Future Building 2024 by Infrastructure Partnerships Australia

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LIVING INFRASTRUCTURE

87 ASSETS UNDER MANAGEMENT

A$73 BILLION PROJECT CAPITALISATION

DELIVERING ON THE PROMISE OF PUBLIC INFRASTRUCTURE

SYDNEY METRO

GOLD COAST LIGHT RAIL

NYAAL BANYUL GEELONG CONVENTION AND EVENT CENTRE

futurebuilding

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Chairman’s foreword

In September, Infrastructure Partnerships Australia hosted its flagship conference, Partnerships, in Sydney. As Partnerships inches towards its two-decade milestone, the value of the event in fostering good infrastructure policy and dialogue grows each year.

Partnerships represents conversations at the highest levels of our industry and, this year, new heights were reached. I am delighted to present this year’s edition of Future Building, which captures these conversations led by the most senior leaders in the sector, across government and industry.

In the opening address of the conference, Treasurer of New South Wales the Hon. Daniel Mookhey MLC inaugurated a new business case policy in the State to enhance efficiency, precision, and fiscal responsibility in infrastructure project delivery.

The conversation around infrastructure reform was also carried by the Minister for Infrastructure, Transport, Regional Development and Local Government the Hon. Catherine King, who, in her second Partnerships address as Minister, reflected on the progress of reform at a federal level.

Influential C-suite leaders added their voices to the day, shedding light on their unique programs of work –Macquarie Group’s Shemara Wikramanayake, on navigating the macro-economic factors at home and abroad; Sydney Water’s Roch Cheroux, on the critical capital program being undertaken to improve water capacity across Greater Sydney;

and Transurban’s Michelle Jablko, on the business growth opportunities on the horizon.

This year’s Partnerships also brought together senior leaders to examine how they are working towards solving pertinent industry challenges, including the formidable energy transition task, the rapidly expanding social infrastructure pipeline, and productivity enhancement in industrial relations, planning and technology.

In a first for Partnerships, and a reflection of the high-quality, exclusive member experiences we deliver, the event closed with a fireside chat between Sydney Airport’s Scott Charlton and Vanessa Hudson from Qantas. The two aviation leaders tapped into the opportunities for collaboration between their respective organisations.

As we embark on a new year, I hope that revisiting these conversations will offer fresh insight into many new and ongoing challenges and continues to inspire your thinking on how you can actively contribute to the future of our industry.

Sir Rod Eddington AO Chairman Infrastructure Partnerships Australia

Renewing renewables: how repowering wind farms will be a key step in achieving net zero targets

Many of Europe’s wind turbines are midway through their planned life; but rather than being a threat to net zero targets, upgrading existing infrastructure is an opportunity to give wind energy a powerful boost.

Europe’s first generation of large‑scale onshore wind farms is about to have a midlife crisis. About 20 per cent of the continent’s wind turbines are at least 15 years old. In countries that were early adopters of the technology, the figure is even higher, with about 50 per cent of turbines in Spain, Germany and Denmark aged 15 years or older.

Given the age of Europe’s early‑generation wind turbines and the comparatively lower expected life of these turbines, large swathes of Europe’s wind capacity will either be decommissioned or require renewal in the near future. The challenge of ageing wind turbines comes just as Europe is seeking to expand its

renewable energy capacity to meet net zero targets, and to ensure energy security in an increasingly uncertain geopolitical environment.

To meet this challenge, energy providers will need to partner with long‑term patient capital willing to fund the significant investment required for the energy

transition, while also refurbishing ageing capacity.

Some energy providers and investors – such as ERG and IFM Investors, through investments in assets supporting the energy transition – have already begun to confront this challenge. ERG is a long-established Italian energy group that, over recent years, has transitioned into a fully renewable energy business with wind and solar installations across Europe. IFM Investors, one of the world’s largest infrastructure managers, became a strategic partner to ERG in 2022, seeking to support the firm’s growth in line with its wider strategy. Through these and similar commitments, investors can aid the global transition to net zero, potentially capturing value as this transformation occurs.

Growing capacity through renewal

Industry group Wind Europe estimates that Europe must double its wind energy capacity by 2030 ‘to meet its climate and energy security goals’.

In this context, the ageing of Europe’s wind turbines looks like a challenging problem. But industry experts argue that it represents a major opportunity to repower existing assets and accelerate the growth of wind capacity.

Over the past 20 years, wind turbine technology has advanced dramatically. Repowering wind turbines (upgrading the ageing estate with state-of-the-art turbines) will not only keep existing wind farms operational, but will also deliver huge improvements in generating capacity that will help achieve renewable targets – all without requiring the expansion of a wind farm’s geographic footprint.

The potential for repowering to help Europe build energy security and

accelerate its journey to net zero is widely recognised. Wind Europe has described repowering as a ‘unique opportunity’ to rapidly increase wind energy production in Europe.

It is a view long shared by the European Commission, and the 2018 Renewable Energy Directive required streamlining for permit approvals for repowering projects. While approvals processes may still not be as rapid as many would like, the European Union has clearly indicated its belief in the importance of repowering. Moreover, the benefits of repowering are well‑proven and are also reflected in the work undertaken by ERG in recent years. This work includes: ► higher energy capacity: more than 2.5 times higher than existing levels ► higher energy production, with peaks more than three times higher than initial generation ► fewer wind turbines for a given capacity, cutting turbine numbers by almost half ► no additional land required.

Turbine technology

The potential of repowering stems from technological advances over the past 20 years that have enabled the scale and efficiency of turbines to increase significantly.

An average 20-year-old turbine is about 90 metres in maximum height to the tip of an upright blade, and has a generating capacity of 800 kilowatts. In comparison, the latest turbines vastly overshadow these ageing installations, reaching heights of up to 240 metres, with a generating capacity of up to 7000 kilowatts each.

Repowering in Sicily

Repowering existing wind farms in Italy is a central plank of ERG’s renewables

strategy. The group plans to increase its total renewables capacity both organically and through mergers and acquisitions, and repowering will account for a significant share of this expansion plan.

At IFM, this kind of active asset management is vitally important to creating value across its entire portfolio, and repowering is a great example of how there is significant value in the long-term ownership of renewable projects that private capital is able to unlock.

In addition to creating value for investors, IFM’s approach to repowering further underlines its commitment to the United Nations Sustainable Development Goals (SDGs). Within IFM’s net zero investments, the company aims to align with the SDGs when investing, and repowering of wind farms directly contributes to four of these SDGs.

The first of ERG’s repowering projects to begin generation was the Partinico-Monreale wind farm in the Palermo province of Sicily, which came online in 2023.

The wind farm at Partinico-Monreale first began operations in 2005, with 19 Vestas V52 turbines each with rotors 52 metres in diameter. The original site had a generating capacity of 16 megawatts and energy production of 27 gigawatt hours.

ERG’s repowering project has replaced these 19 units with just 10 state-of-the-art Vestas V136 turbines. No new land was required, and power capacity and power production has been boosted dramatically (see Figure 1). Similar repowering projects at ERG’s Camporeale and Mineo-Militello-Vizzini wind farms halved the number of wind turbines, with the 12 newly installed turbines in Camporeale having a generation

capacity of 50.4 megawatts, and increasing annual production from approximately 31 gigawatt hours to approximately 86 gigawatt hours. Mineo-Militello-Vizzini similarly went from 59 to 24 turbines, increasing annual production from 77 gigawatt hours to the 234 gigawatt hours.

The repowered Partinico-Monreale wind farm now produces sufficient electricity for about 18,000 households, and avoids 44,000 tonnes of carbon dioxide emissions that would have been created were the equivalent energy to be produced by fossil fuels.

The successful completion of the Partinico-Monreale and similar repowering projects demonstrates the potential of repowering, aided by patient pension capital, to governments aiming to achieve their emissions reduction policies. IFM believes that the private sector, particularly the energy sector, has a role to play in helping meet

global carbon reduction targets, by working with governments to enable the provision of the capital investment required for such goals.

Replacing smaller-scale turbines with larger state-of-the-art installations still requires thorough assessment of environmental impacts and sensitivity to local communities; however, because repowering involves upgrading existing assets rather than developing new wind farms on virgin territory, the obstacles should typically be lower.

Recycling

Repowering existing wind farms can also be carried out with the highly efficient use and reuse of materials. There is an active market for the resale of decommissioned wind turbines, either whole or as parts for maintenance, while the masts are suitable for recycling.

At Partinico-Monreale, 100 per cent of the existing wind turbines and masts have been recycled or sold for reuse in this way.

The age of Europe’s wind power infrastructure is leading to a significant number of assets becoming obsolete. Last year, 736 megawatts of wind-generating capacity was decommissioned. Despite this, repowering enabled some of these decommissioned assets to be replaced with improved infrastructure and, in total, repowering added 1.5 gigawatts, accounting for eight per cent of all wind capacity added in Europe during 2023.

With one in five European turbines due to reach the end of their expected life span with a decade, repowering Europe’s existing wind energy infrastructure will be a significant opportunity for active investment, and will play a vital role in achieving energy security and net zero targets. ♦

Welcoming address Adrian Dwyer, Chief Executive Officer, Infrastructure Partnerships Australia

Good morning and welcome to Partnerships 2024. I’m pleased you could all join us for what is going to be a day of candid discussion and open debate about the pressing issues in, and impacting, our sector by Australia’s most senior infrastructure leaders.

This year, we are delighted to once again host this event in Sydney, with an agenda that boasts a number of fresh, as well as familiar, faces on the Partnerships stage.

Last year’s event saw us gather in Melbourne during a time of deep uncertainty for the industry. We saw a range of government reviews taking stock of the infrastructure pipeline, earning 2023 the moniker of ‘the Year of Reviews’. If 2023 was the ‘Year of Reviews’, then 2024 and beyond must be the ‘Years of Delivery’.

I want to recognise that there are several individuals and organisations that have contributed to making Infrastructure Partnerships Australia the pre-eminent national voice for infrastructure: the Hon. Mark Birrell AM, the Hon. Nick Greiner AC, Tony Shepherd AO, and Mike Mrdak AO. Thank you for your wise counsel and commitment to us from the very start.

Macquarie Capital is also a substantial part of the Partnerships and Infrastructure Partnerships Australia story. As many of you know, Macquarie Capital has been the signature sponsor of this event from its inception and a stalwart supporter of our work across many fronts for nearly two decades. It is a partnership that we – our team, our Board, and our broader membership – are deeply appreciative of and one we know will endure for many more chapters.

Support for today’s event doesn’t end there. Macquarie Capital is joined by a range of other key sponsors that have made today, and our wider work program, possible. I would like to thank Silver Sponsors Transurban, CIMIC and Clayton Utz for their support and contribution to Infrastructure Partnerships Australia; and, finally, our Bronze Sponsors the Victorian Department of Treasury and Finance, The APP Group, Sydney Water, and Transgrid.

While some degree of clarity has returned to the market, and a way forward has been written, our industry is having to contend with a new set of challenges. On this stage last year, I said that if the global challenge of our generation is decarbonisation, then the infrastructure to support the energy transition is the opportunity of our lifetime – this still stands. However, it cannot be ignored that this has been a bumpy ride so far.

The contention that industry would symmetrically switch to delivery of the renewable energy pipeline as the mega-transport pipeline recedes has proven to be an overly optimistic forecast. In reality, the energy tide will not rise fast enough to replace the receding tide of transport

infrastructure investment. An energy transition delivered too late doesn’t serve punters, the planet or productivity. Making this task more difficult are the myriad disruptive forces swirling around the globe and locally. Geopolitical uncertainty is showing no signs of abating in Europe and the Middle East. Meanwhile, a major political change is inevitable in the upcoming US election – irrespective of the result, there will be a new president and new direction. Closer to home, Queenslanders took to the polls in October, to be followed by the rest of the country with a federal election that must happen in the first half of 2025. We are also sailing choppy economic waters, which are playing out in continually rising input costs and tightening budget bottom lines.

Despite all this, however, we should be quietly confident about the medium to long term. In the face of challenges, the industry has proven its capacity to steer the course and rise to these moments. The evidence is in the transport pipeline that we have managed over the past couple of decades, particularly in this city where we have seen the fruits of this labour with the recent opening of Sydney Metro. We can apply those same smarts to the energy transition, the water build-out and the social infrastructure boom, and we have the minds in this room to do it – but it will demand a step change from government and industry.

Treasurer’s address

The Hon. Daniel Mookhey MLC, Treasurer of New South Wales

Key points:

• Business cases continue to be an effective tool to inform government investment decisions, but are becoming expensive and time-consuming processes, stagnating decision-making and delivery.

• A new business case framework in New South Wales has introduced new, expedited processes and changes the circumstances in which business cases are required.

• The changes are designed to update and streamline the State’s business case processes to align with current market conditions, refine the purpose and content required in business cases, and reduce reliance on external consultants.

New South Wales Treasurer the Hon. Daniel Mookhey MLC opens Partnerships 2024

This Government is young and ambitious, and we have an agenda to build the future of our state. I want to talk about how we can build things faster, and how we can work better with industry to deliver the projects that our growing city, and our growing state, needs. We know that the industry also wants to get on with building these projects. We hear that, quite often, it is the government that trips itself up in red tape and slows down industry’s ability to get on with the job of building the infrastructure that we ask for.

I want to talk to you about a subject that is near and dear to all your hearts, and is certainly near and dear to mine, which is business case reform. In the last 15 months as Treasurer, I’ve been listening to so many people making the point that the manner in which the government makes investment decisions is too focused on box ticking, too risk-averse, and often so much broader than the task at hand warrants. To get projects moving, the government needs to streamline the way that we get information to make decisions more quickly. In economics, Goodhart’s Law says that when a measure becomes a target, it ceases to be a good measure. This is a warning against elevating a single practice that contributes to success to an objective in its own right. Otherwise, you end up maxing out that one metric to the detriment of other important things, as well as the overall mission.

I raise this because, at some point, someone pointed out that programs with very thorough business cases tended to go better than those with none. I have no doubt that that was true, and that it was an inspired decision to begin requiring them, as New South Wales did decades ago. Additionally, it was a good decision of the previous government to institutionalise that framework when it comes to major government decision-making. That framework, and the business cases that are a part of it, is a great tool to give the governments the right information to make decisions, and we intend to keep using them for this purpose. But these business case processes are expensive and time-consuming. With the wrong scope or parameters, they too easily waste money and delay projects being delivered for the community. In fact, an entire cottage industry has sprung up off the back of this work.

In New South Wales, we’ve reached a point where the business cases I’m often presented with, and being asked to fund, include large and expensive sections done for no other reason than to tick a box – hundreds of pages, months of work, millions of dollars. Many business cases canvass so many options, or conduct technical studies way before it’s clear that they’re needed, that they prevent rather than enable the government to make informed and timely decisions. In my first months in government, I had agencies asking me for enormous sums of money

to develop business cases. It was not unusual to receive requests for more than $50 million for a business case for a new infrastructure project. These funds would often be for a business case along with technical studies, and sometimes enabling works.

In 2023, the Finance Minister and myself were presented with $7 billion worth of unfunded programs. We were running a comprehensive expenditure review going line by line through all our expenses. The smallest amount we recovered in that review was 20 cents – that’s what we mean by comprehensive. But, following that, we carried out a strategic infrastructure review led by the hardworking team at Infrastructure NSW, which identified many examples where tens of millions of dollars had been spent on business cases, and no project was ever delivered.

Here are three examples. By far the worst were the proposals to build dams at Wyangala and Dungowan, with business case costs of $74 million and $60 million respectively. The previous government had kept these proposals cycling through the business case process for years to avoid making a decision. $134 million was collectively spent on dams that were never built and, from the earliest stages, it was obvious that they were never going to be built. $134 million is enough to build two primary schools.

An early intervention could have identified that these projects would not stack up. The final Wyangala Dam’s business case showed a benefit cost ratio of 0.05 or, to put it in quite stark terms, it would’ve been cheaper for us to provide the people of Tamworth with evian® water for the next 50 years than it would’ve been for us to fund that particular dam. Another, more recent example affected the centerpiece of our 2024-25 NSW Budget that I handed down in June. We announced the biggest-ever state government investment in social and affordable housing – 8400 homes – with half of these going to the survivors of domestic violence. We’re incredibly proud of that historic investment and even more keen for Homes NSW to get on with the job of delivering them. But for this initiative, Homes NSW was required to develop two business cases: one business case for new supply, and one business case for capital maintenance. They were to both go through Treasury business case and Infrastructure NSW assurance processes.

The difference between the two agencies’ processes and assumptions led to significant additional work and multiple updates to the business cases. The team ended up having to develop four separate business cases: two for each budget bid to meet Treasury and Infrastructure NSW requirements. Both asked for different, yet overlapping content.

In another case, School Infrastructure NSW has engaged a large consultancy on a rolling contract to prepare

all school business cases, even though this case for investment is based on simple population enrolment number calculations, which should be a pretty straightforward matter for School Infrastructure NSW to handle in-house. Having outsourced this capacity under the previous government, the agency and expertise went to the consultancy for a costly exercise, with the agency paying for what was essentially the same analysis over and over and over again. So, the evidence for the overhaul is clear; business cases to delay saying no to ‘dumb’ ideas, business cases for projects that were already approved, and a business case outsourcing model with a life of its own.

All of it is wasting time and money, slowing us down and preventing us from getting on with the job of building. The cost is one thing, but, of course, doing this work takes time, and slows down decision-making and delivery. In many cases where the government has already decided and funded a particular option, business cases are still being prepared, canvassing alternative options. All of these issues make it clear that we need to update our processes and untangle our own red tape. So, here’s what we’re going to do: we’re going to spell out three changes to free up our decision-makers, planners and builders to get on with the job of delivering the key infrastructure we need. First, we are creating a fast track to expedite decision-making for projects where government commitments are already made. If the government has announced and funded a particular capital solution – for example, a road like Mamre Road near Western Sydney Airport – the new guidelines will allow the project to progress directly to final business case or even procurement.

Second, the guidelines will allow for program business cases in place of individual business cases for projects where the fundamentals do not require repeated investigations. For example, rather than the NSW Department of Education having to prepare a business case for each school hall upgrade, they can do it as a package. This will reduce time and costs on projects where the case for changes is based on known need. We’re also dealing with business case bracket creep-through doubling the threshold where recurrent proposals require a business case from $10 million to $20 million over four years. Smaller proposals that previously required a business case will now be evaluated by short-form assessment. This will succinctly establish the problem to be solved, canvass alternative options and their costs and benefits, without the need for long and expensive business cases prepared by consultants. We’re also removing a requirement for lower-cost, lower-risk proposals to complete separate preliminary options analysis.

All these business cases need to be fit for purpose, which means, in general, the rules need to be more flexible

about in what order and in what circumstances certain options and technical studies should be required. That is when we’re looking forward to working with you, project proponents and partners, to make sure that we are seeking the right information at the right point in time. These new guidelines will not only tighten the scope for project assessments, reducing cost and saving time, but they will also sharpen the purpose, content, and definition of a business case to activities and analysis that are necessary for the government to make an investment decision. If these changes were in place five years ago, Treasury and Infrastructure NSW suggest that we could have avoided more than 1200 business cases – cases that cost money and delay delivery.

Now, there’s clearly obvious value in exploring options for a proposal that doesn’t go ahead. There are scenarios that may look good, but an exploration of options reveals hidden costs or better alternatives. There are also cases where the only solution is obvious, and a decision has been made, but reviewing the investment cases may be beneficial for fine-tuning and guidance. We don’t want to diminish any of these advantages, but we do need to get on with delivering our priorities with the relevant information for the right state of project.

I’m a student and a fan of former UK Prime Minister Tony Blair, in almost all respects, with a certain exception of his foreign policy. A key tenet of his government was evidence-based policy, which yielded some fantastic reforms. It helped break down old ideologies and methodologies. It asks people to look again at old problems and uncovered new possibilities. However, eventually, it generated its own antithesis: policy-based evidence. Letting process overgrow a purpose is the nature of some systems when you leave them untended.

It is human nature to become accustomed to a system and diligently perform tasks out of habit rather than necessity. That is why reassessment and shape-ups like this are necessary. The changes we are making are not a repudiation of the earlier framework; instead they are reformed to modernise it for our present conditions. They are a necessary revitalisation and improvement of important tasks. These reforms will see us continue to rely on thorough business cases for government decision-making, but they will adjust to ensure that we make the cases that need to be made.

Overall, this should improve the efficiency, quality and cost of decision-making in New South Wales, and ensure that we are in a better position as a government to partner with the infrastructure sector to get on with the job of building the schools, hospitals, power, water and transport solutions that we need for this, the premier state.

BMD is Australia’s leading integrated engineering, construction and urban development business. Over a 45-year history, BMD has grown to become a $2 billion operation, now sharing our expertise internationally in the Philippines and the UK.

Paving the way with our collaborative approach, BMD delivers innovative and comprehensive solutions across civil construction, engineering design, residential and industrial land development, project management consultancy, landscape construction and maintenance, and building construction. Our foundations are built on family values, which underpin our enduring collaborative approach. WE

largest privately owned civil contractor $2.31 billion revenue in FY24 #30 on the 2024 IBISWorld Australia’s exclusive Top 500 Private Companies list reaffirming BMD’s status as Australia’s largest privately owned civil contractor

BMD Group powers up for renewables future

Civil construction group believes that governments should help mid-tier contractors play a bigger role in Australia’s renewables transition.

BMD Group CEO Scott Power says that the Hawkesdale Wind Farm project in Victoria shows what can be achieved when mid-tier contractors collaborate to deliver renewables infrastructure.

BMD Group, a leading privately owned construction group, worked with Consolidated Power Projects on the project, north-west of Warrnambool.

BMD constructed 23 wind turbine foundations, access roads and hardstand areas to support heavy equipment. Consolidated Power Projects provided electrical works, including designing and installing the 33-kilovolt substation.

With the project delivered in March, the wind farm is expected to deliver approximately 97 megawatts of power – enough to power a small city. Spanning 2280 hectares, the wind farm is owned by Global Power Generation (GPG) Australia, a subsidiary of Naturgy Group.

‘From our perspective, the Hawkesdale Wind Farm bolsters our renewables portfolio,’ says Power.

‘It’s a good example of a how a highly collaborative relationship with our client can enable the delivery of a fantastic project and great community outcomes over the long term.’

BMD’s work with Consolidated Power Projects followed its successful collaboration on stage two of construction at the Crookwell 2 Wind Farm, north-east of Canberra – another GPG project.

In Central Queensland, BMD is currently helping deliver the northern section of stage one of the Clarke Creek Wind Farm – one of the largest projects of its kind in the Southern Hemisphere. Once complete, the project’s 100 wind turbines are expected to produce enough electricity to power around 330,000 homes each year.

Power says that BMD continues to expand its focus on renewables projects. In addition to wind-farm construction, BMD has been growing its capability in the water and wastewater sector, with projects

such as the Western Treatment Plant in Victoria being delivered with consideration to improving outcomes as defined by the United Nations’ Sustainable Development Goals.

‘BMD’s momentum in renewables continues to grow,’ says Power. ‘We’ve delivered positive outcomes so far in terms of project costs and timing. Renewables is an area that plays to BMD’s strengths.’

BMD’s regional footprint is an asset for renewables projects: ‘BMD has a large workforce that is used to working in regional and remote areas through fly-in fly-out arrangements. Our company also has a long history of engaging with local communities and other stakeholders, and minimising disruption from construction for farming and other activities,’ says Power.

Empowering tier-two contractors

As Australia races to meet its renewable energy targets, more collaborations involving tier-two contractors will be required.

‘When you look at the scale of the renewables transition ahead, governments must find ways to help mid-tier firms play a larger role,’ says Power. ‘We need more competition in this space.’

Power describes BMD as a ‘tier-two operator with tier-one systems’. Headquartered in Brisbane, with offices across Australia, BMD is a national group of companies engaged in engineering design, construction and land development.

Established in 1979, BMD is now Australia’s leading integrated engineering, construction and urban development business, and is one of the nation’s largest privately owned companies.1 BMD had a record annual turnover of $2.31 billion in FY24, up 13.8 per cent on the previous year.

‘BMD has developed signficant capability in infrastructure delivery over the last four decades,’ says Power. ‘We have the resources, people and expertise to play a larger role in the renewables sector, but current project requirements continue to overly benefit tier-one contractors.’

Power says governments often favour large global contractors over Australian-owned providers due to misconceptions about project risk.

‘There is a tendency to go with tier-one firms because they have the largest balance sheet and more resources, and are thus seen to minimise risk.

‘But over the years, governments have had to step in and rescue tier-one firms on some large projects. Also, many projects involving tier-one firms have gone well over budget and had long delays. It’s a false economy to suggest that the best way to minimise risk is using the largest firms for project delivery.’

Governments should make it easier for smaller contractors to compete on projects, says Power.

