ability to back transactions with bid risk on a committed fund basis. Commonwealth Bank expects global convergence in infrastructure to continue, and we are motivated by the opportunities and challenges that this brings, as transaction stakeholders will all benefit from global best practices. Our contribution will be a continuing investment in knowledge, and maintaining a strong financial profile, to give our clients and counterparts meaningful support over the long term.
John Russell, Executive Director – Infrastructure, Project Finance (UK/Europe)
ACCIONA: BUILDING A BETTER WORLD
ACCIONA Infrastructure covers all aspects of construction, from engineering to project execution and maintenance, leading the way in global sustainable development.
Zaragoza Light Rail
ACCIONA is a leading international organisation and frontrunner in the development and management of infrastructure, water, renewable energy and services. The company was founded more than a century ago, has invested more than $630 million in Australia since 2002, and employs more than 500 people across the country.
ACCIONA Infrastructure is the oldest division within the ACCIONA group, constructing tunnels, railways, roads, bridges, ports and maritime works. The company has a solid foothold in international strategic markets, and has participated in some of the world’s most important works in the last half-century, including the Ting Kau bridge in Hong Kong, the A30 project in Montreal, Zaragoza Light Rail, and the Legacy Way project in Brisbane.
ACCIONA is an active participant in public-private partnerships (PPPs), having developed a total of 34 projects and a current portfolio of 22 assets. In 2012, ACCIONA won the Global Water Intelligence (GWI) Water Deal of the Year for the Mundaring Water Treatment project in Perth. The project was the first PPP in Western Australia, and consisted of the design, construction, financing, operation and maintenance of the new and existing infrastructure.
ACCIONA is the lead participant in a joint venture to design, construct, operate and maintain the landmark Legacy Way transport project in Brisbane, Queensland, and is also currently delivering the Warrell Creek to Nambucca Heads Pacific Highway project in New South Wales, and the Pumicestone Road project on the Bruce Highway in Brisbane.
In South Australia, ACCIONA is a 50-per-cent participant of the joint venture operating the Adelaide Desalination Plant for SA Water, and is bidding for water services and design-build-operate contracts in Western Australia, South Australia, New South Wales, Victoria and Queensland.
ACCIONA is also part of the Helena Water Consortium that is responsible for the finance, design, construction, operation and maintenance of the Mundaring Water Treatment Plant project near Perth.
The company is proud to have won various world-renowned awards, including the 2013 International Tunnel Project of the Year, for the Legacy Way project, at the International Tunnelling Awards; the 2012 Lord Mayor’s Award for Business Innovation; the 2013 GWI Water Company of the Year; and various other awards for its projects around the country.
www.acciona.com.au
