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IN THIS EDITION

1. Federal Government to adopt default electricity price and underwrite assets 2. Victorian Government makes pre-election commitment to remove a further 25 level crossings 3. Infrastructure Australia releases report on Outer Urban Public Transport 4. NZ Government announces expansion of North Shore Hospital 5. NSW Government flags priority investment areas for $4.2 billion Snowy Hydro Legacy Fund 6. Industry news 7. Industry appointments 8. Infrastructure Partnerships Australia news

Watch Allens Partner David Donnelly and Infrastructure Partnerships Australia CEO Adrian Dwyer discuss the emerging challenges in the infrastructure sector and the latest findings from the 2018 Australian Infrastructure Investment Report. 1. Federal Government to adopt default electricity price and underwrite assets

This week, the Federal Government announced several energy market interventions based on key recommendations from the Australian Competition and Consumer Commission’s Retail Electricity Pricing Inquiry report. Specifically, the Federal Government has agreed to the introduction of a default market offer for customers and to underwrite investment in new generation assets.

Accepting a key recommendation from the ACCC, the Federal Government has asked the Australian Energy Regulator to determine a maximum default offer price and reference bill for energy retailers to apply in each network distribution region. The proposed default offer is designed to prevent customers paying higher prices on standing offers. Electricity retailers will also be required to calculate and advertise discounts using a reference bill set by the AER.

Energy market participants have expressed concerns that partial re-regulation through a default price will dampen incentives for competition in the retail market.

According to the Australian Energy Market Commission’s Competition Review 2018, standing offers can be up to $832 per year more expensive for households than the cheapest market offer (see Figure 1).

Figure 1: Maximum annual differentiation between the minimum market offer and median standing offer across each state and territory in the National Electricity Market

Source: AEMC Competition Review 2018

The AER will develop and introduce a maximum price for the default market offer to apply from 1 July 2019 for customers who are not subject to state-based price regulation. The Federal Government has also agreed to a programme to attract new investment in firm or firmed new generation capacity. The ACCC recommended support for new or small players in the generation market. The Federal Government plans to provide this support by contracting to buy energy at a low fixed-price in the later years of appropriate new generation projects.

The Federal Department of Environment and Energy has released a public consultation paper on the Underwriting New Generation Investments programme, with submissions open until 9 November 2018. The Department of Environment and Energy notes the potential risks of this intervention into the market including “incentivising over-investment in generation assets, distortion of debt markets for generation investment, and transferring investment risks from investors to taxpayers”.

Energy market participants have also expressed concern that these interventions will further distort the energy market and diminish investor confidence in the sector, in the absence of a coherent national energy policy. This concern is reflected in the 2018 Australian Infrastructure Investment Report. The report shows that survey participants see regulatory uncertainty (85 per cent) and political/policy uncertainty (70 per cent) as the most limiting factors for investor interest in the energy sector (see Figure 2).

Figure 2: Factors limiting investor interest in the energy sector

Source: Infrastructure Partnerships Australia and Perpetual, 2018

Proponents are invited to nominate projects to the Underwriting New Generation Investments programme through an Expressions of Interest process from December 2018 to January 2019 (see Figure 3).

Figure 3: Underwriting New Generation Investments program timeline

Source: Federal Department of Environment and Energy

In addition to these measures, the Federal Government has also agreed to:

develop legislation to empower the Treasurer to order the divestiture of assets on advice from the ACCC introduce a cap on market share of generation ownership increase transparency in the wholesale contract market, and introduce a Retailer Reliability Obligation, being considered at the Council of Australian Governments (COAG) Energy Council meeting today.

The ACCC released its final Retail Electricity Pricing Inquiry report in June 2018, outlining 56 wide-ranging recommendations to improve electricity affordability for businesses and consumers. The report found that the National Energy Market “is not operating in the best interests of consumers and needs reform, in particular around competition and affordability”.

