Partnerships Conference Magazine

2020 PARTNERSHIPS INFRASTRUCTURE AND INVESTMENT CONFERENCE

GOLD SPONSOR

Accelerating the green transition

From Australia’s first thermal waste-toenergy facility with Avertas Energy to From Australia’s first thermal waste-toa 209 MW onshore wind development energy facility with Avertas Energy to with Murra Warra II, our mission is to a 209 MW onshore wind development accelerate the transition to a greener with Murra Warra II, our mission is to global economy. accelerate the green transition.

With a dedicated team of over 450 staff, Macquarie’s Green Investment Group is With a dedicated team of over 450 staff, part of Macquarie Capital, and brings a Macquarie’s Green Investment Group is depth and breadth of global expertise in part of Macquarie Capital, and brings a green technology and development to depth and breadth of global expertise in Macquarie Capital’s leading position in green technology and development to Australia and New Zealand as an equity Macquarie Capital’s leading position in investor and developer of green energy Australia and New Zealand as an equity and infrastructure assets. investor and developer of green energy and infrastructure assets.

For more information please contact: Lachlan Creswell For more information please contact: Head of Green Investment Group, Ivan Varughese Australia and New Zealand Head of Green Investment Group, Lachlan.Creswell@macquarie.com Asia Pacific +61 3 9635 8060 Ivan.Varughese@macquarie.com Ivan3Varughese +61 9635 8375 Head of Green Investment Group, Lachlan Creswell Asia Pacific Executive Director, Infrastructure and Ivan.Varughese@macquarie.com Energy, Australia and New Zealand +61 3 9635 8375 Lachlan.Creswell@macquarie.com +61 3 9635 8060 greeninvestmentgroup.com greeninvestmentgroup.com

None of the Macquarie Capital entities nor the Green Investment Group are authorised deposit-taking institutions for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 (MBL). MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities.

CONTENTS SPONSOR DIRECTORY

2

CHAIR’S MESSAGE

3

CEO’S MESSAGE

4

DIGITAL INFRASTRUCTURE: AN ESSENTIAL BACKBONE

5

CHECKING MOBILITY TRENDS

8

A BRIDGE TO SMART TECHNOLOGY

8

NSW DRIVING ECONOMIC RECOVERY THROUGH INFRASTRUCTURE

10

THE NEW GENOA BRIDGE: A SOURCE OF INSPIRATION

12

WHAT’S NEXT FOR PRIVATE FINANCING OF GREENFIELD INFRASTRUCTURE

14

COVID-19 AND CHANGES TO THE DESIGN OF THE NEM

17

VICTORIAN GOVERNMENT INFRASTRUCTURE POLICY REFORMS

19

BUILDING VICTORIA’S FUTURE: WILL THE PANDEMIC SLOW US – OR GROW US?

21

A STRONGER TOMORROW: SPEARHEADING A NEW ERA OF INFRASTRUCTURE PLANNING FOR WESTERN AUSTRALIA

23

PA R TN E R S H IP S 2 0 2 0

1

SPONSOR DIRECTORY

Macquarie Capital 50 Martin Place Sydney NSW 2000

Transurban Level 31, Tower 5, Collins Square 727 Collins Street Docklands VIC 3008

Webuild Level 19 99 Walker Street North Sydney NSW 2060

P: +61 2 8232 3333 W: macquarie.com

P: +61 3 8656 8900 E: corporate@transurban.com W: transurban.com

P: +61 2 9922 5458 E: admin@salini-impregilo.com.au W: salini-impregilo.com.au

John Laing Level 16 15 Castlereagh Street Sydney NSW 2000

P: +61 3 9999 0022 W: laing.com

Victorian Government Department of Treasury and Finance 1 Treasury Place East Melbourne VIC 3002

P: +61 3 9651 5111 E: information@dtf.vic.gov.au W: dtf.vic.gov.au

Department of Transport 1 Spring St Melbourne Vic 3000

P: + 61 3 9655 6666 E: DoTCorporate@transport.vic.gov.au W: transport.vic.gov.au

Infrastructure Partnerships Australia Suite 3.03, Level 3 95 Pitt Street Sydney NSW 2000

PA R TN E R S H IP S 2 0 2 0

P: +61 2 9152 6000 E: contact@infrastructure.org.au W: infrastructure.org.au

2

CHAIR’S MESSAGE It’s my pleasure to welcome you to Partnerships 2020.