‘Governments could encourage mid-tier firms to develop collaborative business models and alliances, so they can take on more shared risk, and participate in large renewables projects.’

According to Power, greater ‘packaging up’ of projects is needed.

‘Current project contracting frameworks typically limit the size of projects that tier-two operators can work on. Packaging up projects and providing incentivised cost targets for tier-two firms would enable collaborations to bid for larger work.’

Streamlining reporting requirements for renewables projects would also support tier-two contractors, says Power.

‘Australia’s decarbonisation agenda is a good one, and BMD recognises the importance of strong reporting for renewables projects. But as this reporting requires more resources to collate and deliver, the current framework favours tier-one firms with more resources in this area.’

Opportunities through innovation

Power believes greater involvement of tier-two firms can unlock productivity gains for the renewables transition.

‘By encouraging tier-two contractors to work together and bid on larger renewables projects, governments will introduce greater competition and capability into the delivery of renewables projects.’

Change is needed. The pace of the energy transition has created logistical problems, particularly for regional communities lacking infrastructure to deliver billion-dollar projects. Mobilising large workforces in these areas, rising costs and community opposition towards some projects are other challenges.

‘The solution is greater dialogue and cooperation between government and industry on project delivery,’ says Power. ‘We must find new ways of working together to address early challenges in the renewables transition and deliver outcomes. If we don’t enable greater participation of tier-two firms on larger projects, Australia won’t have the resources or productivity it needs to achieve its renewables targets.’

Power is proud of BMD’s work within the renewables sector and is excited about the future. In addition to greater involvement in onshore renewables projects, BMD expects to deliver infrastructure for offshore wind farms. Through its work in the Philippines, BMD has developed skills in constructing onshore marine infrastructure to support these projects.

In the United Kingdom, BMD has gained experience in nuclear-energy infrastructure – a skill it believes could help Australia as it expands its focus on nuclear energy through the AUKUS agreement.

BMD is also increasing its focus on solar projects. ‘We’re doing more work in wind, water and nuclear, and rapidly expanding our capabilities in renewables. Solar will be an important extension of that work,’ says Power. ♦

To learn more about the BMD Group, visit www.bmd.com.au.

End note

1 BMD Group ranked 30th on IBISWorld’s Top 500 Private Companies list in 2024 by revenue.

Panel discussion Delivering the energy transition

Key points:

• Gas has been accepted more over recent years as a critical element of Australia’s energy transition, and can serve as a ‘last resort’ power supply, but nuclear seems unlikely to emerge as a key transition technology.

• Australia can meet its 2030 and 2050 targets, but requires decisive commitment from the infrastructure sector to plan for the long term once coal-fired power stations begin closing.

• Nurturing trust and continued, meaningful community engagement is critical to developing the social licence for the energy transition.

• Australia needs targeted, capacity-building local markets to develop selective energy infrastructure, but should retain a focus on its competitive advantage.

Panellists:

► Kim Curtain, Deputy Secretary, Energy, Climate Change and Sustainability, NSW Department of Climate Change, Energy, the Environment and Water

► James Hunt, Vice President, Power Systems and Services, Schneider Electric

► Doug Moss, Managing Director, UGL

► Brett Redman, Chief Executive Officer, Transgrid

Moderator:

► Joanne Spillane, Executive Director, Global Head of Private Capital Markets, Macquarie Capital

Delivering the energy transition panel – James Hunt, Doug Moss, Kim Curtain, Brett Redman and Joanne Spillane (left to right)

Joanne Spillane (JS): I’m absolutely delighted to be back on the Partnerships stage and moderating another discussion with this esteemed panel of industry leaders, who really do represent some of the key building blocks of the energy transition. To start, I’d like to frame this morning’s discussion around a theme that goes to the heart of getting the energy transition done well, and that is one of trust. This may not be the first thing that springs to mind when you think about the energy transition, but it really will require us to build trust en masse: trust between regulatory bodies and industry, government and consumers, and communities, contractors, and financiers, both debt and equity.

I would go so far as to say that building trust will, in itself, be one of the critical building blocks to getting the energy transition done well and effectively. So, I’d like to ask my colleagues, where they can in their responses, to reflect on the current state of trust and how we can continue to build that between all parties. I’m going to start by asking each of you to set out your particular part in the energy transition and reflect on how you actually engage with each other. Brett, let’s start with you.

Brett Redman (BR): Thank you. Transgrid is the transmission company that owns and operates the transmission network for New South Wales and the Australian Capital Territory. We have about 13,000 kilometres of transmission already owned and operated. We’re now deeply involved in building out the next wave of transmission projects to lead the energy transition that we’re all embedded in. We work very closely with government. We were privatised about 10 years ago, but we’re very intertwined with government at all levels, in all departments, given the nature of what we do. We’re also the nexus point for a lot of suppliers, contractors and equipment suppliers, as well as community relations and community dialogue about how to get all these things done. We’re in the middle of it and we’re at the front of it as we go through the energy transition.

Kim Curtain (KC): Within the Department of Climate Change, Energy, the Environment and Water in New South Wales, my part is energy and climate change. I think we have a lot of roles touching a lot of different spaces alongside the Energy Corporation of NSW, which is leading the delivery of the Renewable Energy Zone (REZ) projects. My part of the department is involved in the policy around the road map –not just in terms of the energy transition and transmission, but around generation, broader climate change and the role of gas in the future energy mix. We also have the NSW Government’s responsibility for reliability and thinking about how we keep the lights on, as well as the transition to renewable energy. So, there’s a lot of different touchpoints and I think a lot of the team members work very closely with all different parts of my colleagues on the panel.

I think on your point of trust, Jo, I’ve only been in this role for four months and I am extremely impressed by the calibre of people involved in the energy transition, as well as the focus

on where we’re trying to go. But I think we must bear in mind there’s a lot of things we’re doing that are new. We’re testing models, we’re doing things differently and bigger than we’ve done before, and it’s not easy. It’s a challenging space, but I think it’s an exciting journey that we need to go on.

Doug Moss (DM): UGL is a tier-one contractor and has been constructing these sorts of assets for more than 50 years now. This includes over 6000 kilometres of transmission lines, hundreds of substations, switch yards, numerous solar farms, battery energy storage systems and gas-fired power stations. We’re currently building one in northern New South Wales. We’re contracted at the moment to build over 1000 kilometres of transmission lines. It’s a very exciting time with lots going on.

On trust, I think it’s going to take a lot of strong relationships, and so lots of trust to make this happen in line with the Federal Government’s expectations in terms of the 2030 and 2050 targets. There is a mountain of work to be done. It involves everybody in the country and, as Brett touched on, lots of people will be affected by the work. So, I think there’s going to need to be a lot of trust to get this done. We do enjoy a lot of trust. There’s lots of strong relationships with both our clients –including Transgrid, for example – and our supplier base and subcontractors, and that entire ecosystem. I think we’re going to need to do very, very well to hit those targets.

James Hunt (JH): Schneider Electric is a global leader in automation, digitisation and energy management. We deliver artificial intelligence-enabled Internet of Things solutions into data centres, powering the grid, transport, infrastructure, buildings and homes. In 2024, we were named the most sustainable corporation on the planet by TIME magazine. In terms of how I work with those on the panel, if we consider Brett to be representative of all transmission and distribution companies, our software might be operating their network. Our equipment might be embedded throughout the network operating protection automation systems. Doug would be a partner of Schneider Electric whereby we would work on major projects together, delivering solutions for customers like Brett. Kim – it’s more likely that the office you work in has a Schneider Electric building management system or, like many, you would have touched a Clipsal light switch this morning on your way out of the house.

JS: Kim, as you know, there’s a growing concern that the delivery of the transition is not progressing as fast as we need it to. Infrastructure Partnerships Australia’s research recently identified the emergence of latent capacity in the market, which they’ve coined an ‘air bubble’. This is really the receding spend on transport infrastructure – road and rail – from record highs, and the oncoming tsunami of spending on the energy transition, which is taking longer to hit, forming a gap where we now have some latent capacity. What levers can government pull to accelerate the spend on energy?

KC: On that, there’s still a number of rail and road projects continuing, and a number of other infrastructure projects, but there’s also a lot of large energy projects being delivered already. I think it’s not a drought at the moment, but at the same time, some of the projects we’re looking at doing are very large, and are testing our regulatory regimes around planning and environmental issues. I think there’s a lot to work through in terms of looking at what we can do to speed things up and cut out red tape where we can. But anytime you’re changing a model, it takes time.

I think, from a NSW Government perspective, but also the other governments around the country and the Federal Government, we’re all very focused on doing this as fast as we can, but I think there’s a lot of parts to the puzzle that need to come together to be successful. It’s a really easy thing to say and a really hard thing to do.

DM: If it was easy, everybody would be doing it. This is complex and the scale of what we’re doing is probably the issue. The fundamental change in the energy mix that is going on, and will go on for decades, is vast. The scale of this investment, the scale of this change, has probably never been seen before in Australia and surpasses what’s happened in the transport sector over the past 15-20 years, and the resources sector through the resources boom. There’s lots of community pieces to this to be worked out, as well.

JS: James, any comments from you on those levers that could really accelerate?

JH: I think the only comment I would make on that is the earlier we move, the better. We are going to be up against a

number of other factors. We’re not the only game in town in terms of the energy transition. We are part of a global market, so other countries are doing the same thing that we’re trying to do. We’ve seen the impact on our supply chain here in Australia from the Inflation Reduction Act in the United States. Now, it’s not just energy transition investment in other parts of the world, but also investment in electrification, data centres, hydrogen and critical minerals. These are all factors that affect the same supply chain that we’re going to be accessing to deliver the energy transition here in Australia.

JS: That’s actually a good segue to my next question, which is really about this global supply chain issue and where Australia sits in the queue for the goods that we need to actually build the energy transition. The Federal Government has placed a really strong emphasis on its recent Future Made in Australia announcements in an attempt to meet some of this demand domestically. What are the cold, hard facts on how probable that is in the energy transition space? Is there a way for us to get ahead of the global queue and secure what we need? Brett, I’ll start with you on that.

BR: Let me answer in two parts. First, how are we going in the global queue? I’ve been talking about supply chains for years now, and the good thing is that with Federal and State Government support with underwriting agreements, we started to book production slots for critical and long-lead equipment some years ago. This has made us able to approach with confidence all the different transmission projects that we’re looking at. Interestingly, there is one observation I’ll make: I was reviewing papers for an upcoming Board meeting, and we’re

Macquarie Capital’s Joanne Spillane moderates the Delivering the energy transition panel

starting to cancel early slots, so I’m much less worried about the global supply chain at the moment. I am not dismissive of it by any means, but I think we’re getting ahead of that. On the critical path of things that we think about, long-lead equipment is something that we’re less concerned about versus some of the other challenges of getting things built.

On the local scene, I’m a massive supporter of Future Made in Australia and anything that we can do to support local industry. We need to be smart about it. The sheer scale of what we need to order for all these big projects just obliterates the local capacity. So, we’re ordering everything and offering order books to the local manufacturers wherever we can, but the order of magnitude is many, many, many times what’s capable locally. So, as we work out what we want to make in this country, I think we’ve got to be clear-eyed and think about where our competitive advantage is, versus where we can apply the skills, the training, the education, and the knowledge of the Australian workforce to really focus on the smarter parts of the supply chain. I think that’s where we really can build Australian capacity and not compete on the very industrialised, high-labour, poor-working-conditions heavy industry that we see in some other countries.

DM: I would support those comments. UGL still builds trains here in Australia. We’re the only locomotive manufacturer in the country, and that’s because of the unique requirements of those rolling stock here in Australia. It is an expensive place to manufacture. We have a very, very high standard of living, which is a fantastic thing. But to compete, should we be wasting our money on that, if we can buy it much more efficiently overseas? It is a fundamental question to be answered. I think we need to focus on some niche areas where we have a particular advantage, and where there is a particular need – something that is unique for Australia, like building trains, for example. I think we need to be selective, rather than trying to tackle everything, because it’s just not possible. As Brett said, there’s far too much to be done.

JS: James, before I leave this topic, any thoughts from you in terms of what we could do collectively to get ahead of that global queue?

JH: In terms of the global supply chain, we are a minor portion of global demand. Also, if we are trying to replicate different parts of the supply chain, you’re only ever going to replicate a very small element of it. The projects that we tend to deliver are very complicated projects. Any individual piece of equipment in a substation could come from 100 suppliers and have thousands of different pieces of equipment in it, so you’re never going to replicate the full supply chain. We saw some of the limitations of that come out during COVID-19. So, I think we can take a lesson from what we’ve seen, and Brett had a really good example there of forward ordering. What we’ve seen from the data centre business is that they’re very clear

about what they want – they’re clear about the timelines, and they’re willing to put investment dollars behind it in terms of either frame agreements or volume commitments, and place orders. That’s what gets them ahead of the queue.

In terms of what we do here in Australia, we do manufacture here in Australia. Schneider Electric has a couple of manufacturing plants, so it is possible. There is a very active electrical manufacturing business here that delivers for projects like Woodside, for our renewables projects and for battery projects. In terms of Future Made in Australia, as Brett said, I think we’ve got to be very clear-eyed. We’re not going to go head-to-head with China on solar panel manufacturing and try to achieve that sort of volume and scale. That doesn’t make a lot of sense.

But there are elements that would make a big difference to us here in Australia where we have a natural advantage, whether it’s through renewables, our clean energy or our highly educated workforce. We do have an opportunity to invest and then export that globally. If I use the example of leveraging customer energy resources, South Australia is a world leader in integrating those into distribution networks. Some of the things that are being done there are being taken to other regions where they don’t yet have the same solar penetration, but they will in the future. In terms of investment in critical minerals or energy apprenticeships, that makes sense. It’s something we need to do to be able to deliver on the energy transition in the next 10 years.

JS: I want to turn our attention to social licence, which, again, is at the heart of the energy transition in many respects. Brett, you’ve got a number of really significant transmission projects in New South Wales that require community support. Can you share what your experience is around this and what you’re learning in that space?

BR: So, there are a couple of things. One is that Transgrid hasn’t always got it right, and we need to own that and repeatedly go back to that because communities remember for many, many years where you haven’t got it right. We have to keep owning where we haven’t gone well, but learn from it and implement change. About three years ago, when I joined as CEO of Transgrid, we rebooted things like the strategy. One of our three strategic pillars is ‘nurture trust’. It’s the first one, and it’s quite deliberately the first one because without trust, nothing else happens. As a business, we can’t get on and do anything. So, in that context, it’s about giving landowners and communities, firstly, good information around what you’re looking to do, why you’re looking to do it and what choices there are.

The second piece, I think, is to ground everything in authenticity. One of the things that I think people find frustrating is a whole bunch of bureaucratic speak that allows the speaker in the moment to avoid having a difficult conversation. They can

kind of present as if all options are possible, even when they know most of them aren’t. So, I think a very authentic conversation that goes to what we feel needs to happen, what the key choices are, and what we can influence and change versus what we can’t, goes a long way. Within that, in some of our major projects like HumeLink and VNI West that we’re progressing at the moment, we’ve ended up making some major route changes as a result of community consultation that have addressed significant concerns. Even as we’ve talked about other parts of the routes that we can’t change, in the detail of where we build there’s a lot of micro decisions that we can make.

Finally, it’s about being conscious of being a good member of that community. We think about life not as a project builder that’s going to build something and leave a couple of years later. I know our contractors think well beyond that, as well, but we’ve been around for many, many decades in these communities, including pre-privatisation. We’re going to be there another 50 years, 100 years or 200 years – until you can get energy through space, we’re going to be in these local communities. That’s how we think about the engagement and the way that we approach every discussion.

JS: Thanks, Brett. So, Kim, here is a question for you, and I think you’re ideally placed to answer this given you’ve only been in your government role for four months. It’s really about a window into your world: can you describe what it’s actually like to be trying to deliver massive new energy infrastructure within government, and the constellation of different government entities involved in that? How does that work?

KC: Yeah, I must say it’s been an interesting one to get my head around. Being in infrastructure for most of my career, moving into energy has so many more layers of complexity. Probably the two big factors causing that are: the fact that whatever we’re doing in the electricity space has to hook in with the rest of the National Electricity Market. It’s so integrated that something we do in one part affects reliability in another part and it’s not simple to just add something; there’s a lot of coordination required.

The second is the fact that it’s a consumer-pays model, so we’ve got considerations around efficiency for consumers, but it’s not so simple. For government, we can’t just make a decision that this is what we want and then go and do it because we still need to consider what is going to be charged on to consumers. Then you have the regulators on top of that, including the Australian Energy Regulator and the Australian Energy Market Operator, as well as all of the other parties involved in each of the states, as well as nationally.

From our own State Government perspective, we’re coordinating with the Federal Government on access tenders. The work that the NSW Government is doing on Long-Term Energy Service Agreements must be coordinated with the Federal Government’s Capacity Investment Scheme. We

also need to coordinate with government entities around planning and environmental considerations that especially apply to transmission projects, which have huge corridors of land. So, the coordination piece, even just within the various governments, not just State Government, but with the Federal Government and all the other regulators and operators, is, I guess, an interesting map that I’m working out how to navigate.

JS: We’ve seen the re-emergence of the debate over our future energy mix in this country, and I’m interested in your thoughts on whether you think that that debate is actually going to have an impact on the future energy mix in Australia. James, I’ll start with you.

JH: We’re not really seeing much of a discussion around nuclear as a viable alternative in the Australian energy mix. Coal will be gone before nuclear arrives. It’s an expensive generation source. We don’t have a nuclear industry in Australia and it will take time to build one. If we’re going to have that debate, it’s probably one we should have had 15 years ago. What we do see is that the future is electric, the future is digital, the future is renewable. We’re seeing continued investment in renewable projects and in battery projects – so, projects that are on the sites of former coal-fired power stations. Large battery projects are continuing to proceed. In fact, we’re manufacturing equipment and delivering those projects with our partners right now.

DM: From a contractor’s point of view, we are here to serve our clients, essentially, plus the community, as well. So, we’ll do whatever’s required. It would be fascinating to work on nuclear, but I’m not so sure it is going to happen in my lifetime; however, we’d certainly be up for it. There’s plenty going on at the moment. There are plenty of new technologies that are being rolled out. Our people are very excited to be a part of it, as well, so I think whatever the mix is in the future, this sort of change, which is right across the globe, is very exciting for industry.

JS: So, setting aside nuclear, what about the emergence of some other solutions or a change in the perception of other solutions? For example, a continuing role for gas? Do you think there’s a consensus emerging, Brett?

BR: Yeah, I do. I think the feeling around gas has shifted in the last few years. Well done to the gas sector in really promoting the advantages of gas while owning and acknowledging the disadvantages. I feel they don’t shy away from some of the challenges there, but I think they present a good case. The result is that whenever you talk about energy, one of the real traps that conversation also often falls into is that people will start to passionately debate one type of technology, and they get entrenched in it as if it’s all of this and none of that. The future of energy will be a bit of everything. In the longer term, probably not coal.

I can see a future where gas is establishing its case as the backup fuel of the system, and just to remind everybody,

the backup fuel historically was diesel. A lot of pricing in the market was set around the cost of diesel. The way the market was created was that your last resort was to turn on diesel generators. I think gas will play that role in the long term. If you have an extended wind drought or an extended period where renewables aren’t working, gas can be that product that runs and recharges the battery and then turns off again when the weather turns, and we can get back to relying upon renewables as one of our primary sources.

JS: I would say that from a finance perspective, I’m seeing the same thing. I think there’s a growing consensus that gas is going to be here for longer and that it’s simply part of the energy transition. Meanwhile, investors tend to hide under their desks if you mention the word nuclear.

Are there any other comments on that, in terms of the consensus emerging around other solutions?

DM: Gas is going to be very important. It is part of the planning from the Australian Energy Market Operator and others in the sector. I worked out that there’s potentially another 15,600-megawatt gas turbine power station required over the next 20 years to be constructed. We’re currently building one at Kurri Kurri, just outside Newcastle, for Snowy Hydro, and it’s going to operate exactly as Brett described: when the wind doesn’t blow and the sun doesn’t shine. We need a mix of everything and I think gas is going to be an important, albeit relatively small, contributor, but obviously important when it is required.

BR: I was just going to make a quick comment when you talk about different solutions and what I think is likely to emerge. Into that longer term, and let’s go beyond 10 years, which is going to be a choppy transition period, success in Australia looks like a lot more energy being needed. Where will we get that energy from? There’s a lot of work going into offshore wind at the moment as a potential big source of energy in the future. A lot of our customers are offshore wind proponents, and we’re very supportive of them, but New South Wales, in particular, where it is deep water, floating offshore wind is an expensive technology.

Offshore wind is a technology that was developed around the world by land-restricted countries like Spain, the United Kingdom, Japan and parts of North America. The ‘Australian solution’, I think, is inland. I call it Inland REZ. So, if you look at some of our latest reporting that we put out in the Transmission Annual Planning Report, we’re exploring actively ‘go west’. I think there’s great opportunity for Australia at a cost that is much more efficient than what we might see in offshore wind, or in the more urbanised or farmed areas. That, I think, could be the Australian solution that most of the world can’t replicate, but that we can drive an advantage in.

JH: I’d probably echo a similar sentiment on the future of gas to Brett and Doug. It also gives us the opportunity to then transition that gas to hydrogen, supplemented gas, hydrogen,

biogas or ammonia. So, it’s a good transition opportunity for us. I should clarify that my comments on nuclear relate to Australia, not globally. We do service many customers around Europe in their nuclear power plants. I think that one thing we haven’t yet covered on what the future energy mix looks like is hydrogen. Hydrogen is that wild card where we see an enormous growth. The other thing is customer and demand side management. I think that’s often overlooked alongside energy efficiency. When we look at customers that have installed batteries in homes, fewer than one in 10 of them is enrolled in a Virtual Power Plant (VPP). Now, when we look at the potential for customer energy resources, we can see there’s up to $16 billion worth of savings in networks if we can leverage them. But if these customers are not in VPPs, we can’t leverage them. While it’s not the end of the world for now, those batteries, as people get electric vehicles, will start to go from being 10-kilowatt hours to 50-, 60- or 70-kilowatt hours, and become a much greater, underutilised asset.

JS: So, Kim, from a government perspective, what’s your view on other solutions, setting aside nuclear?

KC: At the moment, nuclear is sort of off the table from a legal perspective, but I agree with the other panellists. There’s a mix required here. We need to balance reliability as well as cost. Definitely renewable energy, and wind and solar, will play a huge part, but I agree, there has to be a role for gas in there. It’s just working out what the right balance is.

JS: My last question for each of you is: what is your level of optimism in terms of our ability to hit our 2030 and 2050 targets?

BR: I’m an absolute optimist in what we’re working through with transition. I think 2050 is certainly very achievable, and the world of 2050 is going to keep evolving. We’re not anchored in any particular technology, but I think it’ll firmly be a renewable future. 2030 I do think is looking very challenging with the delays that we’ve seen to date. Now, that doesn’t mean that you fall into the pit of despair. You talk about maybe a year or so

James Hunt, Vice President Power Systems and Services, Schneider Electric

of slippage rather than a cliff edge that creates a real dilemma in the market. Full credit to government in setting ambitious targets and backing it with policy, money and support. While I do think we need to, as a long-term industry, start to recognise that the sharp number of 2030 is challenging, the ambition and the optimism doesn’t change.

KC: I’d agree with Brett. I think I’m cautious about 2030. I agree, I think it’s great that New South Wales legislated the target for 2030 as well as 2050. That 2030 is coming, and as we’ve been discussing, a lot of the energy projects take time. But, of course, the 2030 and 2050 targets are about all of climate change, not just energy. So, energy is just one part of a very large puzzle. Certainly, in New South Wales, we have some large heavy industries with Boral, BlueScope, Orica and others, where if they don’t achieve their transition, then actually, the whole state can’t reach its transition. It’s such a big part of our emissions.

So, I think on one part I’m cautious about 2030 because I think there’s still a lot to do, but I think what keeps me awake at night more is around 2033, as Brett was saying, in about 10 years’ time, when we have a number of coal-fired power plants coming offline – that’s their current proposed time to close. This means that while hitting 2030 is important, I think what is more important for us is to make sure we’re

hitting that 2033 from an energy transition perspective so we have that reliability going forward. I don’t want to turn the focus only to short-term projects at the expense of long-term projects that’ll help us hit those really important milestones just after 2030.

DM: It’s going to be exciting to try, no matter what happens. It’s going to be a great ride for the next couple of decades. From a contractor’s point of view, there’s going to be plenty of interesting, important work. 2030 is hard, no doubt, but I think it’s a bit of a beachhead: something to aim for. 2050 is certainly achievable, absolutely.