Relevant links

Read the Federal Government’s media release Read Infrastructure Partnerships Australia’s story on the ACCC report Read Infrastructure Partnerships Australia and Perpetual Corporate Trust’s 2018 Australian Infrastructure Investment Report Read the Underwriting New Generation Investments programme public consultation paper

2. Victorian Government makes pre-election commitment to remove a further 25 level crossings

The Victorian Government has announced it will remove an additional 25 level crossings under the Level Crossing Removal project, if re-elected in November. The additional level crossing removals are estimated to cost $6.6 billion. Conditional on their re-election, the additional work would be completed by 2025.

The Victorian Government has announced 14 of the 25 additional level crossings that will be removed (see Figure 4), with the remaining 11 to be announced “in the coming weeks”. The additional level crossings were selected following development of a Site prioritisation framework by Transport for Victoria and the Level Crossing Removal Authority.

Figure 4: Priority Level Crossing Removals

Rail line Priority level crossings Early design indications

Sunbury Gap Road, Sunbury Lower road under rail line

Cramer Street, Preston Elevate rail line Mernda Murray Road, Preston New Preston Station Oakover Road, Preston Old Geelong Road, Hoppers Werribee Raise road over rail line Crossing Glen Huntly, Glen Huntly

Neerim Road, Glen Huntly Lower rail line under road

Frankston Chelsea Road, Chelsea New Glenhuntly Station

Argyle Avenue, Chelsea New Chelsea Station

Swanpool Avenue, Chelsea Munro Street, Coburg

Upfield Reynard Street, Coburg Elevate rail line

Union Road, Surrey Hills Belgrave/Lilydale Lower rail line under road Mont Albert Road, Mont Albert

Source: Level Crossing Removal Authority

All identified level crossings are still subject to further engineering assessments and community consultation. If re-elected in November, the Victorian Government expects to complete the 25 additional level crossing removals by 2025. Consistent with a recommendation in Infrastructure Victoria’s 30-year State Infrastructure Strategy, Transport for Victoria and the Level Crossing Removal Authority have developed a Site prioritisation framework for the programme. It seeks to provide guidance on how to identify and prioritise additional level crossings to be removed. The framework is summarised below in Figure 5. Figure 5: Site prioritisation framework

Source: Level Crossing Removal Authority and Transport for Victoria

The key principles to be used to prioritise the level crossing removals under the framework are listed in Figure 6:

Figure 6: Key principles and underpinning factors

Source: Level Crossing Removal Authority and Transport for Victoria

Out of the 50 originally identified level crossings under the programme, 29 have been removed to date. The remaining 21 are expected to be removed by 2022.

Relevant links

Read Prioritising future level crossing removals: Site prioritisation framework Read the Victorian Government’s media release View Level Crossing Removals on infrastructurepipeline.org

Today, Infrastructure Australia (IA) released a report titled Outer Urban Public Transport, which explores how governments can improve accessibility in lower density areas. The report finds that inadequate public transport in outer urban areas can negatively impact quality of life. In total, IA makes seven recommendations including introducing on-demand services and integration of land use and transport planning in outer urban areas.

The report uses new spatial analysis data to investigate the challenges in delivering outer urban public transport across Australia’s five biggest cities: Sydney, Melbourne, Brisbane, Perth and Adelaide.

Although close to half of the population in the five largest cities live in the outer suburbs, the report finds that they suffer from significantly less public transport access than middle and inner suburbs. This results in lower access to “employment, education and other social infrastructure.”

The report highlights three broad challenges for public transport in outer urban areas:

lower levels of access, as people live further away from public transport stops poor frequencies of public transport services, and longer travel times resulting from poorer network and longer travel distances.

The report emphasises that there is a significant need to improve public transport in outer urban areas, however the solutions are not always straight forward. Due to the lower urban density, building high frequency high capacity transport is not an economically viable solution.

Within Australia, public transport requires significant subsidies from governments to keep operating. Figure 7 shows the estimated cost recovery of public transport networks.

Figure 7: Estimated cost recovery of selected public transport networks

Source: Infrastructure Australia

Due to this, the report recommends that governments embrace new, more cost-effective transport modes suited to low density areas, such as on-demand services. The report explains that outer urban public transport issues of low frequency and lower access result from the way that transport networks have been designed.