Just over 12 months ago we came together to discuss the Future of Infrastructure. Since then, Australia has experienced immense upheaval following a devasting drought and summer bushfire season, and now confronts the ongoing health and economic impacts of a global pandemic.

COVID-19 has disrupted the way our sector operates, but it has also provided a unique opportunity to rethink traditional infrastructure approaches. That is why this year’s theme focuses on the Reset.

Over the course of this two-part program, we will hear from Australia’s leading political, public service, and business figures as they share their insights on how we can use this crisis to reset our approach and position the sector to build back better.

We will open the Conference with an address from Australian journalist David Speers on how COVID-19 has changed the political landscape. We will explore how we can strengthen Australia’s economic resilience, the journey towards decarbonisation, and how we might reset construction in a postCOVID environment.

The Deputy Prime Minister and Minister for Transport, Infrastructure and Regional Development, the Hon. Michael McCormack MP will provide an address on the Commonwealth’s response to COVID-19 and share his insights on how the sector can build greater resilience into the Federal Government’s 10year infrastructure program.

discuss the key revenue reforms required to fund our essential services and infrastructure, and some of Australia’s largest infrastructure investors will provide their perspectives on the appetite for assets in a reset future.

We will also examine how COVID-19 has impacted mobility trends and changed the course ahead for our major airports, and be joined by CEO of Macquarie Group Shemara Wikramanayake on how we can leverage private finance and expertise to aid in the delivery of a renewed infrastructure pipeline.

I hope over the course of the two-part program we provoke and challenge your thinking about how we can reset our infrastructure approach and instigate further discussion on how, as a sector, we can generate positive change for the better.

Thank you again for joining the 2020 Partnerships Conference.

Yours sincerely

Sir Rod Eddington AO Chair Infrastructure Partnerships Australia

We’ll hear from the Victorian Treasurer, Tim Pallas MP on his plans for the state’s economic recovery. The Chair of the NSW Federal Financial Relations Review, David Thodey AO will PA R TN E R S H IP S 2 0 2 0

3

CEO’S MESSAGE It would, perhaps, be understandable to be pessimistic about our present circumstances as a country. Australia faces a difficult task ahead in balancing economic and health outcomes, and confronting the deep shocks from this pandemic. But we cannot let these challenges overwhelm our optimism for the future. This crisis presents a critical opportunity for policy bravery, not a time to manage a genteel decline of our living standards. It presents an opportunity to do things differently – to seize this moment of disruption and secure our future prosperity.

Governments have already taken a series of positive steps in providing unprecedented fiscal support to businesses and communities. Consistent with our own advice, public investment in smaller capital projects and maintenance programs has added close to $16 billion to the pre-crisis $185 billion four-year national infrastructure program. The continuation and expansion of this investment will be essential to support employment over the short-term and productivity over the longer-term. But more can, and must, be done.

As we continue the path to recovery, it’s critical the sector embeds the positive shifts from this pandemic - capitalising on behavioural changes and rethinking infrastructure provision. We can seize this opportunity to redesign our approach to resilience and advance long over-due reforms to place Australia in a strong economic position on the other side of this pandemic.

Prioritising reforms that improve the efficiency of markets, better align regulation with users’ long-term interests, remove impediments to private investment, and shift the balance of funding towards users from taxpayers will all be critical to our national prosperity.

PA R TN E R S H IP S 2 0 2 0

A focus on reforms that provide stable revenue streams to governments and boost productivity will also be needed to ensure we do not endow future generations with significant debt and a weakened economy. This means prioritising major reforms like asset recycling, transitioning to a broad-based land tax, and applying a distance-based charge on electric vehicles.

A devastating season of flooding, drought, bushfires, and now a global pandemic should also force us to carefully reflect on how we are embedding resilience into the design, provision, operation, and maintenance of infrastructure. The growing complexity and convergence of our infrastructure systems coupled with the increasing frequency of extreme climate events should challenge policymakers, investors, and providers to renew their focus on resilience in the months and years ahead.

While we cannot definitively predict the future, we can dramatically reduce the economic and social costs of volatility.

We can do this by ensuring that our infrastructure networks and assets, and supporting policy frameworks, remain flexible and adaptive to future shocks.

Over the course of the 2020 Partnerships Conference, I look forward to examining these issues and opportunities with you to help reset and take our sector forward.