JH: I’m an optimist. I would say there are challenges in getting there by 2030. We must ensure we don’t get bogged down in ideological debates around one technology over another, and that we solve the landholder access issues. I think the other thing is that we need to invest early, otherwise we run the risk of hitting that peak from other nations, and other industries taking capacity. I think we need to press forward on the ‘no regrets’ options – renewables, batteries, electrification and efficiency. For 2050, I think it’ll really be down to how aggressive we go on decarbonising heavy industry and the other segments of the economy.

JS: Well, that’s quite an optimistic way to conclude this discussion. Thank you very much for your insights.

Kim Curtain, Deputy Secretary, Energy, Climate Change and Sustainability, NSW Department of Climate Change, Energy, the Environment and Water

Developing world-class infrastructure in Australia

Australia stands at a critical juncture in its net zero journey, with increasing demand for clean energy and low‑emission infrastructure. Navigating this complex energy transition requires ambitious and innovative solutions to ensure the necessary infrastructure is planned, progressed and completed, while also remaining on time and within budget.

In managing this transition, Australia’s public infrastructure market is facing one of its most critical periods of project activity. Over the coming years, today’s work will shape engineering opportunities for generations, by creating new skills for advanced roles, and building new transport and energy infrastructure that helps Australia meet its targets for a low carbon future.

AtkinsRéalis is at the leading edge of this transformative journey, with its Engineering Net Zero Programme developing skills and undertaking projects that will contribute to achieving net zero carbon emissions by 2050.

In recent years, Australia’s infrastructure sector has seen a marked decrease in risk appetite, because the supply chain is less reliable than in previous years, especially for materials and talent. But this hesitancy is heralding new engineering approaches to designing and building key infrastructure, such as public mass transport, clean energy and defence, including AUKUS.

The huge investment into public transport systems across Australia –including trains, light rail and improved road systems – is instrumental in aiding government decarbonisation efforts. AtkinsRéalis is proud to be involved with nationally significant transport projects, including the Sydney Metro,

and ongoing work in Queensland as the state prepares for the Brisbane 2032 Olympic and Paralympic Games.

Developing future talent

To ensure that Australia has skilled labour to meet the demand for essential public infrastructure, AtkinsRéalis is working closely with contractors and delivery partners, bolstering their teams with technical capabilities.

AtkinsRéalis has created a global supply chain of engineering and technical skills. For instance, AtkinsRéalis draws on existing internal skills in Canada, and its Global Technology Centre in India, for its hydropower and substations business. Like Australia, these large countries require long‑distance energy transmission, and have the knowledge and skills embedded to successfully implement the required infrastructure.

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Building resilience

In the long term, these skills will help futureproof Australia’s infrastructure. Infrastructure resilience will become more important, as will making data intelligence led decisions for the operation and maintenance of high value assets – leading to improved life cycles, less downtime, and significant improvements in running costs.

Now is the time to fully embrace the opportunities that technology, international talent, and collaboration can bring – to ensure that AtkinsRéalis’s long‑term infrastructure projects set global benchmarks for resilient and sustainable transport, clean energy, and defence systems. ♦

Keynote address

The Hon. Catherine King MP, Minister for Infrastructure, Transport, Regional Development and Local Government

Key points:

• Over the past three years, the Federal Government has pursued a more targeted and coordinated approach to infrastructure investment through reform.

• Reforms include undertaking the Independent Review of Infrastructure Australia, commissioning the Independent Strategic Review of the Infrastructure Investment Program, and issuing the first Infrastructure Policy Statement.

• A new Commissioner-led model will oversee direction of Infrastructure Australia as the Federal Government’s principal infrastructure adviser.

I have had the pleasure of addressing Infrastructure Partnerships Australia events for quite a few years – both in opposition and in government. In preparation for this year’s event, I had a look back at my speech in 2021.

Back then, I criticised what I saw as a grab bag of different promises more focused on the political cycle than on taking advantage of the unique role the Commonwealth can and should play as a large infrastructure investor. I also called for a targeted, planned and coordinated approach to infrastructure investment from the Commonwealth.

In 2021, I promised to you that an Albanese Labor Government would take infrastructure investment seriously. We committed that we would refocus Infrastructure Australia (IA), that we would work with our colleagues in the states and territories to refresh the infrastructure investment pipeline, and that we would outline a clear set of principles that would guide our investment in projects across the country. Three years on, we have delivered on those commitments.

The first of our major reforms passed parliament in 2023, when we restored IA to its role as the Commonwealth’s principal infrastructure adviser. We redefined IA’s mandate and the products the organisation delivers to better serve the needs of government. This includes not only a more targeted Infrastructure Priority List, but also independent advice across other sectors as well, including energy, housing and communications. These reforms were realised through the 2024-25 Federal Budget, which was, somewhat remarkably, the first in which IA’s advice played a formal role.

I was pleased to appoint Tim Reardon as Chief Commissioner, and Clare Gardiner-Barnes and Dr Gillian Miles as the Commissioners of IA for five-year terms. These three Commissioners bring a wealth of experience across

public and private sectors, and will significantly strengthen IA’s capability in transport, engineering, regional experience, strategic oversight, leadership and complex projects. I would also like to thank Gabrielle Trainor AO for her contribution while acting to support the transition to the new governance arrangements, and as Acting Chair of the IA Board before that.

After reforming IA, we did the hard work of sitting down with our state and territory colleagues through our Independent Strategic Review of all the Commonwealth’s investments. This review was an important step in ensuring that the Commonwealth’s land transport infrastructure pipeline is sustainable and fit for purpose. It was about addressing financial pressures on the pipeline, easing the pressures on inflation, understanding capacity constraints and ensuring that when we committed to a project, we could deliver it.

The review found $33 billion worth of known cost blowouts, and that without significant changes, the Commonwealth would be unable to commit to any new projects for 10 years. While these findings were not unexpected, they were, of course, not easy reading for any government. They meant that we had to make difficult decisions and ensure the pipeline of Commonwealth investment better reflected delivery capabilities.

It is with those lessons in mind that I then issued the first ever Commonwealth Infrastructure Policy Statement. This statement recognises the unique position of the Commonwealth as an investor in nationally significant infrastructure, together with states and territories. It positions the Australian Government not just as a source of funding for projects, but also as an instigator of change and social improvement through what we choose to invest in.

This statement commits the Commonwealth to focusing on delivering nationally significant infrastructure projects. ‘Nationally significant’ refers to those projects that have a clear role for the Commonwealth, and which deliver on the three policy priorities for our investments: productivity, including building resilience into our freight network; livability; and sustainability.

The Infrastructure Policy Statement also clearly outlines that the Government’s preference is for a 50-50 funding split across the costs of projects with our state delivery partners. This means that both levels of government carry an equal share of both the benefits and the risks, particularly when it comes to scoping projects to minimise unexpected cost escalations. It means that prior to the Commonwealth putting money into construction, states need to scope and properly plan projects. Ensuring that there is a shared understanding of project cost, scope and benefit is fundamental work, and work that we are now doing together.

We are embedding these principles through the new funding agreement for transport infrastructure between the

Commonwealth, states and territories. I am pleased to say that South Australia, Queensland, New South Wales, Western Australia, the Australian Capital Territory and Victoria have all signed up to the new Federation Funding Agreement Schedule for Land Transport Infrastructure Projects. The new agreement governs the Australian Government’s investment, in partnership with jurisdictions, in nationally significant infrastructure projects.

Guided by the Infrastructure Policy Statement, we want to ensure the agreement embeds infrastructure investment settings that are sustainable, well targeted and aligned to market capacity. As part of the negotiations, we’ve been working with jurisdictions to identify opportunities to deliver wider social, economic and environmental benefits through our collective investment. This already extended to Indigenous employment opportunities, and has been expanded to cover women’s workforce participation, the inclusion of recycled materials in our projects, measuring embodied carbon, road safety and supporting local businesses when we procure for our projects.

This agreement also ensures that we are properly investing in the maintenance of our highways and roads. The previous government froze indexation of Commonwealth road maintenance funding at $350 million per year. Road maintenance funding had not been increased by the previous government since 2013, which means every year since the election of the Abbott Government, road maintenance funding in this country has faced a cut in real terms.

That has finally changed this year, with us not only locking in future indexation at 2.5 per cent per year, but backdating that reform to when the freeze was brought in, taking the total funding in this Budget to $460 million in the first year, and increasing each and every year thereafter. This is an important mechanism for states and territories to improve safety on our road networks.

Through our reforms like this, the Commonwealth is investing more money in transport infrastructure across Australia than at any point in our history – with the 10-year pipeline now sitting at more than $120 billion.

The reforms have also meant that, in working with states and territories, we are getting more of that money out the door and delivering projects. Through the 2023 calendar year, public sector expenditure on road construction was $18.8 billion – an increase of 18 per cent on the previous calendar year, and the highest level of spending on roads ever achieved in Australia. We have similarly been able to deliver significant investment in rail, with $13.4 billion spent.

In the 2024-25 Federal Budget, we announced that the Commonwealth is now investing in some new projects, and ensuring the delivery of others. This includes:

► $2.75 billion into the Sunshine Coast Direct Rail in Queensland, with 19 kilometres of new dual-track rail line from Beerwah to Caloundra

► $5 billion into the North East Link in Melbourne that will save commuters more than half an hour on the roads and get 15,000 trucks off suburban roads each day

► $7.7 billion into the Torrens to Darlington Project in Adelaide, helping drivers bypass 21 sets of traffic lights, which has been tendered and constructed much earlier than we had anticipated.

We have also been able to invest in more projects in remote and regional areas, including sealing roads to Imanpa, Emu Point and Mungkarta in the Northern Territory, and investing an additional $466 million in the 2024-25 Federal Budget for projects up and down the Bruce Highway in Queensland, bringing our total investment in the Bruce Highway to more than $10 billion.

In Sydney, we’re getting on with major projects important to this state, including investing almost $1.9 billion to upgrade important road and rail infrastructure, and support planning for future projects in the west of the city. In total, the Government has now committed over $17.3 billion to deliver major road and rail projects in Western Sydney, along with the Western Sydney International Airport and Moorebank Intermodal Precinct. These projects will reshape not only the way in which this city works, but also the way the economy of this city works.

Finally, infrastructure needs to keep up with technology and new ways of working, and this work will also look at how we can support innovation and improve the uptake of productivity-enhancing tools. As a government, we are doing so with a number of projects using Modern Methods of Construction, like the Metro in Sydney, which has adopted the use of prefabrication, or at the new Crows Nest Station, which is using precast concrete beams, allowing for safer, more sustainable and cost-effective construction and easier, faster repairs should the need arise.

But at the same time as improving our use of innovative technologies, we need to get with the times with culture and equity. The infrastructure sector offers incredible careers that allow you to take part in projects that literally shape the nation. But too many women do not see a place for themselves in this wonderful industry. To have only 13 per cent of your workforce being women can only ever hold us back – particularly in an era of skills shortages and high demand for labour.

I commend Infrastructure Partnerships Australia for its involvement in initiatives like the global Women’s Infrastructure Network, and I encourage everyone here to consider how they, or their organisation, can make their workplace and industry a more welcoming place for over 50 per cent of our population.

TRILITY making a bigger splash in water services

Successful diversification into training and consulting adds to TRILITY’s growth.

For TRILITY Managing Director

Francois Gouws, diversification is about responding to client needs and harnessing the organisation’s skills.

It’s also about expanding TRILITY, a leading water and environmental services provider, into new markets, such as training and consulting, and new geographies.

Gouws believes diversification is the key to TRILITY’s momentum and the catalyst for its next growth phase.

‘The results of TRILITY’s diversification strategy continue to exceed expectations,’ says Gouws. ‘We have built and grown several operations, and laid the foundations for new ones this decade. The client response has been very encouraging.’

From humble beginnings in 1992, TRILITY has become a partner of choice for government organisations and corporates in Australia and New Zealand.

Today, TRILITY services more than 600 water facilities and has five factory outlets that manufacture modularised water-treatment equipment.

‘Demand for TRILITY’s services continues to grow as water utilities increase spending on water-treatment plants in expectation of drought,’ says Gouws. ‘Longer term, Australia’s ageing water infrastructure assets and climate change are driving demand for water services.’

Growth in Solutions and manufacturing

TRILITY’s diversification strategy has solid foundations. A decade ago, TRILITY began building its Solutions business to complement its core water Operations business. Solutions provides modular solutions, network services, project delivery, servicing and audits.

‘Solutions has become a business in its own right,’ says Gouws. ‘The market

required a broader range of services, and Solutions has grown from there, taking TRILITY in new directions.’

Building a manufacturing business for modularised water-treatment plants was another priority.

‘There was an unmet demand for containerised water-treatment equipment, particularly in rural areas,’ says Gouws. ‘We are proud of the impact that TRILITY’s solutions are having in remote towns.’

Geographic expansion is another feature of TRILITY’s strategy. The business currently delivers wastewater services in New Zealand’s North Island.

TRILITY’s work at the Rotorua Wastewater Treatment Plant has been a highlight, having achieved significant progress on earthworks and installations. The business has also delivered multiple modular water-treatment solutions across the region.

‘New Zealand is an important market for TRILITY,’ says Gouws. ‘Like Australia, demand for water and wastewater services in New Zealand continues to grow. We believe TRILITY can help more New Zealand organisations with their water needs.’

In Australia, TRILITY recently opened a Darwin office, adding to its national footprint.

‘Like other parts of Australia, the Northern Territory faces the challenges of ageing water infrastructure and growing communities. This is where TRILITY’s strengths come into play: delivering solutions for upgrades to existing infrastructure and modularised water-treatment solutions to help remote communities.’

Adding new capabilities

As part of its strategy refresh in 2021, TRILITY decided to grow its training and consulting businesses to develop additional sources of growth.

In 2023, TRILITY became a fully registered training organisation (RTO:46056). TRILITY Training Services offers nationally recognised qualifications and training programs designed for the water industry. Delivered by water industry professionals, the programs cover a range of water, wastewater and network topics.

Since its launch, the training business has continued to attract enrolments, with strong demand for the service from Queensland local governments an early highlight.

‘TRILITY Training Services aims to be the industry-leading educator of the National Water Training Package for the Australian water sector,’ says Gouws. ‘TRILITY has been providing chlorination training for many years; now, as a registered training organisation, we also provide nationally recognised training and certificate courses. In our first year as a registered training organisation, we have already seen a huge demand for water-operator training.’

The training business allows TRILITY’s industry professionals to deliver industry-based training to other organisations across the water sector. ‘TRILITY has some very experienced

people in water who are keen to give back,’ says Gouws. ‘Training is an excellent way to share that knowledge.’

In consulting, TRILITY offers its water industry specialists to a broader range of organisations. The business currently operates more than 43 water treatment plants in Australia and New Zealand, and has a strong group of highly specialised experts.

‘We are expanding TRILITY’s consulting business to leverage its skills in analysing water-quality data, identifying water trends and in forecasting,’ says Gouws. ‘We see plenty of opportunity to expand our consulting services in Australia and New Zealand.’

Sustainable long-term growth

Gouws is excited by TRILITY’s potential to grow existing businesses, develop new ones and expand into other countries.

‘We’ve come a long way in the past decade, and many opportunities lie ahead,’ Gouws says.

In Australia, water utilities are expected to collectively increase their annual capital expenditure from $5 billion to $10 billion by 2027, according to the Water Services Association of Australia.

Gouws expects TRILITY to expand geographically this decade into South‑East Asia and parts of the Pacific.

‘TRILITY is known as a water services provider, but our broader remit is environmental services,’ says Gouws. ‘We see potential to take TRILITY’s experience and knowledge in water, and apply it to other parts of the environmental services industry.’

TRILITY wants to build on the success of the environmentally friendly solution it offers the market. This solution disinfects existing and newly developed network systems using mobile ozone generators, allowing water discharge without residual chemicals.

‘We’re focusing on the disinfectant service in Queensland and plan to expand in other states and territories,’ says Gouws. ‘The mobile ozone generators provide excellent disinfection results.’

People and passion

Growing TRILITY’s 300-strong workforce is another focus this decade, says Gouws. ‘There are more opportunities than we can pursue at this stage due to shortages in skilled labour. It’s vital that TRILITY continues to build and maintain a larger workforce and provides attractive career opportunities.’

For Gouws, a pleasing aspect of TRILITY’s growth is its expanding environmental, social, and governance focus on areas such as Indigenous reconciliation and cultural awareness.

As part of its Reconciliation Action Plan, TRILITY wants to raise its employees’ cultural awareness and strengthen relationships with Aboriginal, Torres Strait Islander, and First Nations businesses.

‘As TRILITY grows, we are determined to maintain the same passion and dedication we always had to make the world a better place through excellence in water, wastewater, and environmental services.’ ♦

To learn more about TRILITY, visit www.trility.com.au.

Keynote interview Shemara Wikramanayake, Managing Director and Chief Executive Officer, Macquarie Group

Infrastructure Partnerships Australia’s Adrian Dwyer hosts a sit-down with Macquarie Group’s Shemara Wikramanayake

Key points:

• The Reserve Bank of Australia increased its policy rate by less than other industrial economies, but will be slower to ease, as inflation has not fallen as fast in Australia as in other countries.

• Economic and structural challenges have slowed Australia’s private capital investment, but we have started to see an uptick in activity.

• The global infrastructure market is broadening, with energy and data assets emerging as the two most important asset classes, but traditional infrastructure remains a safe investment opportunity.

• Australia remains in a strong global position to attract private capital, but is in competition with other countries, particularly the United States, that face similar fiscal pressures.

Moderator:

► Adrian Dwyer, Chief Executive Officer, Infrastructure Partnerships Australia

Adrian Dwyer (AD): Thank you very much for joining us today, Shemara. We’ll start with a fairly broad one – what’s your sense of the Australian economy at the moment: where are we headed and how do we stack up globally?

Shemara Wikramanayake (SW): Thank you, Adrian –good to be here. We’ve been running at a slightly different speed to the rest of the world, and our inflation is proving still quite sticky. I think in the second quarter of 2024, we were coming out annualised at 3.8 per cent or 3.9 per cent underlying, which is what the Reserve Bank of Australia (RBA) looks at. Given that, even though growth is sluggish here, only running at one per cent, our rates are still holding up. Now, I should say that one per cent growth is actually stronger than just about every other G7 economy except the United States, so our growth is reasonable compared to our global peers.

But around the world, we are seeing that central banks are starting to look at reducing rates. In fact, some have started. Now, the Federal Reserve is expected to reduce soon. Whereas in Australia, I think what the central bank is seeing is that inflation is still resilient, so they’re holding rates higher. But in due course, we think that with things like the tax cuts that are coming through, and rates coming off soon, that we should see growth pick up here, as well. As I say, in summary, we are running stronger than most of our global peers, but

our inflation is pretty sticky, so our cycle is probably running slightly differently.

AD: So, with that mixture of economic signals – a bit of a patchwork – what’s your sense of when the RBA will move on interest rates?

SW: As I said, they’ve been approaching things slightly differently, and the RBA didn’t hike interest rates as much as some of our peers around the world because they were trying to sustain the employment pick-up that we had after COVID-19. Frankly, that seems to have worked in that our unemployment rate is around where it was before COVID-19. For many economies it’s higher, including for the United States. All our big peers – the United Kingdom, Canada, New Zealand and the United States – are running at higher unemployment than before COVID-19.

So, that’s why their economies are slowing more and their inflation is slowing more, and this is why their central banks are able to reduce rates a little bit sooner, whereas with the RBA, I think it’s running a little behind those economies. Data keeps changing, so you’ve got to keep evolving, but we think at this stage it’s about six months behind, and that should drive a pick-up in the Australian economy, together with what’s happening with the stage three tax reductions here.

AD: I guess the obvious follow-up from that is what’s the impact on investor appetite for the infrastructure sector? What are you seeing when you talk to clients?

SW: There are some impacts, obviously, from what’s going on in the interest rate cycle, but there are also impacts structurally in terms of what’s happening. So, I think we have to look at what’s happened to date before we look at what will happen from here. What’s been impacting the sector is that while interest rates have increased, the value of assets fell, and that had a denominator impact, with people allocating away from private markets to public markets, or having to allocate less to private markets. So, fundraising got a bit slower for the infrastructure funds. What was taking 17 months to raise had started taking 30 months.

Having said that, investment also slowed because buyers and sellers couldn’t settle on meeting the expectation gap, as they were waiting for rates to stabilise before deploying money. So, we have record dry powder now in infrastructure funds. It is at US$376 billion. People have kept saying it will pick up, and it will pick up because rates were expected to stabilise or come down. But we’ve had other factors, like US elections, causing people to pause deal activity. We’re also finding that the Government debt levels are a factor in deals becoming available.

We are starting to see things pick up, though. Our asset management team is saying that from having seen a deal a month, it’s picked up to a deal a week, and they are deploying more capital. We’re seeing, in this financial year, more capital

getting deployed. The advisory team, as well, is seeing a very good pipeline, and the big US banks that have been reporting are also saying they’re starting to see a decent pipeline. But there still is some caution with people waiting to see these rate cuts come through. There are also structural issues in terms of private investment in Australia. In infrastructure, as you know, one of our leaders said, ‘It’s everything from the deadly boring right through to the barely interesting’. But where this sits in people’s portfolios is the defensive asset class of the capital-protected, long-duration yielding asset class, and you need regulatory certainty and investment environment certainty to give money to that asset class. That, I think, is the bigger factor.

Australia is pretty well positioned on that scale on a global basis. We are considered a safe economy to invest in. So, we generally find that if there are sectors that we are looking for capital in, this will be one of the places people like to deploy because we’ve had a long history of private capital coming into infrastructure. The regulatory side, the market side, and the demographics here mean that this is generally considered a pretty good place to invest in infrastructure. So, there’s a structural factor that I think does weigh positively towards Australia.

Then, there is the cyclical aspect in activity pick-up, which is impacted by what’s going on in interest rates, but also deal flow availability here. I was reading in the papers snippets of deals being reported, but I think the market needs to feel more settled and confident, and then, structurally, we need to see activity.

AD: When you think about the infrastructure sector and those more permanent factors that make Australia an attractive place to invest globally, have you seen us change in relative terms compared to other jurisdictions of late? Or do investors look through short-term choppy waters?

SW: Well, I think relative terms are important for sub-sectors. There are sub-sectors like the traditional infrastructure asset classes like social infrastructure and transportation infrastructure, but then, there are the newer sectors, like energy transition and digital infrastructure that people are investing in. I think the frameworks that each country creates to attract investment are important for those. In the United States, they’re doing a lot with the Inflation Reduction Act and the Jumpstart Our Business Startups (JOBS) Act in terms of attracting capital. We are also doing a lot to respond to that. So, it’s how are we attracting capital to this market relative to the other comparable investment options, and Australia is taking action, as well.

AD: Globally, it’s been a year of elections, including in lots of markets you are operating in. The elections that spring to mind include the United Kingdom, French, Indian and Indonesian. What impact have you seen globally from the elections that have already happened?

SW: I think there were going to be 64 elections this year, and then Macron decided to add another one, so we’ve got 65 that have happened, or that will have happened, this year. For most of them, we haven’t seen material change in approach. Obviously, the United Kingdom had a change of government. India had Modi come back, but with a reduced majority. We’ve had election results in Mexico, India, Indonesia and South Africa.

Generally, the same factors are applying in each country that are impacting infrastructure investment, which is that debt levels of governments have become very high since COVID-19 due to the fiscal stimulus that was needed. They need much more private capital to help them in basic infrastructure investment in developing countries to uplift living standards, and to replace existing assets in developed countries. Then, these areas we talked about, like the energy transition and the digital need, are also driving need for capital.

So, we think that long term, the structural need for private capital into infrastructure should persist. We haven’t really seen a new government in any country come in saying, ‘We’re going to change things a lot.’ I talk about the United Kingdom, where we’ve had quite a big shift after many years of conservative leadership, with the Labour Government in power now. It is very focused on trying to attract private capital into the United Kingdom to help lift standards. Everyone has got to tailor their glide path to attract that capital.

AD: Certainly, we saw the United Kingdom Labour Government recently announce that it intends to bring private sector provision into the National Health Service (NHS).

SW: It’s a big focus for them as to what they do about the NHS. Private capital has a role to play, but the public side, as we all know, has to create the environment for that money to come in, which is a reliable framework. As I said, you need, in infrastructure as an asset class, a safe glide path and certainty that you’ll have the framework. We also need a pipeline of transactions, because it’s not worth putting all the effort in if there’s just one wind farm or solar project.

Also, there are the concierge services that the United Kingdom has done a great job setting up, which can hold people’s hands as they invest. All these things are really important – streamlining and permitting, for example. So, with the NHS, they will need to think through where exactly in the health system private capital can play a role, set up frameworks for it to participate, and set up a pipeline of opportunities.