Figure 8 shows radial and non-radial public transport networks. In Australian cities, public transport is generally radial and is designed to transport people in and out of city centres. As you move closer to the CBD, frequency increases as services from different outer urban areas link to key routes. The report notes that radial networks are “inflexible” and “designed for a weekday commute”, resulting in high car dependence for the other 75 per cent of trips taken on our networks.

Figure 8: Public transport network design

Source: Infrastructure Australia

To overcome these challenges, the report recommends that governments focus on using current infrastructure more efficiently. One way to achieve this is by better integrating feeder services (buses and on demand services) with trunk services (usually rail) by minimising waiting times and reviewing fare policies.

According to the report, integration of active transport and cars should also be a focus, including by providing bike storage and car parking at key centres. This should be coupled with supporting employment growth in suburban and outer urban hubs to improve access to employment outside of city centres.

In total, the report makes seven recommendations to governments, including to:

prioritise seamless integration of transport networks by coordinating service planning, timetabling, fare policy, digital tools and operations embrace new transport modes, such as on-demand services which are well-suited to low density areas implement a coordinated approach to encourage interchange between modes improve physical integration of the public transport network with private, active and emerging transport modes embrace technological innovation in transport, working with third-party operators to improve the user experience integrate land use and transport planning to examine opportunities for employment and residential densification at key sites adjacent to public transport, and develop and grow suburban and outer urban employment centres to improve job accessibility.

Relevant links

Read Infrastructure Australia’s report

4. NZ Government announces expansion of North Shore Hospital

The New Zealand Government has committed NZ$200 million (A$185 million) to build a new elective surgery unit at North Shore Hospital. The expansion will be co-funded by the Waitemata District Health Board (DHB), which will contribute an additional NZ$20 million (A$18.5 million) to the project. The business case for the project is currently under development.

The new surgical unit will be a four storey building consisting of:

four new wards with 120 beds four new operating theatres new endoscopy suites space for clinical support services, and an extended Sky Bridge link connecting the surgical hospital to the main hospital tower block.

Demolition of ageing non-clinical hospital buildings will commence next year to make way for the new surgical unit. It is expected that demolition will take approximately 12 months, with construction of the new building estimated to take an additional three years.

Planning and design have already commenced, with the detailed business case currently being prepared.

In conjunction with the funding announcement for North Shore Hospital, the NZ Government also announced an additional NZ$24 million (A$22.1 million) for new endoscopy and cardiac care facilities at Whangarei Hospital. The funding for Whangarei Hospital is an interim measure, with longer-term redevelopment of the hospital planned within the next 10 years.

Relevant links

Read the New Zealand Government’s media release View North Shore Hospital on infrastructurepipeline.org

5. NSW Government flags priority investment areas for $4.2 billion Snowy Hydro Legacy Fund This week, the NSW Government released five priority areas to guide investments in regional NSW flowing from the $4.2 billion Snowy Hydro Legacy Fund. The priority areas include water, telecommunications, passenger road and rail, and freight.

Following the sale of its 58 per cent interest in the Snowy Hydro Scheme to the Federal Government, the NSW Government established the $4.2 billion Snowy Hydro Legacy Fund.

The NSW Government has now identified five “priority areas” where the money will be expended in regional NSW. This includes:

water security in identified catchments including the Hunter, Gwydir, Macquarie, Lachlan, Richmond, and Bega regions telecommunications, with a specific focus on removing mobile black spots improvements to passenger road and rail services freight linkages through an “air freight hub” in regional NSW, and the establishment of regional “special activation business precincts” to attract business to employment lands in the regions.

The NSW Government’s announcement follows the release of its 20-year Economic Vision for Regional NSW in July that will help guide allocation of the Fund.

In terms of projects, the NSW Government has committed funding towards scoping studies and planning works examining how to make Parkes an “inland port and investment precinct.”