Adrian Dwyer Chief Executive Officer Infrastructure Partnerships Australia 4

DIGITAL INFRASTRUCTURE: AN ESSENTIAL BACKBONE John Pickhaver | Head of Infrastructure and Energy and Co-Head of Macquarie Capital, Australia and New Zealand Joanne Spillane | Global Head of Private Capital Markets, Macquarie Capital

Digitisation has been one of the most important trends shaping the global economy over the past few years.

Now, in the midst of the COVID-19 pandemic, the pace of change is accelerating. As a result, so too has investor focus on increasing exposure to digital infrastructure in their portfolios alongside traditional infrastructure assets.

THE PACE OF CHANGE SHIFTS INTO TOP GEAR Internet content delivered to and from mobile-enabled devices accounts for half of all global website traffic. In the second quarter of 2020, mobile devices generated 51.5 percent of global website traffic and this figure has hovered around the 50 per cent mark every quarter since the first quarter of 2017.1 This means its pace of growth is also a good measure of how quickly digitisation is occurring.

Between 2017 and 2018, global mobile data traffic grew from 11.5 exabytes to 19.0 exabytes per month.2 Pre COVID-19 this was forecast to rise to 77.5 exabytes per month by 2022. It is now estimated that mobile data usage in 2025 will be almost six times higher than the levels seen in 2018,3 driven by smartphone adoption and affordable high-speed network services.

We are travelling less frequently (if at all), spending more time at home, avoiding physical contact and re-thinking the way we consume goods and services.

PA R TN E R S H IP S 2 0 2 0

COVID-19 hasn’t so much changed the way we live, as upended it.

In the space of six months, the pandemic has brought forward the transition from physical shopping to e-commerce by an estimated five years, IBM research shows.

The workplace has been similarly transformed. In 2019, only seven per cent of civilian workers in the US had access to flexible working. Global Workplace Analytics expects that in two years as much as 30 per cent of the US’s workforce will continue to work from home multiple days a week.

Meanwhile, as people stayed home for entertainment instead of going out, broadband usage across the United States and European Union rose 47 per cent in Q1 2020 compared to the same time last year. In the face of unprecedented demand through lockdown, Netflix and Google’s European arms were reportedly both forced to reduce transmission quality just to keep providing their service to all subscribers.

Corporate technology strategies are also changing as the need for scalable, secure data storage has driven the shift from storing data on premises to outsourced cloud providers. The Uptime Institute forecasts that half of all data centre workloads will be run by hyperscale or edge data centres via SaaS providers and the cloud by 2021.4

5

SUPPORTING THE TRANSITION TO AN INCREASINGLY DIGITAL WORLD There was a time (in the not too distant past) when digital infrastructure was a peripheral sub-sector of infrastructure investment portfolios, viewed as a specialist asset class for those looking for core plus returns. As our economy digitises, many sub-sectors within digital infrastructure have become essential to the functioning of everyday life, both for work and home, and investors have recognised the utility-like characteristics of the asset class.

COVID-19 has also proven this asset class as one that can deliver returns uncorrelated to traditional GDP linked infrastructure assets such as airports, ports and toll roads, or regulated utilities and social infrastructure. The impact of the pandemic across the broader infrastructure sector has emphasised the importance of portfolio diversification in providing investors with the resilient cash flows that many seek through infrastructure investment.

ANZ Digital Infrastructure

Figure 1: ANZ Digital Infrastructure

Credit bureaus Data registries

Business, motor and land registries 5G infrastructure

Real assets – connectivity infrastructure

Data centres Telecommunications towers Fibre networks Subsea cables

Transitioning to the new digital reality requires internet speeds to increase, coverage to expand and reliability to improve. Further investment is needed in physical infrastructure such as 5G networks, subsea cables, telco networks and towers if we hope to thrive in our increasingly digital world.

Figure 2: Value of M&A digital infrastructure transactions since 2013 ($Abn)

Source: Inframation (excludes greenfield and refinancing transactions; does not include data for those transactions where the value is not public and for which data is unavailable)

EXPLOSION IN DATA As the volume of data grows exponentially, more data centres will need to be built. All data generated requires storage and secure data centres in stable regions are vital pieces of digital infrastructure.

In the last twelve months alone, Australian investors have deployed significant capital into the data centre sector. In April 2020, Macquarie Infrastructure and Real Assets (MIRA) acquired an 88 per cent interest in AirTrunk, the owner and operator of five hyperscale data centres across Australia, Singapore and Hong Kong. In September 2019, Australia’s sovereign wealth fund, the Future Fund, made its first direct data centre investment, acquiring a 24.1 per cent stake in Canberra Data Centres.