AD: Arguably, the most important election is yet to come in, of course, the United States. How are you approaching the US election? How are you thinking about it – in particular, things like the big pieces of infrastructure legislation, like the Inflation Reduction Act, and the Infrastructure Investment

and JOBS Act? How are you looking at what they might change depending on which new president wins?

SW: Ultimately, in terms of infrastructure investment, it’s really driven at the state and local level. That’s where the regulated assets are. The fact is they also have a very high debt-to-GDP ratio. They have the Municipal Bond Market, which helps them a lot, but they need private capital.

Frankly, as everybody knows, it’s the Republican states that have taken up about two thirds of the opportunity under the Inflation Reduction Act – which has been quite a stimulatory act – but which has attracted a lot of capital to the US market. In the last two years, there’s been another US$493 billion of investment flow into the United States. It’s up 71 per cent in that two-year period.

Now, in terms of what’s gone into areas in manufacturing, clean energy and transportation out of that, it’s been US$89 billion, which is a four-times increase since the Inflation Reduction Act. For clean technologies, such as carbon capture and storage, sustainable aviation fuels and hydrogen, the increase is 12-fold in that two-year period. I know there is talk of Trump not wanting the Inflation Reduction Act to persist, and it potentially was an act with no limits, but there are a lot of projects up and running that I don’t think are going to get shut down. They’re waiting for things like permitting to allow them to happen. But there still should be a decent flow.

There’s certainly been an attraction of private capital into the United States as a result of those acts that has some momentum to run regardless of government. The Trump policies, as you know, are very focused on huge increase in tariffs, continuing the tax cuts and reducing immigration materially. Those could be quite inflationary policies. In terms of investment into infrastructure, the structural environment that’s been created should continue to attract capital.

AD: So, in that global context, I want to come back to the appetite in Australia. You spend a lot of time travelling the world and talking to clients. What do they tell you about the Australian infrastructure sector and their appetite regarding where they want to put their money?

SW: Well, you have your ‘Australian Infrastructure Investment Monitor’ that you published late last year, where you say that we’re continuing to see significant appetite herebecause of the things we talked about – maturity, track record for delivery, economic stability and demographics.

In terms of climate transition, we are seeing a lot of the global players having interest in investing in the projects that are being put forward here. The environment created for the offshore wind, the battery programs, the solar programs and the onshore wind opportunities are all attractive. Shell, BP, ENGIE, TotalEnergies and Iberdrola – we see them all coming here wanting to invest in Australia. We are trying to do things to respond to the Inflation Reduction Act: for example,

Infrastructure Partnerships Australia’s Adrian Dwyer hosts a sit-down with Macquarie Group’s Shemara Wikramanayake

the Future Made in Australia policies that have been put in place to try and attract capital here and the programs that are being run.

But I think this Federal administration, and a lot of the jurisdictions, seem very committed to attracting capital for the energy transition. We are looking for a 43 per cent reduction and still sticking to our net zero timing targets for 2050. We’ve got the Hydrogen Headstart program, which is allocating billions of dollars. We’ve got the Capacity Investment Scheme. We’ve got money given to Clean Energy Finance Corporation for investment. We’ve got the Safeguard Mechanism to disincentivise the biggest emitters from emitting. So, all of these things are seeing potential projects and capital flow here to Australia.

Bloomberg estimates that, by 2050, we will need US$2.4 trillion of investment in Australia and, by 2030, we need to grow our renewable capacity by 135 per cent to 126 gigawatts. You’ve all probably seen the Australian Energy Market Operator reporting that our eastern seaboard is a 50- or 60-gigawatt market and if we’re going to renewables, it’s got to become multiples of that because of the intermittency. So, these are the stats on what needs to be invested.

Now, the public and private sector are going to have to work together to deliver all that, and we need the public sector to create the stable framework so the private capital can go into it.

AD: To broaden the question, what are the thematics? There’s energy, we’ve spoken about that a lot, and there’s digital. Are there other areas you are seeing as emerging or persistent themes?

SW: I think, at the moment, the two big new areas are the energy transition and digital, and this is globally. In our history of investing in infrastructure, the places we invest in have evolved. Infrastructure isn’t just hard assets, it’s something that has a bit of a moat around it so that the cash flows are protected – typically residential service assets. In the early days, obviously, we all started investing in things like transport and roads, and then ventured into ports, airports, utilities and now more social infrastructure, such as hospitals and schools.

Now, much more, we’re investing in digital infrastructure and data centres, including fiber-optic networks, towers, and assets.

And the energy transition needs huge investment. This is not just in renewable projects and the grid, but its impact on transport, agriculture, buildings and heavy industry.

So, those are places of opportunity for investment.

AD: We certainly are tracking social infrastructure, particularly hospitals, as a substantial growth area of infrastructure investment, but there is probably not the

appetite here yet to get more private capital involved beyond the baselines that already exist.

SW: People are investing in other areas of health care –such as radiology centres and digital health. The framework has to be really created for hospitals to become an area that private capital would want to go into. But I think those are the main areas.

AD: I wanted to move to a slightly different subject. You recently opened your new global HQ at 1 Elizabeth Street, above the new Sydney Metro Martin Place Station. I wonder if you could touch on your reflections on that journey of a phone call to Nicholas Moore six or seven years ago to where we are today.

SW: Yes, we talked about the history of Martin Place and the development of infrastructure in Australia – beginning with the original custodians of our land, our First Nations people, the Gadigal people of the Eora Nation, and moving to the arrival of European settlers and the role of Governor Lachlan Macquarie, whose name we took, in pioneering infrastructure with the start of early hospitals and roads in this colony, and in the area surrounding Martin Place. Governor Macquarie also relevantly started the first bank and the first coinage. Prior to that, the big infrastructure project of George Street from Brickfield Hill, which is around Surry Hills to Bridge Street, was paid for with 400 gallons of rum. So, it was great that we had Governor Macquarie push out the centre of the holey dollar and create this big monetary stimulus through doubling the coinage.

Then, in the 1890s, the first road was put in at Martin Place and was pedestrianised much later in 1970 when the first railway station was put in place. So, there’s a long history of infrastructure development that’s ultimately culminating in this next big phase where the State Government has spent about $21 billion on this new rail network that connects the cities north–west and south–west through the CBD.

As well as halving 50-minute journeys in some instances, the project is also delivering improved travel safety, technology enablement, accessibility and sustainability in terms of the climate emissions of this huge piece of infrastructure.

When the NSW Government first decided to do this rail project, our former CEO, Nicholas Moore, took the initiative to submit an unsolicited proposal to upgrade the whole precinct. The proposal included building 39 Martin Place, taking over and developing 1 Elizabeth Street, and putting in place civic facilities in terms of retail, shared spaces and public art to anchor Martin Place again as a centre of activity in the largest city in Australia, and draw people back there.

The project has been our largest balance sheet infrastructure project ever. It allowed us to contribute to a significant development in our home city, and includes our new global headquarters. It also brings all of our people in

Sydney back together for the first time in 25 years in one amazing, world-class workplace.

AD: Treasurer Jim Chalmers was at the launch and mentioned the different phases of the Australian economy. The fourth phase, as he described it, was this technology piece and the digital infrastructure. I know that there’s lots to talk about in that space, but maybe you could just trace out how you see that as the investment thematic.

SW: Yes, he talked about three things in the fourth phase – financial, services, energy, and digital or technology – and two of those impact infrastructure. In terms of what’s going on with energy, we have 105 gigawatts of renewable projects on our balance sheet and in our funds around the world in either development, construction, or operation. These are facilitated through our multiple platforms, like Eku Energy, our battery business, Aula Energy, our solar business and Corio Generation, our offshore wind business. We see lots more opportunity to come together with the private sector and drive solutions for Australia and many countries.

Wikramanayake, Managing Director and Chief Executive Officer of Macquarie Group, provides insight into the current macro-economic environment

On the digital side, as we know, things like artificial intelligence and these large learning models are increasing the need for data centres globally, and with that, there is a huge need for energy, as well. It is estimated that the world’s energy needs will go up seven per cent.

Our investment in AirTrunk was made about four years ago and, since then, we have been pleased to support AirTrunk in growing eight times from where it was when we first invested in terms of capacity – and taking it beyond Australia into Hong Kong, Japan, Singapore and now Johor, Malaysia.

That’s a thematic, I think, that’s got a very long way to run – not just in digital infrastructure, but also in things like fiber optic networks, towers, communications and infrastructure. COVID-19 was a big driver of getting us all to engage a lot more virtually and remotely, and that theme has continued.

Learn more about Macquarie’s role in infrastructure at www.macquarie.com/insights.

Shemara

Unified Utility Models help engineers to trust underground data

Reveal has launched a new Unified Utility Model to help engineers understand the murky world of underground utility information, and deliver projects on time and on budget.

Most infrastructure construction projects begin with an engineer or computer‑aided design (CAD) designer compiling maps from asset owners of all the existing utilities in a project scope area. It’s a painstaking and time consuming exercise and, as many project managers will know, it can also be fruitless – existing utility plans are often incomplete and inaccurate, leading to inevitable design rework and delays on the ground as contractors uncover unknown utilities.

Slot trenches and trial holes can be dug to verify existing plans, but these low coverage necessary investigations often impact larger areas and cost more than required, causing major disruption to the public and the community through traffic closures, noise, pollution, and carbon emission.

The field of utility locating has emerged over the past few decades to fill the gap in providing accurate data on the location of underground utilities.

Typically, this information is only gathered by contractors prior to starting construction. Vital information about anomalies or undocumented utilities that could help inform design decisions goes unrecorded, or remains as paint marks on the ground to be washed away over time.

To improve project outcomes and drive safer, more efficient infrastructure construction, Reveal has developed the concept of a Unified Utility Model – a 3D utility map that combines all sources of data on the underground in a framework that can be accessed and understood by engineers at the concept and design phases of a project.

The Unified Utility Model takes existing utility plans and informs them with the results of geophysical investigations and visual verifications to produce accurate, comprehensive models of the underground that are compatible with building information modelling and CAD environments.

The Unified Utility Model applies internationally supported utility detection and mapping standards, such as PAS 128 and AS 5488. Engineers can easily interpret and rely on the intuitive visualisations that accurately describe both the underground detections and the risks associated with them.

In the example shown above, the Unified Utility Model depicts the existing utility record, the results of the utility investigation and the updated 3D visualisation of the asset, with a chain of evidence showing how the model has been derived.

Armed with the Unified Utility Model findings, engineers can design with confidence, knowing they are minimising the risks of project delay and cost overrun that impacts most infrastructure construction in Australia. ♦

Contact Reveal today to learn more about how your engineering consultancy can deploy Unified Utility Models on your next project.

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STRAILastic_R Green Track Systems – as unique as your city

Today, large cities are much more ecological, and are quieter and more sustainably aware. They are continually looking for new ways to increase greenery to reduce the urban heat sink impact in urban environments. Where there are existing or proposed light rail systems in Australia, city planners and architects are looking to maximise the amount of green track installed to improve the urban environment.

Green tracks, using lawn or sedum, retain a large amount of rainwater and bind fine particulate and road dust to improve the micro environment in urban centres. Moreover, recycled rubber encapsulation of the rail ensures that primary airborne noise and vibration is reduced significantly. The STRAILastic Top of Rail (TOR) Light Rail system provides not only the opportunity for new routes to be greened using its various green track options, but also allows for simple, cost-effective green track conversion of ballasted track using the STRAILastic_R Green Track design. This could be used on the existing tracks, like Sydney’s T1 Dulwich Hill Line or Melbourne’s Canterbury Road and St Kilda lines, to provide them with a new lease on life and a cheaper solution for extensions.

STRAILastic TOR provides a very stable and reliable track system in the Australian environment. The benefits of the vulcanised rubber solution extends beyond its resilience and stability. While made from 70 per cent recycled rubber, the outer cover of virgin rubber contains ultraviolet-, ozone- and fire-resistant materials to withstand the elements.

Cities across Australia can have rapid temperature changes; Melbourne can have ‘four seasons in one day’, with temperature variations

of 10 degrees Celsius or more in an hour. A southerly change in Sydney can turn a 40-degree day into a 20-degree evening, while South East Queensland’s tropical storms can rapidly drop the mercury. Besides wreaking havoc on any idea of what to wear for the day, these temperature variations place large stresses on tram and light rail track infrastructure –whether embedded in asphalt, pavers or concrete. Installing a green track can mitigate these rapid temperature changes by reducing high stresses caused by expansion and contraction.

‘Our systems are used in areas where you have a big temperature variation,’ says Andreas Göschl, STRAILastic’s International Operations Director. ‘STRAILastic track systems, being moulded from vulcanised rubber, have a high temperature stability, and easily manage this issue of expanding and contracting with a temperature range between -40 degrees Celsius and 90 degrees Celsius, with a glass transition point of -55 degrees Celsius. This ensures a very stable TOR product under normal operating conditions.’

Installation is simple as the chamber filler is precisely moulded to fit like a glove against the rail and is

self clamping without glue, finishing level with the railhead. They are designed to withstand the wear and tear of traffic crossing the rail line, and have a non-slip moulded surface for bikes and pedestrians.

While chamber-filling elements are common to many light rail networks, not all are created equal.

‘STRAILastic does not use polyurethane, as it is more like plastic – expanding when warm and shrinking when cold – and reducing the life of the track,’ says Göschl.

It is also difficult to undertake rail replacement.

‘With our very small tolerances in the track, we avoid gaps to prevent entry of water, sand, sediments, and dirt between the rail and the chamber filler. A gap is the worst thing in a light rail track,’ says Göschl. ‘Over time, the rail moves upwards; moisture enters, which creates electrical conductivity problems; and corrosion destroys the rail web.’

The STRAILastic light rail track damping solution keeps the trams and light rail quietly moving. With more than 40 years of vulcanised rubber product experience, and with STRAILastic’s TOR installed in over 60 cities and 300 kilometres of light rail track, you can trust STRAILastic. ♦

Ecological awareness has grown strongly in recent years. Green tracks contribute to the reduction of fine dust pollution and to improvement of the microclimate in inner-city areas.

STRAILastic protects the superstructure from stray current. In addition, noise emissions are considerably minimised.

¬ insulates stray current

¬ quick and easy installation possible, can be installed during on-going Operation

¬ available for all superstructure types by encapsulating the rail, the primary airborne noise is considerably

¬ reduced compared to an open construction method

track damping systems

grooved rail damping systems are available for both sleeper tracks, continous support and are suitable for all track types

¬ easy and fast installation > no bonding required due to self-clamping elements

¬ reaching up to the top of rail (TOR) > joint sealing is not necessary

¬ High mechanical strengths

¬ UV-light and ozone resistant

Keynote address Roch Cheroux, Managing Director, Sydney Water

Key points:

• Sydney Water is at a pivotal moment in its history, facing challenges posed by ageing infrastructure, climate change and the need to service a growing population.

• In its first Long Term Capital and Operational Plan, Sydney Water has committed to investing $34 billion over the next 10 years to deliver new and upgraded water and wastewater infrastructure.

• Collaboration with industry will be critical to this infrastructure program, with Sydney Water working to simplify procurement, and provide greater certainty for partners and suppliers.

Roch Cheroux, Managing Director of Sydney Water, updates the sector on his organisation’s water and wastewater infrastructure program

In New South Wales, we’re seeing a shift in the infrastructure delivery pipeline as major transport projects reach completion, and as we address the housing crisis in Sydney. Water infrastructure is key to enabling Greater Sydney’s growth, alongside energy and housing, with these three sectors now joining the transport sector as the focal point of complex projects. Sydney Water is at a critical point in time, as well, with existing, new and emerging challenges creating the opportunity to rethink how we provide our services to our communities. Ageing infrastructure, climate change, and extreme weather like bushfires and floods, are putting added stress on our network. At the same time, we need to supply more water every day to a growing population.

The significant investments that took place mid last century have been crucial in securing our water supply today, but have created a reliance on rainfall-dependent sources and on few critical assets like the Warragamba Dam and Prospect Water Filtration Plant, which provide water to about 80 per cent of our customers, along with the three wastewater coastal systems that we have at North Head, Bondi, and Malabar, that provide services to about 60 per cent of our customers. This is the reason why Sydney Water is undertaking the largest expansion of any water utilities in Australia. Anticipated growth investments over the next 10 years are occurring both in existing assets and in new areas, as well, and will support about 500,000 jobs – the equivalent size in population of the Australian Capital Territory –and between 600,000 and 700,000 new dwellings.

This is a big task we have in front of us, and to help us achieve this, we have developed our first ever Long Term Capital and Operational Plan to service Greater Sydney for the next 25 years. This plan is, of course, adaptive because we know that between now and 2050 things are going to change, but this is a generational change in the way we provide services. Over the next decade, we are proposing to invest not less than $34 billion in capital. Today, the system we

have is a one-way, west-to-east system, capturing the rainfall in the west, treating this rainfall to make it drinking water, distributing it to our customers, collecting the used water, and then transporting this used water to the coast, where it’s treated and goes back to the ocean. Our plan focuses on two strategic opportunities: the first is reconfiguring the west-to-east flow by decentralising our largest water and wastewater systems, and the second is building new rainfall-independent water sources like desalination or purified recycled water.

Key programs and projects over the next 10 years will deliver new and upgraded water and wastewater infrastructure to service new growth areas in Western Sydney, in the north-west and in the south-west, as well as infield growth that we have in central and eastern Sydney. This includes the delivery of purified recycled water plants and the expansion of the Sydney Desalination Plant to provide resilient and reliable rainfall-independent water supply. It also includes integrated stormwater management in the Mamre Road and Aerotropolis precincts, increased maintenance activity to ensure our assets remain at the right level of operability, and procuring renewable energy to support our 2030 net zero targets. Digital solutions are going to make this investment efficient and doable. Investing now ensures that we serve our communities, enable the thriving, sustainable city that we need and, at the same time, make it possible to keep our customers’ bills as low as possible.

Through a combination of infrastructure renewal, innovative water management, and close collaboration with government agencies and community stakeholders, we can deliver resilient and reliable services. We can integrate the servicing of infrastructure to deliver long-term value for customers. We can maximise community value through healthy waterways and parks. We can embed circular economy principles across our planning, delivery and operation. All our investment decisions at Sydney Water must balance risk, cost, performance and

Roch Cheroux, Managing Director of Sydney Water, updates the sector on his organisation’s water and wastewater infrastructure program

customer expectations. This is for the benefit of our customers and the environment.

Recently, we completed our largest ever customer engagement program, Our Water, Our Voice. Since 2022, we engaged 13,000 customers to understand what matters most to them when it comes to the water services that we provide, and what they are willing to pay. Our customers told us that their top five priorities are for Sydney Water to maintain clean, safe drinking water; ensure bills remain affordable; maintain clean, safe waterways and beaches; build water recycling and/or desalination infrastructure for drought resilience; and minimise leaks and breaks to reduce water losses. Their views inform our Long Term Capital and Operational Plan, as well as our next pricing proposal, which will be submitted to the Independent Pricing and Regulatory Tribunal in late September. At the heart of this proposal are three customer outcomes, which define what Sydney Water aims to achieve for our customers: deliver a great customer experience, water quality and reliability and environmental protection.

Our customers have given us very clear direction on how they want Sydney Water to move forward as we deliver the infrastructure we need to meet our growing population. To achieve this, we have scaled our annual infrastructure expenditure from about $500 million four years ago to about $2 billion in the last financial year (2023-24). We plan to double that expenditure to between $3 billion and $4 billion in the next two years. This totals $34 billion over the next 10 years. The largest chunk of that – 45 per cent – is about growth, and

will support the NSW Government’s ambition on housing. A number of projects are already underway, which will support growth and deliver a more resilient and reliable water supply for all our customers.

Our landmark $1.2 billion Upper South Creek Advanced Water Recycling Centre is now approximately 35 per cent complete and on track to meet the commissioning needs of Western Sydney International Airport by 2026. This centre will provide wastewater services to support 400,000 people by 2056, with recycled water from this project enabling our innovative integrated water cycle management in the Western Sydney Aerotropolis, helping protect sensitive waterways from urbanisation, enabling stormwater to be collected, treated and reused for irrigating parks, and keeping public spaces cooler and greener. The circular economy is a $1.9 trillion economic opportunity for Australia, and this project will help activate a wider circular economy in Western Sydney, including water, energy, bioresources, and job creation. Other projects like purified recycled water and desalination will help create the rainfall-independent supply that our city needs to protect us from the next drought and, combined with our existing assets, can help safeguard our city’s water needs for future generations.

But we know that we can’t deliver this $34 billion program on our own. That’s why we are scaling up our business by optimising our delivery, building our industry intelligence and, most importantly, collaborating more closely with all our partners. To be a more attractive partner, we’ve looked at how we can simplify our procurement processes to take down barriers and develop long-term purchasing models that create certainty for our partners and suppliers. By partnering with big players in the infrastructure industry through the NEC contract framework, we can deliver volume at value and safely. Our original delivery partnership model is the largest by a water utility in Australia and is currently on track to deliver about $8 billion worth of infrastructure by 2030. Our partners know they will secure a long-term pipeline of interesting and challenging projects with a focus on safety, innovation, and collaboration. This innovative model is how we deliver infrastructure differently, and it has helped us attract quality partners and investment by building and promoting a diverse, inclusive, and flexible workplace.

With a more stable, transparent, and accountable platform, Sydney Water is working to create an attractive investment climate, even in challenging fiscal conditions – and we are always open to working with new partners. In 2050, Greater Sydney will be a different place to what it is today by striking the balance between supporting growth, securing our water supply, managing affordability and protecting the environment. Sydney Water is well positioned to meet the challenges ahead. Through innovation, collaboration, and a commitment to customer centricity, we can create a better life for our customers with world-class water services.

Sydney Water’s Managing Director, Roch Cheroux, updates the sector on his organisation’s water and wastewater infrastructure program

In conversation with Michelle Jablko, Chief Executive Officer, Transurban

Key points:

• Sydney, Melbourne and Brisbane remain the most attractive prospects for toll roads in Australia, off the back of sustained and forecast population growth.

• Patronage trends on roads changed after COVID-19, with office occupancy slowly returning to post-COVID-19 levels, complemented by increases in e-commerce activity and leisure travel.

• There are three key impacts from technological innovation – the electrification of the fleet; sustainability, including of Australia’s road funding mechanisms; and changing customer expectations.

• The NSW Toll Review is timely and can bring transparency and clarity to customers after decades of varying regimes and contractual arrangements.

Moderator:

► Adrian Dwyer, Chief Executive Officer, Infrastructure Partnerships Australia

Adrian Dwyer (AD): Nearly a year into the top job, Michelle, what are some of the challenges and opportunities you’ve found over the past 12 months?

Michelle Jablko (MJ): It’s definitely been a big 12 months. It probably helped coming into the role that I was a strong believer in the value we provide for the cities we’re in, and there’s probably no better place for that than in Sydney. Looking back over the last decade, Sydney now has a million more people and it takes 50 per cent less time if you want to drive from the city out to Parramatta, or

vice versa. I’m a big believer in the value, but certainly, the environment today is probably more complex than it’s been. What I mean by that is you have a combination of the fact that it costs more to build things, the cost of money has gone up, so requirements for returns are higher, and at the same time, you have customers who probably don’t want to pay as much either – so we’re trying to navigate our way through all of that.

What I’ve been really focused on, and it’s been pleasing to see is starting to have some impact, is being clear on the value we provide our customers. There are lots of examples about how we’ve done that: by putting out transparent pricing on Google Maps, for example, or investing in customer rewards. These are real things and customers can tangibly feel the value we know is there, but we are making it really clear to customers when they make their choice. Then the other part of it is just how we show up. We’re long term in the cities we’re in and making sure we show up as a long-term partner.

I think what’s been great is we’re starting to see the benefits of that come through for our business. For example, we announced a road widening in Queensland just recently, and I think the way we’re approaching that and trying to be part of an overall solution that works for everyone has been pleasing.

I know you talk about challenges. I look at challenges and opportunities probably as two sides of the same coin. I think how you address the challenges is how you’ll set yourself up and the good thing for a business like ours is that populations continue to grow. As populations continue to grow, people need to move around and technological advances will also mean that the capital intensity of the business will change, as well.

AD: So, Transurban’s the largest toll road operator in Australia. When you look globally, there aren’t many comparable businesses to Transurban. How do you measure yourself? What are the case studies you look to? Do you borrow from other sectors? How do you think about that comparison?

MJ: For me, measurement must come down to our strategy. I put ours into three buckets. The first bucket is demonstrating clear value to our stakeholders. There are things that are very easy to measure, such as time savings, safety outcomes, sustainability outcomes, and then what our stakeholders think of us.

The second bucket is around growth, because we do have to continue to build the business for the future. We have an average concession life, give or take, of 30 years and want to continue to extend that, or whatever form that will be. It might not be ‘concession life’ in the future; it might

be something else, but measuring the tangible growth of the business.