Media reports suggest money from the Fund will also be used for corridor preservation for a faster rail connection between Canberra and Sydney.

According to the NSW Government, work is already underway on some of these projects, with the first studies expected to be completed in early 2019.

Relevant links

Read the NSW Government’s Snowy Hydro Legacy Fund fact sheet and media release Read the NSW Government’s 20-year Economic Vision for Regional NSW

6. Industry news

Lendlease, CPB Contractors and John Holland, the shortlisted bidders for Stage 2 of the Monash Freeway Upgrade, have now been asked to submit tenders for the project. The shortlisted bidders were announced in September.

The Joint Standing Committee on the National Capital and External Territories has released its report into Commonwealth and Parliamentary approvals required for ACT Light Rail Stage 2. The report provides recommendations on route alignment and compliance with the National Capital Plan.

Transport for NSW, Sydney Trains and NSW TrainLink recently held a Project Pipeline 2022 event. The event included numerous guest speakers and updated participants on the upcoming works and services pipeline in NSW. See the event booklet. Jacobs has entered into a definitive agreement to sell its Energy, Chemicals and Resources business to WorleyParsons for US$3.3 billion (A$4.67 billion). The transaction is expected to reach financial close in the first half of 2019.

The NSW Department of Planning and Environment has given approvals for construction to start on the $164 million Bomen Solar Project, near Wagga Wagga. When complete, Bomen Solar Project will produce 100 megawatts of energy.

This week, the New Zealand Transport Agency completed its re-evaluation of the Otaki to North of Levin project to align it with the NZ Government’s new priorities. The NZTA will now work towards designating a new route which is envisaged to be a two-lane highway with capacity to expand to four lanes. The preferred route will be determined by the end of the year.

Works have now started on the $1 billion Rail Infrastructure Alliance under the Melbourne Metro Tunnel project. The RIA is being completed by a consortium comprising John Holland, CPB Contractors and AECOM, in partnerships with Rail Projects Victoria and Metro Trains Melbourne.

Victoria’s first utility-scale Battery Energy Storage System is now being commissioned for use. The battery is a 30 megawatt-hour system and was delivered by a consortium comprising Downer, Spotless, AusNet Services, EnergyAustralia and Fluence. It was funded by the Victorian Government and the Australian Renewable Energy Agency.

Goldman Sachs has released third quarter financial results for FY2018, reporting revenues of US$28.1 billion (A$39.73 billion) across the first three quarters. This is a 16 per cent increase compared to third quarter revenue results reported last year.

About 957,000 international passengers passed through Melbourne Airport’s terminals in September 2018. This represents international patronage growth of 9.8 per cent compared to September 2017.

Morgan Stanley has released third quarter financial results for FY2018, reporting net income of US$2.1 billion (A$2.97 billion) for the quarter. The net income result is 19 per cent higher compared to third quarter results for FY2017.

Metro Trains Melbourne (comprising MTR Corporation, John Holland and UGL Rail) delivered 98.9 per cent of planned rail services, with 92.4 per cent running on time across Melbourne’s rail network in September. These results exceed the required benchmarks under the concession agreement with the Victorian Government.

Jemena has announced that they will construct a $15 million 500-kilowatt electrolyser in Western Sydney. The electrolyser will convert solar and wind power into hydrogen gas. Jemena and the Australian Renewable Energy Agency have each committed $7.5 million towards the project.

The Clean Energy Finance Corporation will provide $100 million of low interest loans to the South Australian Government’s Home Battery Scheme. Under the Scheme, up to 40,000 households will be able to access grants and low interest loans to install home batteries.

The WA Environmental Protection Agency has given conditional approval for the development of a waste to energy facility in East Rockingham, in Perth’s south. The decision of the EPA is open to appeal until 5 November 2018.

The House of Representatives Trade and Investment Growth Committee has started an inquiry into how Austrade attracts investment in Australian businesses. The inquiry will have “particular regard” to sectors including resources and energy, major infrastructure, and advanced manufacturing. The Committee is accepting submissions on the inquiry until 16 November 2018.