The capital intensity of hyperscale-enabled data centres, which support cloud providers such as Microsoft Azure, Google Cloud and Amazon Web Services, is particularly attractive to pension and superannuation funds. According to Synergy Research Group, capital expenditure on hyperscale-enabled data centres totalled over $US120 billion in 2019. These investors find the ongoing capital expenditure required to grow data centre platforms to be a good match with their interest in ongoing investment over time into assets already owned and understood, given pressure to invest continual fund inflows.

Over time, we expect to see data centres become more diverse.

This includes ‘edge’ data centres –smaller facilities located as close as possible to the community they serve – as well as sustainable data centres, which use electricity derived from renewable resources.

GROWING INVESTOR FOCUS ON NEW DIGITAL OPPORTUNITIES Given these thematics, it is no surprise that there has been a significant increase in the amount of capital seeking opportunities to invest in digital infrastructure, both from digitally focused funds and traditional infrastructure funds.

This weight of capital has buoyed activity in M&A markets, with the value of disclosed digital infrastructure M&A transactions between April to September 2020 reaching $A32 billion across 28 transactions, an increase of 150 per cent versus the same period in 2019. Indeed, the value of disclosed transactions for this year to date has now surpassed each of the full year totals for the past three years, despite the constraints of transacting within COVID-19 restrictions.

PA R TN E R S H IP S 2 0 2 0

6

THE NEXT FRONTIER IN DIGITAL INFRASTRUCTURE INVESTMENT Assets such as data centres, fibre broadband businesses and telecom towers have dominated transaction activity. However, while physical assets may be the most obvious examples of digital infrastructure, the category is poised to broaden in scope.

For instance, digital infrastructure will increasingly be used to help traditional infrastructure assets operate more efficiently and at greater scale and capacity.

FIBRE IS MISSION CRITICAL Investment in terrestrial fibre networks is also crucial to support our increasingly connected societies.

These networks can broadly be split into the ‘last mile’ capillary networks that run through our suburbs connecting our homes with high-speed internet, and enterprise point-to-point fibre networks servicing the growing data demands of government and enterprise clients.

In the last 24 months alone, there has been investor interest in both of these asset classes including the sale of NZ-based last mile fibre operator Ultrafast Fibre to First Sentier; Vodafone NZ to Morrison & Co and Brookfield Infrastructure Partners and Zayo in the US to Digital Colony and EQT.

Endeavour Energy has built a ‘digital twin’ in the form of a 3D model of its power grid and the physical items surrounding it, such as trees. It uses this, along with aerial survey data to monitor its network and understand the health and status of vegetation, including potential bushfire risk. Digital twins are also already being used at airports, railways, transmission grids, wind farms and ports.

CLOSING With the pace at which we are transitioning to an ever more digital world, and accelerated by the impacts of COVID-19, digital infrastructure has proven its value to infrastructure investors as an essential part of a well-diversified portfolio and an asset class that will continue to develop at pace.

INCREASED DEMAND FOR CAPITAL PARTNERS Historically, telecommunications networks have been owned by telecommunications firms, predominantly incumbent vertically integrated players. With these firms facing mounting pressure to reduce costs, while also needing to fund 5G, fibre rollouts and further innovation, they are looking for alternative sources of capital. In addition, some listed operators are becoming increasingly aware of the ability to unlock value for shareholders by monetising parts of their infrastructure.

This has resulted in opportunities for specialist infrastructure investors to partner with telecommunications operators to derive long term, stable returns matching the liabilities of their underlying Limited Partners (pension funds and insurers).

In addition to opportunities with telecommunications firms, similar opportunities are also emerging in new digital infrastructure businesses founded by industry veterans. Data centre, terrestrial fibre and subsea cable operations, are areas where demand for capital partners is likely to continue to grow.

1.

2.

3.

4.

Statista 2020, Percentage of mobile device traffic worldwide 1Q 2015 to 2Q 2020 Cisco Visual Networking Index 2018, p 38 Statista 2020, Annual mobile monthly data usage worldwide 2015-2025 Uptime Institute: Uptime Institute Annual Data Center Survey, 2019; cited in Cisco’s 2020 Global Networking Trends Report

Important Notice This article is not research and has been prepared by non-research personnel of certain Macquarie Capital entities within the Macquarie Group. This article has not been independently produced by a research team. None of the Macquarie Capital entities are authorised deposit-taking institutions for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 (MBL). MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities.