The third is around running the business really well, which we measure through are clear financial metrics and, on top of that, safety outcomes. Therefore, I think it’s a combination of value for stakeholders, continuing to grow the business, and running the business really well today.

AD: Transurban’s gone through a big growth phase. Some of that growth has been outside of Australia in the United States. Are there lessons you’re bringing back to this market from that global expansion?

In conversation with Michelle Jablko

Transurban’s Michelle Jablko joins Infrastructure Partnerships Australia’s Adrian Dwyer to canvass the organisation’s future growth, changing driver behaviour and toll reform

MJ: It’s interesting because, in many ways, Australia has been ahead of the United States. In absolute dollars maybe 12 months ago, the total investment in roads like ours was equal in Australia and the United States over the last decade or so. So, if you take a per capita view of that, we’re well ahead.

What’s interesting in North America, where we try to learn from, is that there are different models that work. For example, in Virginia where we have quite a big part of our business in a very congested part of the United States, we run an express lane model. Now, that model itself wouldn’t necessarily translate to Australia because Australian customers don’t necessarily see that as fair. People have different perceptions of what’s fair and what they’re willing to pay for. But what’s good about that model is that the value for customers when they make the choice to use the road is clear. So, I think there are things we can bring back into the Australian market, and that’s why I spoke about the example of Google Maps and putting pricing on it.

We’re really thinking through how we start to talk to our customers in a very personal way, and the technology advancements that will enable us to do that. For instance, our customers can now opt in to receive personalised incident notifications for their chosen routes, at times of the day when they typically travel. This information allows them to leave earlier or take an alternative route if there has been a vehicle crash on the route they usually take. Doing that in a personal way, I think, is probably one of the biggest learnings.

AD: As you think about the North American market and extensions in that market, how do you think about changing government, and changing legislation?

MJ: Our work is mostly state-based rather than federal. Therefore, changing federal leadership can change things like federal funding, which can be attractive in terms of how you’re a part of the funding for new roads. But really, we’re a long-term business and so governments change all the time in terms of what we do.

What we’re focused on in the United States is probably more around our specific value proposition and what do we do differently that makes sense for the government or the state at the time. So, we’ll consider things like if it’s a growing population and if the legislative settings are right for a business like ours that can support a user - pays business.

Then, on top of that, we consider what we bring –because we’re not just going to show up with a big cheque. We don’t do construction, so we bring something slightly different and it’s about who we can partner with, or if there is a specific innovation we might bring. Those are the sorts of things we consider.

AD: Looking back at home in Australia, where are the growth opportunities and the growth jurisdictions for you here?

MJ: In Australia, we have a presence in Sydney, Melbourne and Brisbane, and Sydney is going to grow in terms of population by 25 per cent over the next 20 years. Brisbane is probably close to twice that and Melbourne is somewhere in between. If the populations are growing, people need to move around. On top of that, they need their goods moved around and freight tends to grow at a multiple of the population growth, as well.

I’m confident with a long-term view that the growth will be there. For us, it’s about how we set ourselves up so that we are part of that growth. We’re not a cyclical business, but a long-term sustainable business. So, for me it’s about how we can find new creative ways to be part of that population growth and I think technology will play a part in that, as well.

AD: Let’s talk about innovation and your approach to innovation. You’ve mentioned a few things in this discussion, but Australia is a mature market. Think about places like Sydney, where we have a largely built out network. There are opportunities for expansion, but we will have to extract greater value from the infrastructure we already have. Can you talk us through how you’re thinking about that value extraction?

MJ: Taking a long-term view of innovation is a big limb of our strategy, as well. Looking forward into 20 or 30 years’ time, I don’t know if my grandkids are going to even learn to drive.

That said, there are three big trends we’re watching. One is connected and autonomous vehicles, and we don’t know exactly how that’s going to play out, but we’re looking at whether infrastructure could play a part in that. At a minimum, it’s going to add value to our customers and our roads because you’ll be able to expand capacity with lower capital expenditure – so that’s a positive.

The second is sustainability: in particular, electrification or low-emissions vehicles, and what that will do, not just for the users, but also for governments as they think about how they fund the road network with fuel excise tax declining.

The third is changing customer expectations. I don’t know exactly how all those trends will play out, but I think they will come together in ways that mean we can add more value or extract more value from the infrastructure we have, or add more value to the cities we’re in, in ways we’re not even thinking of today and probably with a whole different level of capital intensity.

So, that’s long term. Short term, there are lots of opportunities for technology to add. I think artificial intelligence and the opportunity that gives us will be huge,

and we’re already seeing it in small ways. For example, we’re using machine learning and predictive analytics for managing congestion and incident response, and addressing safety hotspots. I’m really excited about more and more opportunity for that.

AD: Could you also talk to some of the opportunity around connected autonomous vehicles for freight and the things you’re looking at in that space?

MJ: We’ve been running a couple of trials, which we did in Melbourne, going back probably to 2018 and the last one we did was with a group out of Silicon Valley in the United States called Plus. They’ve been looking at autonomous trucks and we’ve been working on whether the infrastructure can help. Autonomous vehicles will be able to talk to each other. They’ll be able to talk to the network, but they won’t themselves be able to see around the corners. So, the question is, will the infrastructure provide additional, in particular, safety benefits?

What we were able to see with the trials we ran is that because CityLink in Melbourne has sensors all up and down the roads, the trucks could speak to the road around a kilometre or two in advance and know what was coming. So, again, we don’t know exactly how it’s going to play out, but there is potentially something in the infrastructure being part of an overall solution and whether that could roll out more broadly, not just on our network, but more broadly across the cities.

AD: There have been lots of opinions offered on the New South Wales Independent Toll Review, myself included. What’s Transurban’s position on the issue and how do you see the proposed reforms playing out?

MJ: Thank you, and we welcome many of the opinions, including yours. The way I think about it is that the toll review is probably timely. Sydney has grown over decades and what that’s meant is if you’re a road user in Sydney, you have different tolling regimes depending on the road you’re on and you get different toll notices every trip. So, given it’s actually quite a complex network, I think it’s quite timely to look at it. We, alongside others in Sydney, have invested $36 billion over the last 20 years, and that $36 billion has added real benefit. Like I said, it’s 50 per cent faster now, even with a million more people to get out to the west. I remember in the 1990s driving into Sydney city before the Eastern Distributor was built, thinking, ‘I could walk faster than the taxi ride in’, and now you don’t even think about it. So, the investment’s been clear. I think the value’s clear. and what’s been positive in the review is both the NSW Government and the reviewer have said that contracts are binding. So, within that boundary, we’re very happy to sit down as a good partner and work through solutions that could be better. That’s on tolling, but also on reforming toll notices

and other pinch points for customers. So, it’s premature to say what it’s going to be – we don’t know – but I actually think there’s great opportunity for Sydney and for all of the operators in Sydney to come to something that sets Sydney up in a really positive way for the long term.

AD: All of this is happening in the context of some maybe permanent, or semi-permanent, changes that have happened post-COVID-19 with traffic. Where is traffic at and what are you seeing going forward?

MJ: I spoke about population growth. If you take a long - term view, population growth is what matters. In cities, where populations grow and there’s economic prosperity, that will drive freight movements and people having jobs, which is, at the end of the day, what drives traffic. In the near term, though, there has been some change following COVID-19. We look at office occupancy, for example, and it’s interesting to look at the geographies we operate in. Brisbane is pretty much back to where it was pre-COVID-19 in terms of office occupancy. Meanwhile, Sydney is about three-quarters of the way there and Melbourne is probably two-thirds of the way. Office occupancy in these cities is growing and it’s continuing to grow, but overall, we’re about two-thirds of the way there.

So, that’s been a behavioral change. Having said that, the last reported number we put out was 2.5 million trips per day. That’s the highest it’s ever been. It’s just that the composition of it is a bit different. We might have less people going into the city for work, but more e-commerce, and people have really changed behavior in terms of e-commerce, or people driving out to the golf course or driving on holidays. So, there’s been some compositional change, but net people are still driving and seeing value in the roads.

AD: I’m going to ask a final question. Everybody knows that the best thing about being an infrastructure company CEO is that you get to don personal protective equipment and go and look at sites. What are the best things you’ve seen in the 12 months of looking around?

MJ: It is a fun part of the job, I have to say. I’ve been watching the West Gate Tunnel in Melbourne as it’s evolved and had my first time climbing a ladder up onto the elevated road. A few weeks ago, I was able to drive up there for the first time and walk along the new veloway that we’re building, so that’s exciting.

I have to say, I do like the everyday, as well. I like just getting on the road and driving out and feeling like it has made a difference; like I said, I’m a big believer in the time saving. So, I went out when the Rozelle Interchange opened in Sydney, and I know there’s been a lot of talk about Rozelle, but actually getting on it and driving out to Penrith, the time flew. This is what it’s about. This is why we exist.

In conversation with Michelle Jablko

Macquarie Capital economic update

This is a summary of the Macquarie Capital economic update presented at Partnerships on 13 September 2024.

Key points:

• Despite geopolitical volatility and risk, and the fastest and highest increase in interest rates in decades, the global economy has shown remarkable resilience, maintaining an average gross domestic product of around three per cent.

• While the global economy is moving into an interest rate easing environment, Australia appears to be three to six months behind the rest of the world, with continued sticky labour market conditions and increased shipping costs expected to keep rates steady until February 2025.

• The public infrastructure pipeline in Australia is strong, largely driven by public sector expenditure, but private capital will have an important role to play moving forward.

Presented by:

► Tom Butcher, Executive Director, Head of Infrastructure, Asia Pacific, Macquarie Capital

It’s great to be able to discuss the economy from Macquarie Capital’s perspective. We’ll start the way Macquarie tends to do – at the macro, high level and dig into the detail.

The Global Geopolitical Risk Index, hosted by the United States Federal Reserve, scrapes news outlets for commentary and activity that would represent geopolitical risk, while excluding all financial market activities like the global financial crisis (GFC). From this Index, we can see that, notwithstanding what is going on and continues to go on in Ukraine, and particularly in and around Israel and the Middle East, things have normalised. What does it say about the global economy and the resilience of the global economy if we are faced with these quite extraordinary bumps, yet within a fairly short period of time, that things are normalising? In addition, 60 countries with more than two billion people will host elections this year – including one big one in November. So, while there is a lot of volatility and risk, the resilience of the world’s risk appetite goes on.

For 20 years, on average, we have grown globally at about three per cent, and that’s exactly where we are now. This is notwithstanding the fastest and highest increase in interest rates since the 1980s and the geopolitical issues mentioned earlier. It is quite remarkable and at odds with all market commentators, bar maybe one or two, and some who believed

that the global economy would break, and we would be facing a second GFC. Growth has slowed in the United States, which was expected to be in recession this year, to a quarterly run rate of about three per cent. This is slightly above trend, but the drums are beating; inflation has really come off, unemployment is starting to rise and the US Federal Reserve is looking to cut interest rates. Meanwhile, China is hitting its growth targets, although I think there are question marks around the quality of that data. China is pursuing five per cent growth and, right now, is running quarterly at about three per cent growth. Finally, recovery has stalled in the Eurozone, where gross domestic product (GDP) is growing at a far slower rate and the European Central Bank (ECB) has already started cutting rates.

While global growth has now started to turn, what has caused the last 18 to 24 months to still run at three per cent?

Very simply, it’s two economies: the United States and China, which have both outperformed expectations. Although interest rates have increased in the United States, consumer spending has remained robust, and while business investment has slowed, it hasn’t collapsed. The Inflation Reduction Act and the Creating Helpful Incentives to Produce Semiconductors and Science Act have delivered stimulus for that economy.

Meanwhile, domestic consumption has slowed in China, but was propped up by some easing of rates in late 2023 and

initiatives to support lending into the business community. China has also benefited materially from exports and buying from Asia and Europe for lower-priced alternatives, as well as the green export boom – electric vehicles, solar panels and batteries. So, the outlook is fair, but not all risks have dissipated.

What are the consequences of a Harris or a Trump presidency? There is a consensus that, given the architecture that sits around policy implementation, there won’t be a huge amount of change if Harris is elected. Our view is that it’ll be much of the same. If Trump is elected, it is likely to be slightly more negative for growth and more inflationary – and therefore, slightly more downside on interest rates. Clearly, what goes on in the United States impacts us all and this is one of those key risks to look out for.

Moving on to two key bits of economic data: inflation and interest rates. Inflation clearly has moderated, with high interest rates dampening demand and improvements in global supply chains, but the monthly data is volatile. We are moving into an easing environment, with several central banks having already eased interest rates, including China in 2023, and the Bank of Canada, ECB, Bank of England, and the Reserve Bank in New Zealand. The US Federal Reserve has more room to move with inflation relatively under control, and so, if they need to cut more, they can do so in comparison to the Bank of England and ECB, where inflation is a bit stickier.

That’s the high-level global picture that we see; however, at the Australian level, it’s a different story. We’re probably three to six months behind the rest of the world. Real GDP growth has started to decline, principally driven by interest rates and the consumer pullback; however, we do have a multi-speed economy, with Queensland and Western Australia doing rather well in contrast to Victoria, while New South Wales is performing moderately. While inflation is back under control, there’s stickiness driven by ongoing tightness in the labour market, although that is easing. We do have relatively strong wages growth accompanied by relatively weak productivity, which is going backwards and has been since 2020. But we have very high housing prices, healthcare costs and energy costs, although these do fluctuate. In summary, the Australian economy is slowing, and interest rate cuts will be coming soon.

At the same time, we live in a complex world and things change. As an island nation, we rely on trade and must have an efficient, low-cost shipping industry. While we don’t have a low-cost shipping industry at the moment, it appears to be staying fairly efficient. We have seen a spike in shipping costs as a result of the diversions that have been necessary around the Red Sea. Interestingly, we’re still seeing movement of goods around the supply chains in a relatively low-pressured way. Our perspective is that that high cost, and the sheer requirement to move goods not through the Suez Canal and

the Red Sea, but around the bottom of Africa, has to take its toll and will be impactful. This adds to our view that the RBA is taking a wait-and-see approach.

For some time, population growth has been a key driver of the Australian economy – without it, we are likely to have been in recession or heading into one. Clearly, population growth has delivered a lot of benefit, but also some pressures, especially on our infrastructure and housing; however, it has started to come off quite sharply and the expectation is that it’ll come off more sharply as changes to visa application and processing rules are brought in. Overall, the impact of this change in population growth will be negative for the economy, positive for the labour market, and positive for existing infrastructure and housing pressures.

On the labour market, we’ve seen the data, and the trend has certainly turned. Those in the construction industry know the story all too well, with wage price inflation and difficulties attracting skilled labour; however, we are seeing changes to these conditions, with unemployment starting to tick up and pressure on wages starting to come off. We do wonder what happens to the labour market with the changes in population growth – but, overall, the ongoing slowing in the economy would mean that we do see softer labour markets going forward.

For a long time, the Australian economy has been an agriculture-based economy and done very well. Coal has been around for a very long time. While agriculture is still rather prominent, the Australian economy is becoming increasingly diversified and captures a range of different commodities, including bulk commodities, critical minerals, and services. Now, it’s more resilient and, in our view, more robust than ever, and clearly well-positioned around significant growth economies. While our economy will continue to evolve, we do think that there’s strong demand for our exports for decades to come.

Looking at one of those key exports – the Industrial Metals Index displays the pricing for aluminum, copper, nickel and zinc. While it is quite volatile, it is starting to settle back down to slightly more normalised levels and closer to pre-COVID-19 levels, which should bode well for input costs. Meanwhile, iron ore is linked to China’s steel production, which is being cut due to a slowdown in construction. Iron ore price has come off, which again bodes well for input and construction costs, and development of infrastructure – although it probably doesn’t bode well for the Australian Government’s balance sheet and budgetary position, and Australia’s GDP. This is another signal that there is some softness in the economy and in one of our key exports, but it doesn’t detract from the long-term attractiveness of the Australian economy as an investment destination.

In long-term investment in Australia, the public infrastructure pipeline is strong. Part of that is driven by cost inflation, but a lot of it is driven by the public sector picking up where the private sector hasn’t and making significant investments.

This represents about 2.5 per cent of GDP – about $65 billion – of work outstanding. While the private sector has come off, it has remained stable, so one of two narratives may be at play: the private sector has been displaced or the public sector has stepped up. There are many elements driving this expenditure – the cost environment, population demand and the energy transition – but the bottom line is that the spend is healthy and the spend is up.

Considering the global economy picture, the domestic economy picture and the infrastructure picture, where are the markets and are they supportive? Where is activity? In terms of Mergers and Acquisitions (M&A) activity, 2021-2022 was a boom year and a record year, which cooled off in 2023 and 2024, given what happened to interest rates and the pause in activity as buyers, sellers, and investors sought to reset.

At a global level, M&A activity in the first half of 2024 outpaced the first half of 2023 and we are seeing promising activity offshore for the second half of 2024. Therefore, we are expecting 2024 figures to be up on 2023 figures. Australia and New Zealand are showing a similar trend across all M&A. In infrastructure, we’re still struggling to make up some ground, although 2022 was a very significant year, particularly with some large transactions, including Sydney Airport. What we see as an institution in our pipeline of activity is significantly more growth than what we’re seeing now and we would expect the entire year to be up in 2024, with the energy transition and transport the two key drivers.

The dominance of the private capital market is well known, and it is pleasing to see that private capital fundraising has recovered – an increase of 150 per cent in the first half of 2024 over the prior half – dominated by very large fundraisings by significant global fund managers with a focus on digitisation and the energy transition. The ‘dry powder’ continues to be at record levels, in part given fundraising that had occurred and that is occurring, but also the lack of ability to deploy. So, the capital is there and interested in investing in infrastructure. In particular, there is a lot of unspent capital focused on core-plus investment, with investors looking for more risk. This is quite timely, given where the cost of capital is. The same story is playing out in debt markets, with private capital and equity in support of infrastructure. We’re seeing good liquidity, good support from the banking market for high-quality deals, and reasonable pricing. Digital and the energy transition continue to be among the preferred sectors, but there is still a focus on traditional core and core-plus infrastructure.

Turning to Australian and global listed equity markets, the data indicates that there has been a significant reduction in the number of listed companies on the Australian Stock Exchange (ASX) and a light load of initial public offerings (IPOs). Since 2018, there have been $29 billion worth of IPOs on the ASX and $103 billion worth of take-privates

– of that, $68 billion is out of the infrastructure sector. This indicates that there is a market, but how open is it? Will private capital continue to be the primary source of equity funding into infrastructure? We think it will be. When you have listed markets at all-time highs, very little new issuance, and the third- or fourth-largest superannuation industry in the world, you have demand. We are confident that the listed markets play a role going forward, and that’s especially the case for infrastructure as the demand is there to pursue attractive investments.

To summarise, our view of the world is defined by four key things: the first is heightened uncertainty, but the anticipated recession hasn’t come; the second point is geopolitics, with disruptions to supply chains continuing to put pressure on and elevate the cost of materials; the third is the complexity of Australia’s inflationary environment, and while we do expect easing, there is some way to go. Lastly, the markets are there to support infrastructure investment – both greenfield and brownfield.

Tom Butcher, Macquarie Capital’s Executive Director

– Head of Infrastructure, Asia Pacifi c, delivers the annual Macquarie Capital economic update

Inland Rail construction momentum builds in New South Wales and Victoria

Inland Rail is Australia’s largest-ever freight rail infrastructure project. When fully operational, this 1600-kilometre line will allow double-stacked trains to travel between Melbourne and Brisbane in less than 24 hours, enhancing Australia’s national freight network and supply chain capabilities.

It will also better link businesses, manufacturers and producers to national and global markets, and generate opportunities for industries and regions during construction and beyond.

Inland Rail construction is well advanced between Beveridge, Victoria, and Parkes, New South Wales, with these sections on track for completion by 2027.

Victorian communities like Glenrowan and Wangaratta will soon welcome new, modern infrastructure such as road bridges and pedestrian underpasses at train stations, which are boosting cross-town connectivity, improving public safety, and enhancing pedestrian and disability access.

It is full steam ahead in New South Wales, too, with construction well underway from Stockinbingal to Parkes. Major construction on sections between Albury and Stockinbingal will also start in early 2025.

As each section of Inland Rail is built and made operational, it is allowing regional businesses to shift more freight on rail, and is providing an interface between regional rail lines, capital city and export markets.

Each 1800-metre double-stacked train on Inland Rail will carry the equivalent of 110 B-double trucks, reducing congestion by taking tens of thousands of trucks off our roads each year.

For example, grain trains are now running on the upgraded Inland Rail track and existing rail lines between the Croppa Creek silos north of Moree and the Port of Newcastle. These trains can transport a significant volume of canola from the Port of Newcastle for export to European markets when compared to trucks.

When construction between Parkes and Beveridge is completed by 2027, Inland Rail will also connect to Australian Rail Track Corporation’s existing 8500-kilometre rail network linking Melbourne, Sydney, Perth, Adelaide and the Illawarra via Parkes, creating more commercial opportunities.

Inland Rail is generating thousands of jobs for local and First

Nations people, as well as supply opportunities for hundreds of local companies, providing a major boost to regional economies.

It will also help Australia keep pace with freight volumes, which are expected to grow by more than 20 per cent between 2018 and 2040.

While construction is powering ahead between Beveridge and Parkes, Inland Rail is focused on achieving its remaining environmental approvals, and acquiring land for the project in northern New South Wales and Queensland.

Future decisions on the delivery of sections between Narromine and the end point of Kagaru in Queensland are a matter for consideration by the Australian Government. ♦

Regional rail line commodities

NHVR’s Strategic Local Government Asset Assessment Project

The National Heavy Vehicle Regulator is improving access to bridges and culverts – now and into the future.

The National Heavy Vehicle Regulator’s (NHVR’s) Strategic Local Government Asset Assessment Project (SLGAAP) is working with local governments to optimise heavy vehicle access on local road networks across Australia. With funding provided by the Australian Government, the SLGAAP helps councils to build capability, and discover the load-carrying potential of their bridges and culverts, by providing them with greater confidence and certainty when making heavy vehicle access decisions.

The project is also developing a national inventory of bridge and culvert data for local government roads in the NHVR Portal, the regulator’s digital destination for industry and road managers, which will support the implementation of a National Automated Access System (NAAS).

Since its inception, the SLGAAP’s data for more than 5200 structural assets on local government roads has been collected in the asset capability module in the portal.

The SLGAAP has helped enhance the understanding of bridges and culverts by commissioning field inspections and capability assessments. By the end of 2024, it is expected that the project will have completed 1000 asset assessments across 109 local government areas.

Members of the heavy vehicle industry have praised the project for enabling local councils to safely expand bridge access for trucks and improve productivity.

Cockerill Transport’s Brad Boak says it’s positive to see that the SLGAAP’s work had improved access in his area.

‘As a local transport operator delivering stock feed to local farms that support agriculture and manufacturing, I now have access to travel safely on roads that were not previously available … [and] as a result of the Pyrenees Shire Council’s participation in the SLGAAP, upgrades to bridges in the local area have allowed me to move stock feed more efficiently,’ he says.

Councils that have participated in SLGAAP have also spoken to the benefits it has provided for them.

Horsham Rural City Council’s Manager of Strategic Asset Management, Krishna Shrestha, commends the project for empowering her council to better understand the capability of the town’s bridges.

‘The SLGAAP has helped us obtain drawings and information on our bridges that we did not have previously,’ she says. They worked tirelessly to collect this information, and we are now better prepared with our asset management system and heavy vehicle access management of our bridges.’

The Australian Government has now committed to a further phase of funding to continue the collection of asset data. As the project progresses into Phase 3, the NHVR will accelerate this compilation of bridge and culvert information, helping local governments in South Australia and Victoria to participate in the development of a NAAS. ♦

For more information, visit www.nhvr.gov.au/road-access/local-governmentroad-managers/strategic-local-governmentasset-assessment-project.

Improving access to road assets now and into the future

The NHVR’s Strategic Local Government Asset Assessment Project, funded by the Australian Government, has been helping local governments build capability and realise the load-carrying potential of their bridges and culverts, providing councils with greater confidence when making heavy vehicle access decisions.

In the next phase the project will further develop an inventory of key bridge and culvert data, enabling local governments to access the forthcoming National Automated Access System.

The NHVR will be focussed on the development of this inventory for local governments in South Australia and Victoria.

For more information, visit nhvr.gov.au/slgaap

Panel discussion Building social infrastructure assets

Key points:

• The ballooning health infrastructure pipeline requires greater coordination between jurisdictions and reform to skilled migration policy, alongside a focus on greater productivity.

• Public Private Partnerships can contribute to the delivery of the social housing pipeline, and governments across Australia can draw on lessons from Victoria’s Ground Lease Model and overseas to successfully integrate the private sector in its delivery.