The Audit Office of NSW has released its Report on State Finances 2018. The report finds that NSW had a budget surplus of $4.2 billion for FY2017-18. The Australian Renewable Energy Agency will provide Chargefox with $6 million to develop a $15 million electric vehicle charging network between Brisbane, Sydney, Canberra, Melbourne, and Adelaide. The network will include 21 charging stations, to be located no more than 200 kilometres apart from each other.

The Australian Logistics Council has released a discussion paper titled, ‘A Common Data Set for our Supply Chain’. The discussion paper reaffirms the need for an independent Freight Observatory, which Infrastructure Partnerships Australia argued for in our April 2018 paper, Fixing Freight: Establishing Freight Performance Australia. Read the ALC’s discussion paper.

The Victorian and Commonwealth governments have signed a $2 billion five-year National Housing and Homelessness Agreement. Under the NHHA, funds will flow from the Commonwealth to Victoria to fund social housing and specialist homelessness services.

The New Zealand and Japanese governments have signed a Memorandum of Cooperation on hydrogen. Under the MOC, Japan and New Zealand will work in collaboration to develop the technology and help reduce emissions from the transport and energy sectors.

The Queensland Government has announced an intention to declare 856 hectares of land south of Cairns as a State Development Area. This designation would set aside the land for industrial development and give the Queensland Coordinator-General more powers to streamline planning and development approvals.

7. Industry appointments

The Federal Government has extended Rod Sims term as Chairman of the Australian Competition and Consumer Commission until August 2022. Mr Sims has been Chairman of the ACCC since 2011.

Frank Tudor has now started as Managing Director of Jemena. Mr Tudor was most recently Managing Director of Horizon Power.

Jacobs has announced three senior appointments within its business. Marietta Hannlgan has been appointed as Chief Strategy and Communications Officer, Darren Kraabel as Chief Technology and Innovation Office, and Madhuri Andrews as Chief Information Officer.

AECOM has appointed Shayne Hanran as the Regional Managing Director for North Western Australia. Mr Hanran will oversee nine offices in Queensland, Northern Territory and Western Australia. Mr Hanran was previously the Area Director of North Queensland and Northern Territory for Australia and New Zealand (ANZ).

The New Zealand Government has appointed 13 members to the Prime Minister's Business Advisory Council, including McKinsey & Company’s Andrew Grant. See the full list of appointees.

Energy Taskforce

Infrastructure Partnerships Australia will be holding an Energy Taskforce with Richard Gross, Chief Executive Officer, Ausgrid.

Date: Thursday, 1 November

Time: 2.30pm – 4.00pm AEDT (Sydney – Melbourne) 1.30pm – 3.00pm AEST (Brisbane)

To register for the Energy Taskforce, please email Eddy Wu HERE

Social Infrastructure and Public Services Taskforce

The final SIPS Taskforce for 2018 will focus on Infrastructure Partnerships Australia's upcoming research on the Economic Value of Health Infrastructure. This research seeks to promote a better understanding of the economic benefits of investment in health infrastructure in addition to the more obvious social benefits. The Taskforce meeting will involve a detailed discussion on the direction of the research, including key policy recommendations and case studies.

Date: Thursday, 1 November 2018

Time: 10.30am (sharp) - 12.00pm AEDT (*Sydney and Melbourne) 9.30am (sharp) - 11.00am AEST (Brisbane)

To register for the joint SIPS Taskforce, please email Eddy Wu HERE

*Please note that the Sydney location has reached capacity.

Tax Taskforce

Infrastructure Partnerships Australia will be holding a Tax Taskforce with David Bradbury, Head of the Tax Policy and Statistics Division, Centre for Tax Policy and Administration, Organisation for Economic Co-operation and Development (OECD).

Date: Monday, 5 November

Time: 10.00am – 12.00pm

Venue: DLA Piper Sydney office: Level 22 No.1 Martin Place SYDNEY NSW 2000

Dial-In option.

To register for the Tax Taskforce, please email Eddy Wu HERE

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