FOR MORE INFORMATION PLEASE CONTACT John Pickhaver Head of Infrastructure and Energy and Co-Head of Macquarie Capital, Australia and New Zealand E: John.Pickhaver@macquarie.com P: +61 2 8232 5049

PA R TN E R S H IP S 2 0 2 0

Joanne Spillane Global Head of Private Capital Markets, Macquarie Capital E: Joanne.Spillane@macquarie.com P: +61 2 8232 9906

7

CHECKING MOBILITY TRENDS Scott Charlton | Chief Executive Officer, Transurban

COVID-19 is a health crisis unlike any we have seen during our lifetimes. It can be hard to see the path back to a level of normality while we’re in the midst of such upheaval, but if we reflect on other crisis events of recent decades – be they economic, national security or health related – the patterns that start to emerge can be helpful.

Massive change and uncertainty often give way to predictions and speculation about the future, before the risk eventually passes and we cautiously return to a somewhat familiar way of life, to find that some long-term trends have accelerated during the crisis.

Working in Hong Kong when SARS gripped the city in 2003, I saw this unfold. As we changed our ways of working and socialising, people wondered what the impact would be on Hong Kong, a place of high energy and high density. Predictions were made about fundamental changes to office blocks, shopping malls, residential towers and people catching public transport.

Sure enough, as the city gained the upper hand over the virus, we began finding confidence in doing what we used to.

Eventually, trains were again crowded, airports packed, offices full and of course, Hong Kong buzzing.

PA R TN E R S H IP S 2 0 2 0

Fast forward 17 years and there are similarities now, although each virus has unique characteristics. The COVID pandemic has been on a scale unlike anything we have seen, and from a health and economic point of view it has been devastating. The discussion it has triggered about how we go about our lives – whether it is work, travel or how we socialise – has many people wondering what kind of world will emerge as the crisis subsides.

To better understand what people are thinking, Transurban commissioned an independent survey of 4,500 people in Australia and North America to get a snapshot of how they themselves see life after COVID. And some of the results are surprising.

It turns out the office is far from obsolete in most people’s thinking. In fact, the majority of people - 86% - expect to return to the workplace when the pandemic risk has passed.

There is a very human side to the workplace, and the survey tells us people are missing their interactions with colleagues, they’re missing being able to get work done efficiently, and they are keen to regain some separation between their work and home lives.

8

But while people expect to return to the workplace, the way they get there might change.

While Australians typically cite convenience as the biggest factor in determining how they commute to work, our research suggests that safety is now the number one consideration.

Safety means different things to different people, so while we may see some people choose to drive when they return to the workplace, many people may also choose to walk, cycle, take public transport, or a combination of these modes.

Travel data shows us that driving is proving to be a popular choice as restrictions ease in some states, and traffic may well return stronger than it was before the pandemic.

It may sound counterintuitive coming from someone who runs a roads company, but the last thing we want is for everyone to jump in their car. We build roads, not car parks, and no-one benefits from high levels of congestion.

The most liveable cities have a good mix of rail, road and active transport options to keep everyone moving. We know that people overwhelmingly use public transport to get into CBDs, and use roads to get around them, so if people switch modes in large numbers, this raises considerations about the resilience of our transport networks.

So, while we are in the thick of the pandemic, it is an opportune time to ask ourselves what we want our commutes to look like when the risk has passed. We can all agree that debilitating congestion should not be the inevitable outcome when we return to our workplaces in large numbers.

We know that our cities will continue to grow, and the scale of the infrastructure task itself cannot be ignored. Nor can the cost of doing nothing, with Infrastructure Australia putting the cost of congestion at $39 billion by 2031.

Despite the impacts from COVID, these are exciting times for our sector. We are seeing the biggest pipeline of potential projects in years, and infrastructure is expected to play a central role in COVID economic stimulus efforts by both state and federal governments.

Mobility trends suggest we may see a level of disruption across transport modes for some time to come, making this an opportune time for governments and industry to work together to ensure we have efficient and resilient transport networks into the future.

Many options – from flexible working hours to leveraging data and technologies – should be part of the conversation, and we also need integrated transport networks that help spread the peak travel periods and give people choice in how they want to travel.