• The decarbonisation of Australia’s social infrastructure requires early engagement with contractors to provide opportunities to innovate.

Panellists:

► Paul Crowe, Chief Investment Officer, Plenary Group

► Skye Mason, Director of Operations, Construction, Lendlease

► Kate O’Sullivan, Deputy Secretary, Infrastructure Division, Department of Treasury and Finance, Victoria

► Emma Skulander, Acting Chief Executive, Health Infrastructure NSW

Moderator:

► Brendon Lamers, Partner, Clayton Utz

Building social infrastructure assets panel – Brendon Lamers, Skye Mason, Kate O’Sullivan, Paul Crowe and Emma Skulander (left to right)

Brendon Lamers (BL): There is currently a keen focus on delivering social infrastructure. The demand is clear. There’s a significant pipeline across health, social housing, stadiums and education. What are some of the common trends and challenges you’re seeing in procuring, financing and delivering these assets? I might throw to Emma to start.

Emma Skulander (ES): In the context of the scale of the pipeline that we have, Health Infrastructure NSW delivers about $2 billion a year of health infrastructure for New South Wales. Keeping up the momentum on that pipeline is probably our biggest challenge at the moment. The cost escalation across the sector is certainly presenting challenges in productivity. We’re focused on how we can do things, how we can think about things differently, and how we can accelerate getting the shovel in the ground faster so that we can get things moving.

There are many processes in place that mean that people work methodically to get to the point of actually getting that shovel in the ground. I think the escalation is putting a lot of pressure on us to be innovative and think differently around that.

Paul Crowe (PC): Certainly, the demand is there. I think the structural challenge for governments and industry at the moment is the shift of our focus from transport. Transport projects have taken up a huge amount of capacity in the supply chain.

At the same time, that’s only one part of what government needs to do. There is also providing health and education, and now a big focus on housing. It is only just catching up in terms of government’s attention and, therefore, the repositioning of supply chains around that and markets is a real challenge. The private sector is pulling away a bit given where feasibilities are at the moment, so that frees up some supply chain, but a lot of that supply chain is being absorbed into big transport projects. So, we’re seeing a lot of price uncertainty and price escalation across supply chains.

Skye Mason (SM): I’m going to take a bit of a contractor lens, drawing on what Emma was talking about with getting shovels in the ground. For us, what we’re really starting to see is the power of the collaborative contracting model. This is a model specifically helping to drive productivity, and a theme that is near and dear to our hearts in the contracting world is productivity. If we can see flexible deal structures that have shared risk and reward, we’re seeing better innovation, better efficiency, and better accountability throughout the project life cycle.

BL: Kate, in addition to that question, I know that 12 months ago, Tim Pallas announced the whole-of-government procurement framework for infrastructure in Victoria. It would be good to also get an understanding of how that is progressing, and how it has matured over the course of the last year.

Kate O’Sullivan (KOS): I think infrastructure isn’t an end in itself. The great thing about social infrastructure is that it facilitates high-quality services to our community, and I think that

innovation piece Skye mentioned is really important because, for us, the cost of capital of building something is minuscule compared to the operating cost of running it effectively over a 40- or 50-year asset life span.

Victoria has a good track record in terms of its social infrastructure pipeline across the health, education and corrections sectors, with projects that are at a good size for the market between $500 million and $1.5 billion. So, we attract a competitive market for those projects.

The updated procurement models that the Treasurer released last year were about contemporising that risk allocation and building some efficiencies into the process, and we have seen it pay dividends.

We did develop these models and standard contracts with peer review, and also in consultation with New South Wales, and they’ve been applied to a number of projects. The early form of the incentivised target cost model was applied to the Suburban Rail Loop Tunneling Packages, which reduced the departures that we would normally see. They’ve also closed the Public Private Partnerships (PPP) Harmonised Deed on some Ground Lease Model transactions, the Geelong Convention Centre and the Melton Hospital PPP project.

We’re also doing market sounding across our future pipeline on that PPP model, including for transmission and projects, and the next big hospital project in Parkville, in Victoria.

The other point I wanted to mention is that the Commonwealth has really encouraged us as states to work together with them on a national construction strategy. Victoria is leading the procurement element of that work stream, which means some familiar themes, in terms of those commercial principles, will come through in that national construction strategy.

BL: This works perfectly with my next question for Emma on the report that Infrastructure Partnerships Australia recently published around the constraints in delivering health infrastructure, and the pipeline issues associated with it. From a New South Wales perspective, how is this impacting on your approach to delivering health?

ES: Infrastructure Partnerships Australia’s report, ‘A Healthy Pipeline: Delivering Australia’s Hospital Infrastructure’, talks about the national health landscape in terms of infrastructure delivery and I think probably prior to this point in time, New South Wales has been the biggest deliverer of health infrastructure across Australasia. Accordingly, we’ve been well placed to attract the resources that we need to be able to deliver the work.

In the last few years, both Victoria and Queensland have really increased what they’re doing, and New Zealand certainly is getting more active in that regard. That’s clearly placing a challenge on this acute period of time over the next few years.

I think what the research has highlighted is that over the next few years, there are very significant health projects

out to market that are essentially competing for resources across the states, and that the funding allocation is not being coordinated. Obviously, each government has its own priority to have their infrastructure delivered as soon as possible, but I think that the procurement coordination the research calls out is a bit of an opportunity.

For us in New South Wales, because of that legacy pipeline, we are fairly well placed to deliver what we’ve got now. Where we’re challenged is retaining the workforce and the skill sets that have historically just been focused on our program, and based in New South Wales. We do have the benefit of a lot of them wanting to stay in New South Wales and keep working on the pipeline, but we’ve certainly started to see a watering down of capabilities as consultants and contractors become attracted to work in the other states.

I should also mention that this relates to the specialist trades in health, as well, and that’s probably the crux of the problem rather than at the top level. The crux is really there’s not enough trades to deliver all these jobs at once.

So, we have some discussions with the other jurisdictions in terms of our pipeline, but everyone’s got their own priorities,

and I think it’s optimistic to think that anybody’s going to actively re-sequence to give the other state a better chance at delivering their work. I think we have to have those conversations, but so far, we haven’t had too much success in terms of outcomes, and this report really highlights that and some of those challenges.

BL: Skye, what’s your perspective as a contractor? Where are the opportunities to actually increase these skills?

SM: It’s interesting because we play across all jurisdictions. This is a juggle that we do every day. In smaller states, some of the challenges might be that the scale of the projects outstrips the capacity of local suppliers, so we’re having to leverage interstate trades and things. Add to that the insolvencies, which we see continuing through COVID-19, and our ageing population. The reality is we are running out of prime working-age labour.

Given that, I think there are some big opportunities in the skilled migration landscape. We need to look at what construction-specific specialist roles we need, and what levers can be pulled. First, we need more specialist roles on the list, and then work out how can we streamline some of the visa application processes so that we’re getting the right specialist

Clayton Utz’s Brendon Lamers moderates the Building social infrastructure assets panel

into the country in a timely manner. As a collective, we also need to be exploring how we get better productivity with less labour.

BL: I might just shift gears and move to social housing, which obviously gets a lot of press. Victoria has the Ground Lease Model program, with stages one and two underway, and stage three on the horizon. How do you view that? Do you see this as a success, and do you think other states should be exploring a similar model?

KOS: The need for more social housing and public housing is a collective demand pressure across all our jurisdictions. The Ground Lease Model is one that’s worked well. We’re building on public sector land in partnership with the private sector for a combination of public and market housing. It has the best bits of a PPP: it delivers high-quality assets, and we lock in maintenance for 40 years against a KPI regime. There are good partnerships embedded in it, including with the community housing associations, and so far, it’s offered value for money and has built our assets on time.

So, if I was to observe some lessons from Ground Lease Model stages one and two in terms of how they’ve been transacted for other jurisdictions, the first is it is important to get your site selection right, because you want that commercial dynamic where the private market housing offers the ability to offset some of the public and social housing costs. I think scale has also been important, to get the right size of project that attracts the market. Bundling sites that are in close geographic proximity is also really useful.

Finally, structuring is also important. The Ground Lease Model has been structured in such a way that you can access some Commonwealth schemes, like the concessional financing from Housing Australia, in combination with other investors, including international investors. Wearing a state-based hat and partnering with the registered housing associations also offers us an opportunity to access Commonwealth rental assistance for our tenants, which, in turn, attracts some GST exemptions.

As you said, the Ground Lease Model is going to be part of our future pipeline. Victoria is considering a progressive long-term program to replace our public housing high towers, so there are plenty of opportunities ahead.

BL: I’ll turn to Paul because Kate, you’ve mentioned a few times having projects at the right size to attract private capital. Focusing on housing, but also moving beyond that, what have you seen where private capital was used successfully within states? And what are the lessons that we can learn globally to make these actually attractive to private capital?

PC: I think that we’ve been an advocate of the Ground Lease Model, along with Partnerships Victoria, to get that up over the years. It is a great model that ties long-term infrastructure capital into a housing solution and, in doing that, removes the development considerations of property

finance. There is a reduction in the cost of capital of the private sector when partnering through an infrastructure model.

Tied into that is the idea that the private sector is responsible for the community indirectly via the community housing provider they partner with because they don’t want that site or community to generate a stigma that could affect private rents.

So, it will be very interesting to see how that evolves over time and the benefit of that long-term investment that will be tied to the outcome of that community.

We hope that gets taken up by other states, but know there will be tweaks. There are issues around site selection, size and how you attract the right contractors.

Turning overseas, this idea of PPPs in social housing is not new. For instance, in Ireland, Plenary Group is putting a submission in for bundle three and getting a team together for bundle four. The community housing providers in this environment simply don’t have the balance sheet to invest themselves. So, how does government provide the balance sheet? Well, they’re trying to do it via a PPP that supports the community housing provider in terms of providing a 100-per-cent social housing solution in that instance. The model has been very successful, but it has taken a while to get going. Part of this is because of planning. The Government wants to get the projects done politically and that does slow things down around these sorts of projects unfortunately.

Beyond that, we’re obviously in the Middle East, where places like Abu Dhabi are adopting a PPP model, and seeing the benefit of changing their procurement style to consider building it in partnership with the private sector, knowing that it’s going to be looked after for the next 25 years.

Kate O’Sullivan, Deputy Secretary, Infrastructure Division, Department of Treasury and Finance, Victoria

Something that we can’t forget is that there is an underlying benefit to PPPs that is not just about delivering the asset, but about delivering the service, and underpinning that service delivery for the 25 years with a quality asset that has a KPI regime around it.

The Middle East is very enamoured by the model, and will innovate around it. Speed of doing things is very much at the forefront of their thinking and countries in the region are exploring models similar to a development partnership. This involves partnering directly with a developer who has the capability to put a structure together, work the structure in partnership, and go out to tendering contractors and other parts later. So, we’re seeing that model evolving in the Middle East.

BL: An increasing focus of governments across the country has been new housing within the framework of infrastructure. We’ve seen a lot more around over-station developments and precincts, and there’s benefits and disadvantages of that. Skye, what do you think the role of infrastructure is in solving the housing crisis?

SM: I think it’s critical because with infrastructure you get scale. If we look to your point around the over-station developments and the transport hubs, they bring an ability to integrate affordable housing solutions in livable, walkable areas that have fantastic opportunities for amenities and employment.

KOS: It’s a similar dynamic in Victoria, including delivering the government’s commitments around the Housing Statement. Infrastructure Victoria has put out some really good work that

Mason, Director of Operations, Construction, Lendlease

tries to focus that density uplift around existing infrastructure, because we just can’t afford to keep building infrastructure in these greenfield areas.

PC: I think governments are turning away from ‘I just need to build a hospital’ or ‘I just need to build a train station’, and thinking about ‘I actually need to build a health precinct’ or ‘I need to build a transit precinct’. They need to think about the other elements that come together when you go to the market to procure because that must involve the private sector. Government can’t deliver all the elements of what comes together in terms of a world-class precinct. If we think about those things, there’s a whole raft of ways that the private sector and governments can work together with an aligned outcome of a successful project.

ES: I think the NSW Government has clearly put housing at the top of its list. Across government, the agenda is very focused on how we deliver more housing and quickly. I think the coordinator general role of Infrastructure New South Wales will have some impact in terms of trying to sequence infrastructure with the housing delivery.

I think the challenge now is trying to get out of the starting blocks with some of that housing when you’re trying to do everything at once. I think that, initially, the focus on enabling infrastructure, like the development around the Sydney Metro stations, really brings some great opportunity. But what we need to do is make sure that we’re using that and getting that work happening as quickly as possible, so that the plans to the translation of the actual delivery of that infrastructure are absolutely the focus.

I think, then, in turn, the social infrastructure around that, and what that density will mean for the need for hospitals is probably the next step – to think through what that means to the service planning and what services need to be delivered in those communities. A great example of that at the moment is the thinking around how health care will be delivered in the Aerotropolis area and what infrastructure there will need to be as that density starts to increase.

BL: The other aspect is that the regions are growing. Given all these constraints, how do you actually service infrastructure and the regions, and building new hospitals?

ES: Regional delivery at the moment is particularly challenging and I think the trade shortages are having a broad impact. We try to leverage the partnerships that our contractors have in local areas and use as much local employment as we can. But in some instances, that’s simply not feasible, and a new workforce must be brought in to support regional delivery needs, which puts constraints on the local housing sector.

We’re thinking through how to support a transient workforce or people who do permanently relocate to the regions, which we have, pleasingly, seen a lot of people do – but that comes with its own challenges.

Skye

We are having to think strategically, and in some areas we are struggling to get the incentives to attract contractors. I think that will continue to be a challenge for the next little while.

We’re spending $3.9 billion over the next four years in the regions. Certainly, we’re turning our attention from the big metropolitan hospitals, because we have almost redeveloped them all, and moving to more regional, smaller hospital delivery, and accommodation for health workers in the regions. We have a program around that and some other facilities, such as palliative care facilities and ambulance stations.

BL: Kate, what about in Victoria? Are you finding similar issues, whether it’s in housing or schools?

KOS: Yes, I think that there have been some good examples. Bendigo Hospital was successfully delivered primarily with regional, but some metropolitan, involvement. When we are looking to the future workforce around energy, for example, in the Latrobe Valley, it will be about that workforce transition. There are also examples where, going back a little while, the desalination plant in Victoria was built in regional Victoria, but had a byproduct of a number of social infrastructure improvements, including around Wonthaggi’s local hospital. So, I think that workforce planning to the extent of having training centers in regions is also a potential.

BL: Skye, you unfortunately have to try to get the workers out there.

SM: We do. I think the problem that we’ve all touched on is that once we’ve exhausted the fly-in fly-out, the project allowances, the lifestyle sell … we then need to think deeper than that. I think there are some changes that inherently we need to make that start to stitch new ideas into the DNA of construction. I’ll touch on just two items of that.

One is technology. You would be living under a rock if you think that technology is still the golden elixir to fix everything. It’s not because it’s incredibly challenging, but there are certainly some areas of technology around offsite construction, automation, and robotics that can have a massive impact. But we need collective investment in how we make that successful and how we make it work because the benefit of that is we have better working conditions, safer sites, and, in most cases, a reduction in the onsite labour required. It also attracts a broader section of the workforce, so we can look outside of the traditional construction lenses.

Coupled with that, the second is one we have touched on: forming local industry partnerships. I think one of the really unique elements of infrastructure projects is their scale and tenure. If I give one of our projects up in Katherine in the Northern Territory, as an example, the sheer scale of some of the subcontracts that have been able to work with local subcontractors has meant that they’re able to upskill over time. This provides First Nations jobseekers and school leavers

with skills and employment opportunities beyond the life of the projects. We’re then seeing those people being able to go to other regions and help deliver. So, it’s a win-win situation. If we start to look at how we stitch many elements into adapting our DNA, hopefully we can start to come up with some collective answers.

BL: Emma, one of the questions I just want to focus on is around environmental, social and governance issues. The NSW Government has introduced its Decarbonising Infrastructure Delivery policy, which will apply from next year and require the upfront measurement of carbon emissions throughout the project. Is it possible to talk about how your agency’s going to be implementing that and how sustainability impacts new planning around health?

ES: I think that the new policy is welcome because it gives us a framework to work within. I think each agency is probably finding its own journey through the net zero transition.

With this new policy, what we’ll start to see is that business cases will include some greater option nearing around what needs to be done to reduce carbon impact in these investments that we’re making. I anticipate that’s not going to go away in this new, efficient process that we’re going to be working on.

I think also engaging with the market early is important to try to make sure that we are enabling innovation along the way. If we wait until we know exactly what we want on a project and a long way down the pathway before we start asking the questions of what people can bring to us to help our sustainability agenda, then I think that we will be asking the question too late.

Also, it calls for the requirement of a carbon management plan, which articulates the roles and responsibilities of all the parties in carbon management on a project. I think that will be helpful for us to make clear what we’re expecting of who within our projects. So, I think that’s the framework that will come from that policy.

As an agency, we have a number of design principles that we’re working with in our priority areas around decarbonisation, electrification of facilities, and alternative energy approaches. Climate resilience is also a big priority, and coming back to the regions, we are certainly interested in making sure that our facilities are resilient to the environment that they’re delivered in – in particular, in Western Sydney, and out west in New South Wales.

Health generally is a huge waste emitter in New South Wales. I think we contribute approximately eight per cent of waste emissions in New South Wales as a sector. So, we’re also looking at different ways of delivering infrastructure that can help health to manage that waste output, and ways that we can use energy and water more efficiently.

I’ve just said 20 things that made it sound quite simple, but it is fairly complex and there’s a lot of work underway. I think it’s

Crowe, Chief Investment Officer, Plenary Group

just leveraging this framework to be able to be clear with the sector and the market about what we want.

BL: Changing topic quite significantly: I was watching the Paris 2024 Olympics with some trepidation. I currently live in Brisbane and have deep concerns about whether we’ll be ready in time for the 2032 Olympics. I might throw to Paul first: What advice do you have for how they could start delivering the venues that we need in a mere eight years?

PC: I am anxious as to how Brisbane’s going to do this. It was amazing what Paris did. To have the same sort of format of temporary facilities and new facilities is a massive task ahead for Brisbane. If they don’t get on with it, we do risk being embarrassed as a nation and I hope they do get on with it.

I think the private sector has been urging the Government to get on with the process of selecting facilities, and there’s a range of procurement options that will be needed, so it’s about working out which ones to partner with private sector on, which ones are legacy projects and which ones are temporary. The private sector, despite all this engagement, I think, is still waiting for that decision to be made.

There’s an election coming. They may or may not set up an authority. These assets – the big arenas and the big stadiums, if they get done – are legacy assets. Stadiums are classically done on a build-to-fail basis, where not enough maintenance is put into them and, as a result, they need a refresh. There are considerations, not only in Brisbane, but around other stadiums here and elsewhere in the world, about how to do

it in partnership with the private sector so they have a longer legacy, given they are big investments to make for cities.

BL: I want to ask the Government representatives to get involved, but I might throw to Skye and ask, is this focus coming into your planning already?

SM: We’ve just been advocating for decisive action and clear planning. I think, as a nation, we really need that, so I think we’ve just got to get going. We need clear government leadership, early stakeholder engagement, and then tried-and-tested delivery models. We don’t need to rewrite the book, I don’t think.

BL: I will let each panellist pretend for a day that they’ve got the unfettered power to change one thing around social infrastructure. What would you do if you could change one or two things with the aim of delivering social infrastructure faster and more efficiently? I’ll throw it to Emma first.

ES: Skye touched on scale earlier, and I think that we are all competing for the same things in different places. The Olympics is the perfect example of the opportunity for scale. We’ve been dabbling in offsite manufacturing to deliver some of our own key worker housing and ambulance stations, and other things. We are challenged by it in terms of the efficiency because of the lack of scale for ourselves.

I think if I had power for the day, I would demand everyone came on board with my agenda to help me upscale, to enable everyone to deliver the outcomes they need – because unless we actually get it to a scale that it’s feasible, it won’t have the impact that it could potentially have.

PC: I would probably target two things around planning rules and procurement. I think in the mature infrastructure market that we have, there are elements of processes that have gone into projects that we should just review. For instance, the planning process and the procurement process is too long, and that can turn people away from the benefits of a competitive PPP bidding model because the benefits are there to see in different assets, particularly in some of the hospitals down in Victoria.

Business cases very much need to be done. Everyone needs alignment about why we’re doing the project and that’s what the business case is there for. That should be the start of how you get that social license to do things, but then the length of procurement and the length of planning process that follows just slows everybody down.

KOS: I think there’s a real opportunity to simplify our technical specifications and focus on that design piece to really produce some efficiencies. I know every project thinks it’s special, but there is a lot of replicability across our programs that I think we could be making more of on the client side, which then has benefits for our contracting partners.

BL: And the last word to the contractor?

SM: Yes, fully supportive. I love all those ideas. Let’s just make them happen. If we could align federal, state and territory governments on a program of works, I think we’d be there.

Paul

QIC Infrastructure

About QIC

Established

QIC at the forefront of infrastructure resilience

QIC’s focus is on asset sustainability and enhancing long term value for stakeholders.

For QIC Partner Kirsten Whitehead, building greater resilience into infrastructure assets is about more than risk management; it’s also about creating long‑term value for communities and investors, and is fundamental to responsible stewardship.

As a QIC Infrastructure Portfolio Manager, Whitehead is part of a team that is expanding its work on infrastructure resilience.

‘QIC’s near 90 strong investment team has a long history of focusing on infrastructure sustainability,’ says Whitehead. ‘That work has grown this decade to focus on a wider range of dynamics that could potentially impact asset resilience and service delivery.’

These dynamics include the transition to a low carbon economy, physical climate change risk, cyberthreats, and geopolitical and security risks.

‘At QIC, we’re thinking more broadly about infrastructure resilience and the

interdependence of different assets across communities,’ says Whitehead.

QIC manages $36 billion across 22 direct infrastructure assets in five Organisation for Economic Co operation and Development countries.1 Owned by the Queensland Government, and with a global client base of institutional investors, QIC has delivered attractive risk adjusted returns through an international portfolio of unlisted infrastructure assets since 2006.

In Australia, QIC manages 16 direct infrastructure assets on behalf of its clients, with an expansive footprint across all states and territories. QIC’s key infrastructure investments include ownership of Brisbane Airport, Hobart International Airport, Port of Brisbane, Port of Melbourne, ConnectEast Group: EastLink, and Tilt Renewables – one of Australia’s largest renewable energy platforms.

Whitehead says QIC’s scale and longstanding relationships aid its work on infrastructure resilience.

‘As a large investor, QIC can directly influence an asset’s approach to resilience assessment, planning, and implementation through our stewardship and engagement processes, and through collaboration with key stakeholders.’

This scale, together with a breadth of exposure across different sectors and regions in Australia, enables QIC to invest substantial resources in this area.

‘This involves understanding the interdependency and complexity of infrastructure systems as a whole, and how the weakness in the resilience of the system can have cascading impacts across communities, the economy, and investors,’ says Whitehead.

Innovation in resilience planning

Whitehead believes that the infrastructure sector needs to focus more on long‑term asset resilience against a wider set of dynamics.

‘As an industry, we’re still at the beginning of this journey,’

she says. ‘So much more needs to be done to understand how assets would respond to growing risks and dynamics, and what that could mean for stakeholders.’

The starting point, says Whitehead, is broadening the focus on asset resilience beyond physical climate change risk. ‘That work is critically important and ongoing, but other infrastructure threats are emerging in a heightened risk environment.’

QIC’s Senior Principal –Sustainability, Innovation and Resilience, Andrew Sellick, says that examples include potential cybersecurity attacks on airports; the impact of geopolitical risks, such as trade or military wars, on ports; the risk of state-sponsored terrorism on utilities; or the risk of another pandemic.

‘These risks may never eventuate, but as long-term investors in infrastructure, it’s incumbent on QIC to ensure that our assets have appropriate risk-management strategies to safeguard communities and investor capital,’ says Sellick.

He says that a feature of QIC’s work on infrastructure resilience is its thinking beyond an individual asset and where it sits in the broader ecosystem.

‘When you assess these risks, you recognise the interdependency of infrastructure assets in community ecosystems. An airport, for example, might be at risk from another piece of infrastructure that connects to the airport.’

In environmental risk and decarbonisation, QIC’s work has expanded beyond climate change mitigation to adaptation.

‘It is very clear that we need a proactive and collaborative approach to building Australia’s resilience to climate change,’ says Sellick. ‘If we don’t, inaction is expected to cost us $35 billion every year in Australia by 2050 through the direct cost of extreme weather events.’

QIC’s work in airports is an example. At Hobart International Airport, QIC considered bushfires, flooding and other potential risks. It also considered

biosecurity requirements if global warming leads to disease outbreaks.