If we achieve this, then we will make our post-pandemic lives a little better, because thankfully the pandemics of the past all have one thing in common – we have overcome them.

FOR MORE INFORMATION PLEASE CONTACT Ann Styles Corporate Communications Manager, Transurban E: astyles@transurban.com

PA R TN E R S H IP S 2 0 2 0

9

NSW DRIVING ECONOMIC RECOVERY THROUGH INFRASTRUCTURE Simon Draper | Chief Executive Officer, Infrastructure NSW

The NSW infrastructure delivery program is continuing apace.

Given the events of the past year, that alone is cause for celebration. Usually the focus of Infrastructure NSW is on longterm benefits, particularly as they relate to the underpinnings of prosperity – productivity growth, supporting population growth, enabling greater labour market participation and, increasingly, ensuring resilience to extreme events. Investments are guided by well-considered State Infrastructure Strategies, solid planning within infrastructure agencies and thorough evaluation and ongoing assurance of projects. We think long-term because the benefits are baked into our economy for many decades, and some projects take years to plan, design and deliver.

Now we are experiencing something unfamiliar in Australia – a need to uphold economic activity and employment through the direct and immediate effects of public investment. During the pandemic, households have experienced public health restrictions on activity and how they spend, albeit with some household income support by governments. It is also not surprising that many private investors have conserved their cash and bolstered balance sheets where possible, meaning new investment has been restrained. In that environment, direct expenditure by governments takes on a different hue. Having formed good fiscal habits, governments are being asked to rethink their approach.

At the start of the pandemic in March and April 2020, we were focused on the construction sector – how to provide confidence that activity would continue, how to fill the gap left by the withdrawal of private sector investors and how to maintain industry capacity. In this we would claim, if not perfection, then a good pass mark. The NSW Government and its agencies coordinated actions, approach and messages in a way that set a new benchmark. While the immediate benefits flow to construction, this also injected the wider economy with cash, confidence and a sense of normality.

We engaged widely through direct messages, online forums, online videos and case studies, but we also took more concrete steps. A project pipeline was published in the midst of the lockdown confirming commitment to projects. Commercial principles were released to address the concerns of contractors and suppliers fearful of being caught between fixed contracts and disruptions to operations. Project procurement processes continued as planned. Approved working hours on construction

PA R TN E R S H IP S 2 0 2 0

Walsh Bay Arts Precinct – Construction is continuing across NSW without interruption.

(David Clare, First Light Photography)

10

Barangaroo Delivery Authority. Photo: Daniel Noaeen

sites were extended. Planning applications and the associated community consultation continued online and on schedule.

Further, the industry and government worked closely through a joint WHS working group to develop protocols and practices to manage infection on work sites, and provide confidence to health officials and police that construction activity could continue in a manner consistent with public health objectives.

INSW worked closely with the NSW Chief Medical Officer, the head of SafeWork NSW and senior police officials to support continued construction activity.

Although there were moments of concern about the ability of skilled workers and specialists to move across borders, or availability of suitable personal protective equipment, each week most agencies reported that their projects were continuing with minimal impact, and that remains the case today. Ironically, while some state borders closed, collaboration between jurisdictions stepped up a level.

of the pandemic. In NSW, the impact of infrastructure spending will be felt by continuing with the program laid out in successive Budgets, bolstered by additional funding announced in recent months. Considerable work has been done within the NSW Government to identify where additional investment can proceed within the timeframe required for stimulus. Lessons have also been drawn from the bushfire recovery on how to procure and implement large programs of smaller works, involving local contractors who may have been previously unknown to major contractors.

It is natural to give great weight to current circumstances, and perhaps underestimate the potential for recovery and rapid change. The experience since March 2020 has been dreadful in terms of the health of our citizens, business stress and unemployment. However, there have been useful lessons on how quickly we can respond to unexpected impacts, and how effectively industry and governments can collaborate. No matter what happens next, let’s hold onto those lessons.

We are no longer scrambling to respond operationally, but the economic impacts remain as challenging as in the early days

FOR MORE INFORMATION PLEASE CONTACT Infrastructure NSW E: Mail@insw.com P: 02 9255 1700

PA R TN E R S H IP S 2 0 2 0

11

THE NEW GENOA BRIDGE: A SOURCE OF INSPIRATION Marco Assorati | Executive Director, Asia Pacific, Webuild

The Genoa San Giorgio Bridge, built by Webuild and inaugurated on August 4 2020 as the replacement to the Morandi Bridge that tragically collapsed two years ago in the Italian port city of Genoa, has become a source of inspiration – so much so that the Italian Government wants to replicate its success on other public works across Italy.

What has captured the imagination is the way the €202 million (A$332 million) bridge was built. For a country inured to projects being stuck in bureaucratic paralysis for years, the innovative fasttrack model applied to its construction allowed Webuild (Italy’s biggest infrastructure group, formerly known as Salini Impregilo) and its partners to build it in record time.

Known as the ‘Genoa Model’, Webuild worked closely with the Mayor of Genoa acting as Extraordinary Commissioner of the project to avoid the adversarial rapport that can sometimes develop between client and contractor. By developing a strong team spirit, every contractor, supplier and public administration official working on the project came to share the same goal: to build the bridge as quickly as possible to re-establish a major transport artery that is crucial to the local economy.

The pace of work was quick and demanding. A month after the tender was awarded in December 2018, the contract was signed – even before the technical designs were completed.

The necessary permits, meanwhile, were given without delay – a rarity in Italy.

Webuild’s workers began driving piles into the dry Polcevera river-bed while demolishers were still removing the wreck of the Morandi Bridge. Once the first piers were erected, they started installing the steel spans for the deck while the remaining piers were still being completed.

The construction site hummed with activity 24 hours a day, seven days a week – save for Christmas and a few days of bad weather.

The work continued even during COVID-19. By declaring the PA R TN E R S H IP S 2 0 2 0

project of national importance, the government allowed work to progress after extra health and safety measures were put in place to mitigate the risk of infection among the workers.

From the laying of the first pier to the completion of the bridge, it took 420 days, representing around 10,100 hours of work. At the peak of construction activity, more than 1,000 people specialised in 40 trades worked simultaneously across 20 stations on site.

The number of small- and medium-sized companies involved in the project was also considerable. Nearly 330 of them from across Italy provided more than €160 million (A$263 million) worth of supplies and services, equivalent to almost 80 per cent of the project’s value.

The simplicity of the design by Renzo Piano, the star Italian architect behind One Sydney Harbour, made the work easier.

Reflecting the trend towards modular construction, the bridge’s sections including the spans were prefabricated, adopting the same shape and size in many cases. The piers are also identical in size, sharing the same external dimensions of 9.5 metres by 4 metres. This facilitated the use of a single type of external formwork for their erection. The aesthetics of the structure were also a key consideration given the bridge needed to blend

12

into the surrounding urban environment. For instance, the aggregates used for the concrete came from a single quarry so as to give the piers the same colour and texture.

The bridge has also become the latest example of smart and sustainable infrastructure for the country. The solar panels Webuild had installed along both sides of the deck provide all the energy that the bridge needs to operate. That includes powering the: • 18 light posts, each 28 metres high • robots that run along the length of the deck to inspect the structure • accelerometers, extensometers and other sensors that monitor the bridge’s soundness and the traffic that flows across it, and • the database that stores all that information to inform the future design of bridges of this type.

There is a system inside the deck that dehumidifies the air to avoid corrosion. The robots that inspect the deck also clean the solar panels and wind barriers, using rainwater collected from the last storm. When it rains, the bridge’s drainage system helps to protect the environment by channelling the water for treatment before releasing the excess onto the riverbed. The asphalt that was used for the road, meanwhile, contains recycled plastic.

“This bridge represents a new way of doing infrastructure in Italy,” Webuild Chief Executive Pietro Salini said ahead of the bridge’s opening. “(It is) proof that even in Italy, strategic public works can be built within the right timeframe, at the right cost and in respect of norms and safety rules.”

Although Webuild has a combined 114 years of experience building bridges and viaducts for a total of 946 kilometres across the globe, the company continues to refine its expertise in their construction of project after project. That includes the replacement to the Gerald Desmond Bridge at the Port of Long Beach in California, the second tallest cable-stayed bridge in the United States, and the viaduct for Sydney Metro Northwest, the first cable-stayed curved railway bridge in Australia.