‘QIC worked closely with the board of Hobart International Airport to assist in the development of a climate change adaptation plan. The plan was informed by a vulnerability assessment using an evidence-based approach and different emissions scenarios to identify strategic adaptation actions to address them’ he says.

At Brisbane Airport, QIC was involved in climate change analysis that informed the height of the airport’s new runway, one of Australia’s largest aviation projects. Whitehead was, at the time, a non-Executive Director (alternate) of Brisbane Airport Corporation. ‘Partly as a result of that engagement, the new runway’s height was built 1.5 metres above the minimum regulatory requirements,’ she says.

Resilience, the energy transition and the opportunity set

Whitehead says QIC’s work on resilience helps it identify investment opportunities in the energy transition thematic, and also reorientate existing businesses to leverage this thematic through its active asset management approach.

‘Australia’s decarbonisation journey must be delivered through a decentralised solution,’ Whitehead says.

‘While large-scale investment in renewables is a critical part of Australia’s response to decarbonisation and net zero, opportunities at the other end of the value chain with customer and consumer-facing infrastructure look quite interesting, such as

distributed generation solutions and smart meters.’

QIC owns 100 per cent of Pacific Energy, a producer of sustainable distributed energy delivering reliable off-grid power solutions to Australia’s resources industries and remote communities. Under QIC’s management, this business has significantly transformed to a market-leading remote provider of sustainable energy solutions with renewables and hybrid solutions to its customers.

In 2023, QIC partnered with Vector to own Bluecurrent, a leading smart-metering business that provides more than 2.5 million electricity and gas meters across Australia and New Zealand.

‘QIC’s investment in Bluecurrent is an example of the opportunities emerging from the alignment of decarbonisation and digitalisation,’ says Whitehead. ‘Bluecurrent has very high market share in New Zealand, and an opportunity to build a large presence in Australia, against a backdrop of low penetration of smart meters in Australia.’

Whitehead is proud of QIC’s work in infrastructure resilience, and excited about its potential. ‘Through innovation in risk management, QIC can create more value for infrastructure investors and governments. Most of all, we can help ensure that infrastructure continues to deliver vital services for communities by better protecting these assets against risk.’ ♦

End note

1 At 30 June 2024.

Panel discussion Boosting productivity: industrial relations, planning and technology

Key points:

• Strategic planning for the housing build needs to account for the associated social, transport and freight infrastructure needed to support communities.

• Adequate and flexible strategic planning, including early planning for industrial land-use zones, is critical to improving productivity and optimising land use in Australia’s infrastructure sector.

• Assessing projects under a time, and cost-plus-carbon metric could improve productivity by reducing resource demand and environmental impacts, and encouraging innovation.

• Industrial action can have widespread and lasting impacts for the cost, availability, and speed of goods and services being delivered, as well as implications for the broader infrastructure network, and requires developing strong relationships and governance arrangements.

Panellists:

► Marika Calfas, Chief Executive Officer, NSW Ports

► Craig McGrory, Chief Transformation Officer, ACCIONA

► Rob Stokes, Former New South Wales Minister for Planning and Public Spaces

Moderator:

► Ben Hughes, Group Executive, Marketing, The APP Group

Panel discussion on productivity featuring Rob Stokes, Marika Calfas, Craig McGrory and Ben Hughes (left to right)

Ben Hughes (BH): Productivity is certainly a well-used term. It can cover a range of contexts and is often misused. A question for all of you to set the scene around productivity, and because I’m keen to understand and to help the room understand, is: what does productivity mean to each of you in your different areas? Marika, I might start with you.

Marika Calfas (MC): Thanks, Ben. I think that, technically for our ports, productivity would be about how many goods we can put through in a particular time, but I don’t really think that’s how the layperson thinks about productivity at ports. And I do agree that it gets mixed up with efficiency, optimisation and performance. A lot of people focus on one or two elements. It might be how fast containers are lifted off a ship, but actually port productivity is a lot more complex than that and depends whether you want to look at the marine-side, quay-side, or the land-side interface, and there are a dozen metrics you could use for that.

I actually went to the Productivity Commission’s inquiry report from 2022. The actual report was on lifting productivity at Australia’s container terminals, and also mixed in productivity, efficiency and performance – so I’m no clearer from them as to how you would define it. For me, it’s a mix of productivity and efficiency, and how well we’re moving the goods through our ports efficiently, sustainably, and with capacity and optimisation.

Rob Stokes (RS): We often talk about productivity almost in the same breath as we talk about sustainability and liveability, as if somehow, they’re opposed to one another, when in fact, like Marika said, it’s ultimately about efficiency and it’s about getting the biggest result for the least effort. So, it’s a measure of efficiency effectively. As someone passionate about green infrastructure, I think there’s a real synergy between economy and ecology to that extent, being efficient with our use of resources to try to get the biggest impact for the community is what productivity is all about.

Craig McGrory (CM): Similarly for us, we look at it in terms of the outcome and then the resources required to actually achieve that outcome. The two biggest resources we have in our sector are people and materials, and I think there are two components to these resources. There is the cost side of both of those, which, as discussed, is very expensive in this market for a number of reasons, but the quantity is the bit that we need to try to focus on. In our business, we definitely try to focus on how we’re managing the quantity and balance of those resources. When we take a step back and look across the industry and all its different parts, it’s a question of how we can start to address reducing the number of people we need across the entire process.

I think where we are talking about industrial relations, as well, the assumption is that we have to make our blue collar more effective – but we don’t need more people to dig a hole than we used to. As outlined in an Australian Financial Review

article in early September, I think from 2003 to 2023, we’ve had an increase from 28 per cent to 38 per cent of the number of white collar people needed in our sector. So, where are the opportunities across planning, design and execution where we can actually start removing wasted effort?

BH: Building on that, while productivity can often be taken to be doing things right, it should also mean doing the right things. How does that thinking and element tie in? Rob, do you want to start off?

RS: Starting with the right project is obviously important and that’s why I was intrigued by the announcement from Treasurer Daniel Mookhey in relation to truncating business case processes. That’s good in one sense, but only if you’re making sure that you are considering the options in relation to investment. This is why the role of government, for example, Infrastructure NSW and the State Infrastructure Strategy, is important in ensuring that you’ve started with a clear list of what you want to do because otherwise you tend to bounce around from project to project. Generally, we were pretty good because we had that broad plan, but sometimes I thought, ‘This sounds like a great project in terms of benefits versus costs, but what else might we be doing with this investment instead?’

So, I think that strategic planning is crucial, and I’ve got to say as an aside, that often we in New South Wales lament the fact that we have the worst planning system in the world. We don’t; we have the worst development assessment system in the world, and strategic planning is really important. We can’t keep our eye off planning strategically for the infrastructure we need to support growth, but once we’ve decided what we want to do, we should get on with it.

MC: I think for us, in terms of doing the right thing, it’s about looking at how our operations work sustainably. When I say sustainably, I’m talking about economic, social and environmental sustainability because the way we operate, we’re a big visible node in the community and there are certain expectations that come with that, and certain interface impacts, as well. So, we need to make sure we have our social licence to operate, and therefore operate in the right way and grow in the right way. We have the challenge of decarbonisation as well as climate change and climate resilience, and how we address each of those things. We also have to be economically sustainable, otherwise we can’t do any of the other things.

The other piece to that, in terms of linking it to a productivity piece, is that we are not only a node, but a big node in an interconnected system. The reality is that we have a responsibility in that system because if any one part of that system has an issue, it has a cascading effect on the other parts. We are subject to what others do in the supply chain as much as they’re subject to what we do. So, we have a responsibility to try to work with that supply chain and do the right thing to make

sure those other parts are working efficiently, as well. There are a lot of challenges in that, particularly as we have quite a fragmented supply chain system in this country.

CM: ACCIONA is very much focused on sustainability and regeneration. We link back to the United Nations’ Sustainable Development Goals, of which 72 per cent require infrastructure. There’s not a natural limit to doing the right things. There’s plenty for us to do. I think what would assist, and it’s been mentioned before, is that transparency of the planning process and that clarity, so that they can be executed more promptly.

BH: Let’s bring technology into the discussion now. Innovative technology is often heralded as a light on the hill for driving productivity growth. What role do technology developments play in making things more efficient? I should note that the presence of technology is different to its adoption. Who’d like to kick us off? Maybe you, Craig.

CM: We haven’t been applauded as an industry for the adoption of emerging technology and I think it gets back to the fundamental components of what we’re talking about with productivity. There’s a whole lot of robotics that are fantastic to improve the efficiency of our frontline workforce. We can invest in that so that we can actually do more with fewer people. I think the artificial intelligence (AI) component is very important for us to actually start to simplify the huge burden that we have on regulatory requirements and even the design standards, so that we can reduce the quantities we spoke about earlier in terms of materials and people. So, on the base of that, we can actually do a lot more with less.

I think the biggest barrier we have is fear. I think as an industry we’ve trained to think we’re here to manage risk and we’ve forgotten that we’re actually managing work. If we take a managing risk perspective, we’re naturally defensive, meaning

it’s safer for me to do it the way I’ve done it before because that didn’t cause a problem. So, although we’re an industry full of engineers that are supposedly great at innovating, we constrain ourselves because we’re so focused on risk and making sure that the design standards are met that are over-designed. We sit there and say, ‘Well, we’re preventing ourselves from actually being innovative,’ and that’s what we need to address.

MC: I would say ports are relatively early adopters of technology in the space of automation. Ports introduced automation from the early 1990s in Rotterdam, particularly in 1993, and then it’s progressively increased across the world. But what I would say is that automation is not for everyone –it’s a horses for courses thing. Automation can be very good at improving safety, reliability and consistency, but it may not actually improve efficiency. People tend to introduce automation in countries with high labour costs and a skilled workforce. So, it’s not always that automation is the answer to every problem. For instance, it’s a lot more difficult to flex up and down when you have automation than when you have a manual operation. So, we’re still operating with different methods in Port Botany, we have some semi automation, and other methods that are purely manual. Some of the ways that ports have also adopted automation is through truck and train arrival systems, going paperless, having digital booking systems, paperless entry into container parks, and all of those things through digitalisation, and they’ve been able to adopt technology well.

An example of one that we have just completed together with Patrick Terminals is our co-investment in an automated rail terminal. This has a higher capacity, but it also integrates with their automated stacking yard. So, you can take a container from the terminal to the rail without any humans touching it and vice versa. It then goes on a dedicated freight rail line to the Moorebank Intermodal Terminal, which also has an automated rail terminal. Essentially, you have two ends with automation, with a dedicated freight line. While there are still two train drivers, this is an automated connection. So, I think there is progress. A barrier to automation is that it is expensive to implement in any form of technology. It is complex and doesn’t always go right the first time, and takes time to ramp up. There are also barriers to change among people within the businesses, as well.

RS: Well, I think a good example would be the digital twin, which will liberate councils and other consent authorities rather than needing to have extensive notice and comment periods for Development Applications (DAs) and proposals. Instead, communities will be able to see three-dimensionally what the impacts will be, and notice and comment periods can be truncated. Sometimes, though, industry wants government to set up replicable machines to make decisions for them, like getting DAs made by AI or setting up calculators to determine biodiversity offsets, or whatever it might be. The problem is, the machines are only as good as the data that inputs into

Marika Calfas, Chief Executive Officer, NSW Ports

them and, in fact, in almost every situation, it won’t fit the box entirely.

So, I think it’s really important for technology to help scaffold discretion by experienced decision-makers, but not take that discretion away. I think often we try to create these regulatory tools as though a planner or an engineer or a decision-maker is exercising discretion, and that’s a terrible thing. We need to recognise that discretion is a good thing. We have highly trained and very experienced development professionals who actually have judgment to be able to make decisions. Use the technology to give them the information they need to make the decision, but don’t have the technology making the decision.

BH: Staying with that theme, if we think about the construction sector, it’s often in the news around its lack of productivity. I’m keen for your thoughts, after seeing different construction projects occur, on what the role of modern methods of construction is and what does it really mean? Is this something that will move the dial in terms of creating productivity and using offsite manufacturing? Craig?

CM: Definitely. For the right projects, I think it’s something that needs to be invested in. But I think to make a return on those investments, and all too often we think about a project as a silo, we need to actually achieve the entire return of all investments, whether it be innovation in technology or new construction methods off that one project. To get back to the planning conversation earlier, if we can actually get a far better pipeline of work where there is that certainty of work, then there can be broader industry investment to actually make those investments pay off in terms of modular manufacturing and thinking of designs in different ways.

BH: Marika, have you had any involvement? Do you have thoughts around the role of modern methods of construction going forward?

MC: Look, we’re contracting people to do a lot of the infrastructure delivery, and a lot of our infrastructure is concrete. So, for us, it’s probably more about how we decarbonise that concrete, particularly in a highly corrosive and exposed environment. We’ve been doing some trials on different things, like low-carbon geopolymer armor blocks for our breakwaters, to see if they’re as effective as the traditional blocks, as well as putting in low-carbon concrete on container-rated pavements. But we have yet to trial it in those really harsh, heavy operating environments.

We build infrastructure to last 50 or more years, 100 years ideally. The standards aren’t there, and we really need the standards to be there so that we can rely on the fact that they’re going to be in place. Another example is the tank farm for ethanol exports that is being built in Port Kembla at the moment. The tanks have been built with little modular curved sections brought to site and welded onsite. That sort

of modular construction has helped to put those tanks up a lot quicker than if you’re actually building it all by steel yourself onsite. So, I think there are ways you can deliver on those.

RS: I think it’s clearly the answer, but it’s so difficult to achieve. It requires a whole cultural shift in the way in which we plan, procure and develop. For example, on building certification systems – how would a building commissioner certify a house when it’s there? In relation to consenting systems, this needs to do it at scale, and of course, we consent project by project, so it’s difficult to develop that scale. Then there’s just the relational aspect whereby a lot of building contractors have their list of trades that they use and, all of a sudden, that just blows up that model entirely.

BH: There’s a lot being said about the contemporary industrial relations environment that we’re all navigating. Of course, there are periods in the pipeline when there’s a lot of activity and sometimes it’s more stable, but right now it’s shifting that pipeline. The transport pie is starting to contract as we heard earlier, and the energy pie is growing, but there’s certainly some uncertainty around that. So, I might start with you, Marika, from your perspective being at the waterfront. What are your observations of the current environment through an industrial relations lens?

MC: Well, it’s quite visible when there are issues at the waterfront – I think that’s probably safe to say. Going back to the Productivity Commission report, it noted that productivity on the waterfront is actually at the container terminals, and impacted by the conditions within the enterprise agreements, as well as the bargaining process that occurs through those enterprise agreements. The sorts of conditions in the enterprise agreements that are highlighted in that report include what we call the ‘family and friends’ clause, where you have conditions around who you can employ, and also around who gets involved in the rostering. So, that’s one part and probably one you don’t see so much.

The part you do see is when there’s protected industrial action and only when it’s gone on for a long time. That’s probably the point I would make. As I mentioned before, our ports are a node in that interconnected system. If our ports aren’t working, the rest of the chain all clogs up, and that clogging up not only has an impact on receiving your goods, but it also has an impact on the cost at which you receive those goods. So, let’s go back to the peak industrial action period in 2020, where at Port Botany our three stevedores all engaged in protected industrial action at the same time, each for a period of two to two and a half years. Because of that extended period of time, there was overlapping industrial action, and it was at this point when you really felt and saw that impact.

During this time, what we saw were things like US$300 per 20-foot container surcharges being applied to those containers,

which was a 14 per cent uplift on the actual ocean freight rate at that time. You then see the disruption going on. But it’s not just the duration of the disruption, it’s the type of protected action that can be taken that’s also quite interesting and has evolved. So, over the two and a half years you didn’t see it all because it wasn’t people stopping work and standing at the gates or striking for 24 hours; it was a progressive build-up. For instance, this involved maintenance crew members using their non-dominant hand when undertaking work where safe to do so, not driving the key cranes more than the minimum safe speed or the shuttle carriers faster than 10 kilometres per hour. Then there were stop works, which could be as short as 15 minutes every regular period, increasing to 30 minutes, or one hour, or 24 hours.

So, you get the picture that it’s sort of like little bits at a time that all incrementally have an impact on productivity that results in this congestion. When we’ve done an analysis of the economic cost of that, we found that a 24-hour shutdown of the ports has an economic cost of about $12 million. If it’s four hours every day over a year, it starts to be $720 million as an economic cost. There’s a cost to this, as well as what you see. So, what I would say is I think the issue we have is not that you can’t take protected industrial action, it’s rather the duration of that and the nature of the protected industrial action, and they haven’t changed.

We had DP World and Svitzer last year. Right now, line services – the people that tie up the ships – are about to go to a ballot for protected industrial action. Next year, at the back end, we have Patrick and Hutchison again. So, I guess you get the flavour of where we sit in the industrial action world.

BH: Rob, you’ve been out of government for a while now, what are your observations of the current environment?

RS: When we came to government, we had a clear plan of how we were going to fund the infrastructure pipeline. We had asset recycling, and we had the wages policy. The wages policy was there to give us certainty about how much money we were going to have to spend on wages from year to year, and it framed the discussions we had with unions. And we are now living with the consequences of dismantling those two things. In fact, former NSW Premier Bob Carr told me that legislating the wages policy was one of the best things that our Government did because it gave government control over the budget so we could make long-term decisions about where we wanted to allocate funding.

When I was Education Minister, for example, I would deal with the unions regularly, but we’d talk on issues of pedagogy. Wages discussions were not conducted at a ministerial level. I didn’t waste any time talking about the internal workings of wages discussions with trade unions. Frankly, you don’t want your ministers doing that. I can’t imagine how much time is being wasted in these ongoing endless debates about wages,

which is subverting government from its job, which is to deliver for the community. So, the wages policy: regardless of what percentage you choose, just choose a number and that will frame your decision, so you’re not constantly in these endless negotiations. And we started by talking about productivity –they’re not productive uses of ministerial time.

BH: Yes, and it certainly doesn’t bring stability into the marketplace. All right, Craig, the elephant in the room is the administration of the Construction, Forestry and Maritime Employees Union (CFMEU). Do you think the recent news about the CFMEU is a watershed moment?

CM: Well, I think unions have an important role to play and I think, for us, we have a very large frontline workforce ourselves. We value the relationship we have with our frontline workforce and the subcontracted workforce. We have really healthy and respectful relationships with many different unions. When this first blew up in the media, I was actually at one of our sites in Victoria, at a pre-start. We had major occupation for some rail work and the conversation that we had with the workforce then was one of absolute pride in the work that was being done by them, and by us together to make a significant change in the infrastructure that was being provided. And I think the vast majority of the people in our sector are very much focused on doing well, and are proud of the work that they do.

What we’re talking about is governance. I think we have a view that there should be no difference in the governance arrangements that unions have between us, as companies. But we seem to have a different set of rules, which brings a lot of this complexity to it. When we talk about industrial relations, I keep coming back to the fear, because I think that’s what’s stopping a lot of what’s moving forward. Unfortunately, a lot of the negotiations are around trying to address the uncertainty we have in work.

We have a view that the high rates of poor mental health, affecting one in four people in our sector – and the unacceptable suicide rates – are due to the uncertainty of work and the pressure that that places on people. So, separate to the governance around the unions, I think if we can get this planning right and start providing certainty of work for the people in our industry, not only will we get better outcomes for society, but the people that work in our industry will also get far better personal outcomes.

BH: I’d like to turn our attention to resolving challenges, planning and regulation reform. How do we balance the competing priorities like this? We’re trying to navigate the housing supply pressures while trying to preserve crucial infrastructure and productive land. What does all this look like from an economic productivity standpoint?

RS: Again, we must start with strategic planning and my worry is that we are moving away from planning strategically. The problem is, though, whenever we do a strategic plan, the first applicant comes along and says, ‘But I want to do

something different’. So, the whole plan breaks. We must be careful to plan with a degree of flexibility and then deliver on what we planned, rather than allowing the plan to be subverted as soon as it’s delivered.

The next thing is, we need to understand what planning processes are there for. Community consultation, for example, is often what really drags processes out. There are two points for community consultation. The first is to get legitimacy for the decision; that’s the idea of social license. The second – and presuming the input is valuable – is that the proposal can be altered or improved on the basis of what people had to say about it. If any planning processes are not directed to those aims, then we shouldn’t have them. So, we need to go back to what the purpose is of planning and democracy. We also need to recognise that while it’s frustrating and slow, if it is removed, it’s very corrosive of democracy itself. When people don’t feel that they’ve been involved in planning their future, they tend to rise up against the system. So, it’s important to have a robust system, but to make it as effective and efficient as possible.

I also think in relation to planning systems, for example with housing, my experience of planners is that they’re not sitting around in rooms thinking, ‘Now, how can we stop development?’ That’s generally not what they’re thinking. Often, they’re trying to see how they can consent to this development in terms of the traffic modelling or the sewage infrastructure – this is the enabling infrastructure that has to be there for them to say yes to something.

So, I was slightly alarmed by the recent report from the NSW Productivity and Equality Commission that suggested we are spending too much on infrastructure and that we need to direct the workforce into housing. You can’t do one without the other. Once you stop delivering the schools and the hospitals, you’ll soon realise why you needed them. You can’t solve the housing crisis just by building houses. Houses need infrastructure in order to create community. So, it all comes back to strategic planning, and if you get that right, then the consenting process should be very quick.

My view is that strategic planning processes are important, and development assessment is where you can save the time. If a proposal is in accordance with the plan, then the presumption is it should go ahead. If it doesn’t accord with the plan, and this is often where someone puts in a planning proposal, for example, which will generally take more time because no one planned for it. This will mean changes to the traffic modelling, capacity, utilities and all those sorts of things. Focus more on strategic planning and get the efficiencies in development assessment.

BH: Good observations. Marika, any thoughts around planning and regulation reform?

MC: Well, I would say freight. Freight, if it’s thought of at all, is an afterthought in planning and expected to sort itself out. The reality is, as much as you need schools, hospitals, water

and electricity, you also need freight. So, freight should be integrated into the planning system – and it’s not. That is why we not only have a housing crisis, but an industrial lands crisis. We have the lowest vacancy rate of industrial lands in the world in Sydney because of the fact that we don’t plan for industrial lands and keep rezoning our industrial lands to other uses.

RS: Marika, that was one of the points in the NSW Productivity and Equality Commissioner’s report suggesting we should ‘review’ – I think that’s a word for ‘get rid of’ – the industrial lands policy, which would actually make the problem worse.

MC: Correct, this was in their last report, which was overruled by both the Greater Cities Commission and, ultimately, the Department of Planning. So, I don’t know why they’d bring it up again if it has already been reviewed, and the outcome was we need our freight lands in our urban centres, not just out west. The goods are going to where the people are – and the people are all in urban Sydney, Parramatta and then Western Sydney. We need large blocks of land for dark stores, consolidation hubs, and logistics and warehousing activities – and, currently, we have a shortage.

We need to open up serviced industrial land so that we can continue to operate those freight and supply chains because ultimately, it’s adding to the cost of every item that everyone in this room buys, and that every one of your businesses use, as well. It also adds congestion on our roads if we don’t get it right. The other part to it is the conditions that are put on industrial lands. The expectation is you have an industrial parcel of land, but you also have to worry about the impacts of that land on everything else planned around it, when actually, it’s a two-way street. So, we end up with these pieces of industrial land that can’t be used optimally because they end up with curfews or caps.

Former NSW Minister for Planning and Public Spaces Rob Stokes

So, we need to protect, keep, and grow industrial lands well located and we need to be able to optimise the use of those lands by using them to their maximum potential, and put in place planning controls on the urban areas around it so we can do that.

BH: Let’s change our direction here. One of the persistent policy thematics over the past couple of years is around decarbonisation, and we started to touch on this and the shift to embodied carbon. Rob, when you were in the driving seat back in government and opposition, carbon policies in New South Wales pioneered a new direction and some of that is now being rolled out nationally. Appreciating that body of work was through the emission lens, what’s your view around decarbonisation now as the stalking horse to productivity reform?

RS: Firstly, I’d love to take credit for that, but it was actually Infrastructure Partnerships Australia that raised this issue with me in the first place. We were able, by listening to Infrastructure Partnerships Australia, to fashion that into a policy that’s now being embraced across the country. Effectively, it came back to that original definition of efficiency. Decarbonisation is a very productive thing to do because you are using fewer resources to achieve the same or improved outcomes. Using less steel or concrete makes things faster and cheaper to deliver, and is good for the environment. But it goes back to what Craig was saying about risk, we’ve got this incredibly conservative and heavy hand of risk aversion.

Well, of course there’s risk involved, but we often assess the risks of doing a project. We don’t counterbalance the risk of not taking action, and we need to have a more considered and flexible view in relation to risk.

The decarbonisation agenda was effectively ensuring that projects were measured not just on time and cost, but also on their ability to save carbon. So, ironically, the mindset and culture of people assessing these things was not just time and cost, but also incentivising design standards that actually look at how we can shrink the use of these resources, which is so much better on so many levels. It’s great in terms of time and cost, and great for the planning, as well.

BH: The final one to wrap up – we started the session talking about what productivity means to you. What’s the one thing you could do in your particular area if you had a magic wand to address productivity?

CM: I think it’d be simplifying the amount of tape that we have. It doesn’t matter what color it is, there’s too much tape. If we look at the decarbonisation topic that we’re just talking about, we nearly lost the opportunity to deliver the Western Harbour Tunnel in a way that had fantastic benefits for the environment and the community, and Transport for NSW trusted us to do it. But that nearly didn’t happen because it went completely against the environmental approvals that were already in place, and took another year while we started to actually try and get those approved.

MC: I would go with elevating the importance of freight in people’s minds. If governments and community can recognise its importance, then I think they’ll be more tolerant of how it operates and what it needs to operate. Then they’ll build them into the strategic plans that we need and deal with them appropriately through the planning process, and probably the industrial relations, as well. I would make everybody realise that freight should be at the top of their list when they wake up in the morning.

RS: I actually agree with Marika, and with Craig. Let’s get rid of rules and go for principles. Something I tried to do in the planning system was starting with the principles of what you’re seeking to achieve, and the rules should be there to align with the principles. Often, they don’t. Standards are there to try and make processes more efficient when they’re replicated, but constantly, we take our eye off what we’re seeking to achieve, and the problem we’re trying to solve, and look at the boxes. If we took the boxes away, I constantly found that there’s almost a learned helplessness among our planners, assessors and engineers, and a reliance on what the rule book says. The response to that should be, ‘No, you have a brain, you have common sense, you have experience, you’re well educated; figure it out.’ Often our probity systems and things also work against using discretion, and using it wisely and making good decisions. So, replace the rules with principles.

ACCIONA Chief Transformation Officer Craig McGrory

Capella Capital expands business with wins in health, housing and energy sectors

Since 2009, Capella Capital, together with its partners, has secured more than $32 billion of projects across the full spectrum of transport, social and energy infrastructure throughout Australia.

It currently manages more than $20 billion of assets, alongside third‑party equity capital of over $1 billion, including for Aware Super.

As Australia’s leading public infrastructure developer, financial adviser and asset manager, Capella Capital regularly leads successful consortiums on Australia’s largest and most complex projects.

The company works closely with project partners to deliver award winning outcomes to enhance the communities it is privileged to develop infrastructure for.

Social and affordable housing

Recently, Capella Capital played a pivotal role in advancing the social and affordable housing sector in New South Wales, supporting Bridge Housing on its $230 million mixed use development in Redfern, a project set to make a significant impact on the local community. Capella Capital has also partnered with a number of community housing providers, helping secure multiple preferred applicants in Housing Australia’s funding round one call for applications.

Energy

In New South Wales, Capella Capital acted as financial adviser to ACEREZ (Acciona, Cobra and Endeavour Energy) on the Central‑West Orana Renewable Energy Zone (REZ) transmission project procured by EnergyCo. It is the first contestable REZ in Australia, initially unlocking up to 4.5 gigawatts of new network capacity.

In the Northern Territory, Capella Capital partnered with the Department of Defence to deliver on base energy security by developing twin solar farms. Delivered by Lendlease, these projects have provided important employment opportunities to First Nations communities and local subcontractors.

Health and public assembly

For the past two years, Capella Capital has been developing the $1.1 billion Frankston Hospital, while the Exemplar Health consortium including Capella Capital as lead sponsor, investor and asset manager has recently achieved Financial Close with the Victorian Government for the new Melton Hospital Project with its partners Lendlease, Honeywell, Compass and Invesis.

Capella Capital continues to manage the Sunshine Coast University and Bendigo hospitals, which were delivered and maintained with its consortium partners Lendlease, Downer, Aware Super, and Siemens Financial Services.

The company is similarly proud to manage the International Convention Centre Sydney, delivered, operated and maintained with consortium

partners Lendlease, ASM Global, Downer, Hostplus, and Aware Super.

Transport

In Victoria, Capella Capital was the lead sponsor, financial adviser and equity investor, on behalf of Lendlease, as part of the Cross Yarra Partnership, comprising Capella Capital, Lendlease, John Holland, Bouygues and John Laing, which are delivering the Metro Tunnel and Stations public private partnership.

Capella Capital performed a similar role for the $11.1 billion North East Link tunnel project with the Spark consortium – comprising Webuild, CPB Contractors, GS E&C, China Construction Oceania, John Laing, Ventia, DIF, and Pacific Partnerships.

The future

Capella Capital Managing Director Malcolm Macintyre says he’s excited by recent growth in the business. He sees the social and affordable housing and energy sectors as providing significant opportunities for the company in future.

‘If you’re looking for a genuine partner with market leading experience in large, complex infrastructure projects, we look forward to hearing from you and working together to imagine more.’ ♦

Fireside chat Unlocking more value through collaboration

Key points:

• Decarbonisation is the biggest challenge facing the aviation industry, but can be achieved with strong intent, regulatory reform and developing a domestic sustainable aviation fuel industry.

• Infrastructure investment is critical to improve capacity, but must be delivered in line with demand to deliver value for money.

• Project Sunrise, and the long-distance opportunities it brings, will revolutionise international air travel for Australia, and require a premium service to meet changing customer demands.

• Shared customers and shared customer experiences requires collaboration between airports and airlines, which can be enabled through technological improvements.

Panellists:

► Scott Charlton, Chief Executive Officer, Sydney Airport

► Vanessa Hudson, Group Executive Officer and Managing Director, Qantas

Moderator:

► Adrian Dwyer, Chief Executive Officer, Infrastructure Partnerships Australia

Sydney Airport’s Scott Charlton and Vanessa Hudson from Qantas delve into points of alignment in a fireside chat moderated by Infrastructure Partnerships Australia’s Adrian Dwyer

Adrian Dwyer (AD): Thank you very much to both of you for joining us. You are both around the 12-month mark, or close to it. Vanessa, I think you’ve just ticked over 12 months in the role, and Scott, it’s on the horizon. How’s the journey been so far, Vanessa?

Vanessa Hudson (VH): The journey has been really interesting in many ways. I definitely did not anticipate stepping into the role the way I did. The one thing that I think is a blessing when I look back on the past 12 months is that diving in headfirst is sometimes the best way to go, particularly with a business as complex as airlines. Thinking about the last 12 months, I’m really proud of the team I lead. No CEO can do the job by themselves, and I’ve got incredible capability across the organisation – from pilots, to cabin crew, to engineers, to ground staff – but also an amazing executive team that’s so passionate. I’m just thankful that we focused on what we did and I think our results this financial year demonstrate we’re getting the balance better than we have in the past.

AD: Scott, how’s it been for you?

Scott Charlton (SC): It has been interesting. Vanessa has had the benefit of 20 or 30 years in aviation, whereas this is my first go. So, it’s interesting coming from a business where you’re a subject matter expert, to going in and leading people who are the subject matter experts, and so passionate about aviation. It has been a fun learning experience for me where I get to ask dumb questions like, ‘Why does this occur?’ and ‘Why does this happen?’

AD: One of the interesting things about you both coming into the roles at a similar time is that it’s an opportunity to rethink the relationship between the airport and the airline. Scott, could you just talk us through how that’s gone as you’ve both welcomed each other to the roles?

SC: It has been interesting for me. One thing the world’s great airports have in common is a great home carrier and the national carrier – whether it’s London, Singapore or Dubai. At Sydney Airport, we’re very privileged to have Qantas as the home base. The relationship wasn’t where I wanted it to be when I joined, and we needed to do a lot of things. From our perspective, there’s no way that Qantas can win and the Sydney Airport loses, or Sydney Airport wins and Qantas loses – we must win together.

Historically, it has not been the best from Sydney Airport’s perspective regarding how we behaved and the things we brought to the table. As a new CEO, sitting down with Vanessa and her team, we asked for a reset in the relationship and if they could trust us, and we’re very pleased that Vanessa and her team agreed. We’re working really closely together to look after the things we need to around safety, on-time performance and passenger experience. I think we’re on a good path and while there’ll always be those challenging times, I think we have so much in common. We have to think of ourselves as a collective

group to make things perform. So, we have a common journey, and it’s been great the way Vanessa’s team has embraced the airport team.

AD: Vanessa, are you happy with the reset?

VH: I think what Scott said is absolutely spot on in terms of airlines and airports being fundamentally codependent in a way. Our success is their success. Their success is our success. As Scott said, Sydney will always be our home base. The opportunity that we had, both coming into the roles, and at the same time, was the ability to do things differently. One point of reflection, 12 months on, is that the relationship we have modelled at the CEO level filters down into the organisation. As leaders of our organisations, we have a very important role to model the behaviours that we want the organisation to demonstrate. I genuinely think that we have found value on both sides of the fence because of that, rather than being more acrimonious or combative.

AD: Aviation capacity for an island nation is critically important, noting the approval of Melbourne Airport’s Third Runway by the Federal Government; however, there are still clearly constraints in the system. Vanessa, how do you see those capacity constraints right now and how might we address them?

VH: We are an island nation with a population dispersed across the major cities and regional Australia. The role that airlines and airports play in being able to serve those centres is critically important. We need airports and airlines collaborating to bring infrastructure on at the right time. I say that because we are big supporters of the new runway in Melbourne – but it has to come on when the demand is there. We must strike a balance to make sure that the travelling public doesn’t pay for infrastructure that is either ahead of demand, or is actually not designed efficiently. This is often a point of tension in conversations we have, but we must make sure that when infrastructure comes on, it is fit for purpose and efficient. I think that’s really important.

Airlines are also in a phase of impending fleet renewal, with newer aircraft technology that is more fuel efficient and can fly further, but is also quieter. We, and our competitors, are in an important phase of making sure that we stay ahead of that replacement curve. At the same time, we are facing other challenges related to increased weather events, and resourcing across our operations and in air traffic control. Therefore, we have to make sure that the right system is in place to help airports use their infrastructure efficiently, and help airlines to recover when things don’t go to plan – because we know that things don’t always go to plan.

AD: Scott, I want to focus on Sydney and its criticality to the broader network. Where are the constraints that you see?

SC: Historically, airports have been led by capital because that is the way they can make returns, as well. Whereas at Sydney Airport and working with Vanessa’s team, we’re

focused on how to solve the problem operationally first. Let’s solve it operationally first and look to capital second.

I think there’s a lot of latent capacity at Sydney Airport that sits in air services, and in the operations of the airport and Qantas, and other airlines. So, for us, it is about unlocking all that incremental capacity. Some of the international standards that airports and airlines are using around the world, such as precision runway movements, continuous climb and continuous descent, and things we are currently not using, may benefit Sydney and the broader network.

As Vanessa said, we’ve also had staffing issues for air services, air traffic control and border force emerging from COVID-19, which, once addressed, will make the airport and the airlines much more efficient. As an airport, 90 per cent of what we have in common with the airlines, and particularly Qantas, is how we capture these things and work together to make the airlines, and the airports, much more efficient.

AD: Some are things in your control that you can do together and collaborate on. Some are things outside of your respective control that might raise a case for collaborating on to get government to change its mind. Vanessa, what are some things where you think there’s a shared mission for yourselves and Sydney Airport?

VH: On the point before, the first is the efficient use of runways and being able to deliver our schedule, particularly

when it’s off schedule due to weather or any other effects. I think that’s important, and Scott and I are both aligned on that.

The second thing we want to spend more time talking with Sydney Airport about is the long-term infrastructure planning process because it is to both our benefit to get that right. There is value to be unlocked for both of us, and long-term infrastructure developments need good visibility and good coordination with all levels of government.

The third one is the experience of our shared customers. Customers spend a lot of time in the airport and we know, from speaking to customers, that they want to move through the airport as seamlessly as possible, with minimal fuss and time. Technology is something that we should be adopting to find the best ways of doing that.

Finally, sustainability is the single largest challenge for aviation and the aviation ecosystem, and finding the pathway to that future must be something we do together.

AD: I just want to drill down on that idea of a shared customer, because the ticket says Qantas, but in reality, customers experience both the airport and the airline. You mentioned technology and the role it can play; presumably there are regulations, as well, that can play a role. Scott, do you want to talk first about some of the opportunities?

SC: Well, the customer will always have something in their mind, whether it’s to blame the airport, the Government or the

Scott Charlton, Chief Executive Officer, Sydney Airport

airline. It doesn’t really matter to us. We need to have the best customer experience, and we need to do everything we can to help the airlines and to help the passengers. The airlines and the airports are trialling new technology, and we’re working together to push the Government and move it forward on adopting technology, which is going to make the airport and the airline experience much better.

I think, for us, we’re in competition against the other airports, and against the other airlines. I apologise for some of the past experiences at Sydney Airport. We’re working on it, particularly in international travel. We’ll try to fix the things that are under control and then, collectively, the airlines and the airports really need to work together to fix other pain points.

One that was resolved recently is the double up in asking customers if they have any dangerous goods in their bag at the automatic check-in and again at bag drop. It took 18 months for the team to get clearance to only ask that question once. But that accrues to 15 seconds for 42 million people, which is a lot of time and equipment. So, there are all these tiny things that collectively we can do together to make the airspace and the airfield much more efficient.

AD: I want to talk about Project Sunrise, and get each of your perspectives – starting with you, Vanessa – on what that means for the long-term development of aviation as we know it.

VH: We’re incredibly excited about Project Sunrise. There have been several big step changes in the evolution of aircraft technology over the last three decades. The first is the 747 that enabled Qantas to serve the East Coast of the United States directly. The A380s came in a decade later, which enabled the midpoint carriers to emerge as incredible hubs, particularly in the Middle East and Singapore. Because of our geographic distance and disadvantage, this caused end-of-the-line carriers to feel the pressure of what those midpoint carriers could do through their hubs. Now we have the next step change in engine technology providing us with the ability to fly an aircraft from the east coast of Australia to New York or to London.

This is occurring at the same time as changing consumers and consumer preferences, both in terms of wanting to – and being prepared to – fly significant distances to avoid a stopover. Customers are showing us, and currently demonstrating on our Perth to London services, that they’re prepared to pay a premium for that. Also, we are seeing here, and across the globe, that there’s a significant number of customers prepared to do that and pay that, but further, who want to have the premium experience with it.

That’s important because for these aircraft to make the distance, we must have a higher premium seat count for the payload for the aircraft to be able to make it that far. So, we’re at this juncture again with aircraft technology, given the changes in the consumer trends that enable Qantas to see

and go after this opportunity. Flying over the hubs is going to be the way we eke out what will be a competitive advantage for Qantas in our home market because we have the traffic rights and a loyal, but also premium-seeking, customer that actually wants to travel more directly.

AD: Scott, from an airport’s perspective, what do you say?

SC: For Sydney Airport particularly, it’s a dream for us. First, the aircraft are quieter and more efficient. One of the biggest advantages for us is that the flights will probably come in at different times, and not during peak times. Sydney currently uses about 65 to 67 per cent of the slots, and about 90 per cent during peak, which means there is a lot of capacity. To be able to use the different times of the day is incredibly important for us.

We are going to do everything we can to make sure Qantas directs all its A350-1000s to Sydney by providing that premium service to Qantas passengers when they land. While the A380s will continue to be around for a while, changing to the narrower aircrafts to accommodate long-range flights will mean changing the way the airport operates. It’s a very exciting time for Sydney to get all those point-to-point flights.

AD: I want to get each of your perspectives on the decarbonisation journey: from Vanessa regarding the stuff that moves, and from Scott regarding the stuff that doesn’t.

VH: I think aviation has had many challenges, from pandemics to September 11 and the global financial crisis. But the greatest challenge that we face is the one that is still to come, which is decarbonising our industry. It’s going to be very hard to do, and we have to set ourselves some pretty ambitious targets to reduce our emissions by 25 per cent by 2030. Emissions reduction is going to be through a combination of the new fuel-efficient aircraft, sourcing sustainable aviation fuel (SAF) made from feedstock or biostock and carbon offsetting. We’ve started that journey, and have partnered with many, but we want more partners to come on this journey. There needs to be a coalition around decarbonising aviation because it is going to be a hard-to-abate industry.

We are going to have to be brave. We are going to have to invest and put our money where our mouth is. But we also need to bring with us the whole of industry, government, policy settings, and also airports, because our success in this journey is their success. We don’t want to have happen what we have seen in other jurisdictions where there is flight shaming, or where governments make regulation decisions that curb air travel. We don’t want that – not just because it isn’t good for our business, but as a country I think aviation serves a very important part of our economy. So, we’ve got to figure it out. It’s going to be hard, but we’re on that journey.

AD: Scott?

SC: It was interesting coming from a road company to find out you’re responsible for the emissions of the aircraft.

Reducing Scope One and Scope Two emissions will not be easy, but is something the airport can manage. Working with the airlines on how we handle our Scope Three emissions –the fuel emissions from the aircraft – is critically important. As Vanessa said, there are a lot of immediate things that we could do through just regulation change.

But longer term, SAF is obviously incredibly important. Right now, we are sending our feedstock offshore and are going to pay a big premium to get it back. We are producing enough feedstock and, in 2025, could produce enough feedstock to cover about half of the airline volume of fuel that we have in Australia. So, we are trying to work with some of our investors who are involved in SAF to set up facilities in Brisbane and New South Wales.

Sydney Airport is the largest user of aviation fuel, and we are very keen to develop that locally, working with our airline partners and the Government. As a major supplier of fuel stock, it would be a shame to lose this opportunity to Singapore or overseas, or for us to end up having to buy credits or ship it back. To Vanessa’s point, this is probably the biggest issue because without SAF, we are going to be producing quite a bit of the emissions going forward.

AD: Are there places where we should be seeking to emulate what they’re doing internationally on SAF?

VH: We always should be looking beyond our own shores to other areas. I think that the United States has great policy settings from the Inflation Reduction Act that is really equalising the cost of SAF for airlines. Their policies are about giving the right incentives that actually drive the commercialisation of SAF faster through the adoption rate and airlines being really motivated to do that. We’ll be picking up SAF out of the United States next year, and we’ll be seeing a lot more of it come online. We’re also seeing in Europe that mandates are coming in, which we have supported publicly because it is important that sustainability doesn’t create winners and losers.

Mandates are important because it equalises the playing field, and that’s also an important demand driver, as well. There are very different responses across very different jurisdictions, but they are all things that we can learn from. In Singapore, for instance, the government is buying the SAF and adding that as a surcharge onto the price of fuel that is picked up out of Singapore. But the most important thing, as Scott said, is that Australia has the natural resources to create what could be a competitive advantage for us, and I think this is a great opportunity.

Qantas Group Chief Executive Officer and Managing Director Vanessa Hudson

Innovation driving Cross River Rail project

The use of sophisticated digital tools and planning techniques are aiding delivery.

At the Cross River Rail project in Brisbane, train drivers take a digital ride on the new rail line and its twin tunnels.

Using the latest mixed-reality technology at the Cross River Rail Experience Centre, the drivers review the location of signals and markerboards inside the future tunnel paths.

Through a 270-degree screen, they are, metaphorically, in the driver’s seat of a project that will transform travel in South East Queensland and elevate Brisbane’s status as a world-class city.

Firefighters are also being given an opportunity to use the same technology to digitally walk through fire escape routes at the project’s four new underground stations, including Albert Street, the first CBD train station built in Brisbane in more than 120 years.

The technology will give the firefighters a major head start on

understanding the new underground stations, which are due to open in 2026.

These and other Cross River Rail innovations are helping deliver Queensland’s largest-ever infrastructure project – and providing valuable learnings on using digital tools to aid infrastructure delivery.

Graeme Newton, CEO of the Cross River Rail Delivery Authority, says the project’s early integration of its building information model (BIM), geospatial information systems (GIS) and 3D digital visualisation gaming engine technology has paid off. The Delivery Authority decided on greater use of digital tools after meetings with the team for Crossrail, the massive rail project that opened in London in 2022.

‘Infrastructure projects tend to use digital simulations mostly for marketing and publicity,’ says Newton. ‘We also do that, but by integrating that work with

BIM and GIS on Cross River Rail, the work goes much further, and can be used for planning and delivery purposes on a day-to-day basis.’

The BIM was overlaid into the project’s geospatial model, and gaming engines were used to make the data visually attractive.

‘Our digital representation doesn’t just depict the project,’ says Newton. ‘It’s the actual project, right down to the handrails, flooring, roof and everything else, to specification.’

This digital detail is helping stakeholders with project assurance and acceptance.

‘The biggest lag in projects is usually at the back end, when having to wait until the facility is built before doing inspections,’ says Newton. ‘Our digital model allows stakeholders to get ahead of that curve. Through virtual and mixed reality, they can get a digital sense of

the project that helps them plan their physical inspections.’

Technical excellence

Digital tools are essential in a project with as many moving parts as Cross River Rail. The $6.3 billion project at its core includes 5.9 kilometres of twin tunnels running below the Brisbane River and CBD, and four new underground stations at Albert Street, Boggo Road, Roma Street and Woolloongabba. Eight rebuilt stations, three new Gold Coast stations and a new world-class signalling system are also included in the Cross River Rail Delivery Authority’s extended scope.

Tunnelling under a river and busy CBD, and constructing stations under the city’s existing infrastructure, added to project complexity.

‘There have been incredible and unique engineering feats on Cross River Rail,’ says Newton. ‘People walking through the Brisbane CBD had no idea of the work beneath their feet.’

Like most major projects, Cross River Rail had disruptions, delays and higher-than-expected costs due to inflation and supply bottlenecks after COVID-19; however, it remains on track to commence in 2026, with the twin tunnels completed, all rail track laid in the tunnels, and station fit-outs well underway.

‘The sites look more like train stations and less like construction sites every day,’ says Newton. ‘Although we are pleased with the significant progress, we are not immune to the unprecedented external pressures faced by infrastructure projects across Australia, and are monitoring these pressures closely.’

Delivery focus

The Cross River Rail Delivery Authority’s work on integrated targeting scheduling is another innovation sourced from Crossrail in the United Kingdom.

The scheduling enables project stakeholders to work together in a more fluid and less linear fashion.

‘Scheduling on major projects often ends up like a “baton” change,’

says Newton. ‘When a project milestone is met, the baton is handed to the next group. This risks a dispute between contractors about whether that milestone has been met and who has access to a part of the site.’

Newton says that integrated planning scheduling creates a different mindset and a stronger culture of project collaboration.

‘It’s about finding more ways for different project groups to work together, rather than wait at the gate for one part of the project to end before another part begins.

‘In the past, construction teams at underground stations might not want anybody on site until their work is finished,’ he continues. ‘With integrated planning, we have found ways for teams doing final touches and fittings to do some of that work now. Effectively, it’s about creating the right milestone incentives to encourage teams to collaborate more and get the job done.’

Extensive community consultation is another feature of Cross River Rail. With 16 active worksites and more than 3800 workers, there have been significant disruptions for CBD commuters, traders, and residents.

In FY24, the project had 3775 engagements with communities and key stakeholders on construction. Most engagements involved proactive doorknocking, face-to-face meetings and information sessions.

A bright future

Having led the Cross River Rail Delivery Authority since its formation in 2017, Newton is proud of his team’s efforts and is excited by the project’s potential.

‘Over the next five years, Cross River Rail will be the catalyst for a more connected, accessible and efficient public transport system in South East Queensland. It will make other potential rail improvements more feasible, ease road congestion, and help Brisbane respond to population growth.

‘The project will transform how we travel, creating more trains and stations on the network,’ Newton adds. ‘It will also catalyse urban renewal and precinct development around the new stations.’

Estimates suggest that precinct activation could be worth up to $20 billion annually over 20-30 years, and could create up to 35,000 jobs.

Newton believes the public does not always fully appreciate how major projects can enhance their lives until they experience new infrastructure.

‘More people are starting to understand the immense benefits that Cross River Rail will deliver to South East Queensland – and how it is more than a rail project given its economic, cultural, and environmental benefits.’ ♦

To learn more about Cross River Rail, visit www.crossriverrail.com.au.

Cross River Rail will transform the way we travel across the whole of South East Queensland. Journeys will be quicker door-to-door; there will be new stations in more convenient locations; there will be capacity to increase train services as our population grows; and public transport will become a more viable option for the whole of our region, helping to ease congestion on our roads.

Work is well underway on delivery of the project’s core scope of twin tunnels and four new underground stations. The Cross River Rail Delivery Authority is also delivering two new surface stations at Exhibition and Dutton Park and has been tasked with delivery of additional rail related upgrades including accessibility rebuilds for six stations between Fairfield and Salisbury; building three new stations on the Gold Coast; enhancements for train stabling facilities and the introduction of a new world-class signalling system.

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