FOR MORE INFORMATION PLEASE CONTACT Marco Assorati Executive Director, Asia Pacific, Webuild E: m.assorati@salini-impregilo.com

PA R TN E R S H IP S 2 0 2 0

13

WHAT’S NEXT FOR PRIVATE FINANCING OF GREENFIELD INFRASTRUCTURE Justin Bailey | Regional Managing Director (APAC), John Laing Andy Haining | Investment Director, John Laing

Until recently, a $1 billion greenfield infrastructure project was considered a “mega-deal”. Now $1 billion is seen as a “modest” sized project, with many early works or secondary packages associated with major projects being much larger than that.

Construction cost escalation can explain some of the change, with annual cost increases running well ahead of CPI, but another reason is the number of once in a generation transport projects which the States and Territories are procuring.

• for communities, private finance can allow development of economic infrastructure without placing a burden on government.

Over the last 30 to 40 years, private finance procurement models including Public Private Partnerships, Design, Build, Finance and Operate, and Build, Operate, Own and Transfer and other related forms have been applied in the delivery of a range of infrastructure asset classes. This includes social infrastructure such as schools, hospitals, prisons and stadiums, through to water and utilities, and many road and rail projects. However, the trend in recent years has been to use private financing models almost exclusively for the larger and more complex transport projects.

SOCIAL INFRASTRUCTURE

With the right policy settings, private financing models can be applied across a wide range of sectors. This can accelerate the delivery of new infrastructure, creating work for the construction industry and local jobs.

Industry has been waiting to see more privately financed social infrastructure projects come to market following a relative hiatus in procurements over the past four or five years. The exceptions to this are the current procurement for Footscray Hospital in Victoria and the recent South Australian Schools project, both of which were very well received by the market and have seen a broad range of contractors participating.

Privately financed procurement is not for all situations, but where applied in the right context, they can be an important procurement model and ultimately benefit all parties involved:

So why are governments instead sticking to traditional procurement despite the success record of delivery in education, healthcare and corrections? Some believe that privately financed transactions “take too long to procure” due to the upfront planning work undertaken prior to procurement and the length of the procurement process. However pipeline certainty and early selection of private finance as the procurement model can reduce procurement time frames, as can streamlining bid requirements and further standardisation of commercial documentation.

• for governments, they can provide optimal whole of life outcomes, better risk adjusted cost, a high level of design innovation and importantly, in many cases, allow governments to focus on the services they provide and not the assets that enable such services;

Social infrastructure remains very important from an industry perspective. Such projects are of a scale that allow smaller contractors to participate directly. They also typically represent a risk profile that is more manageable being predominantly single site, with less third party interfaces and shorter timeframes.

• for contractors, given the additional contracting certainty and security required to support private finance, they can contribute a higher construction margin into an overall order book comprising a number of different procurement models; and

The outcomes for users of social infrastructure delivered as privately financed projects is helpful demonstrating the success of this form of procurement model. Infrastructure Partnerships Australia’s research paper Measuring The Value and Service Outcomes of Social Infrastructure PPPs in Australia and New Zealand reported that:

This has left a market where only the Tier 1 contractors are able to participate in many projects, and the models are only applied to projects that come with the highest risks in delivery. Whilst we see a continued role for private finance in the delivery of large transport projects, it is clear that there are benefits to an application of private finance to a broader set of projects.

PA R TN E R S H IP S 2 0 2 0

14

• “Service providers (95 per cent) stated that their PPP project has delivered on the service promised by the relevant state government and delivery agency”; and • “Service providers (95 per cent) and all contract managers participating in the research prefer working in a PPP facility and service contract over a traditional government-owned and operated facility”.

CIRCULAR ECONOMY Australia is seeing other developed nations accelerate towards a circular economy. This often includes modern waste to energy facilities to divert residual waste from landfill. As a sign of what is possible, two thermal waste to energy plants are under construction in Perth, Western Australia. This will materially reduce municipal and commercial waste from the Perth market going to landfill where this is currently no alternative.

Private financing principles apply very well to this sector. The transactions are capital intensive, complex and require multiple commercial arrangements to underpin their commercial viability. The projects require developers with the appropriate skills to understand, evaluate and structure around key risks and secure revenue arrangements in order to ensure projects are financeable. Whilst the market is nascent, international experience is already in Australia and there is strong appetite to invest in the waste sector. Clarity around policy settings from state and territory governments and a co-ordinated approach to market by the major council groups can accelerate investment in the sector.

PA R TN E R S H IP S 2 0 2 0

DECARBONISATION OF TRANSPORT Governments globally are looking at how they can achieve their stated emissions reduction targets. The decarbonisation of the transport sector is seen as an important contributor to these efforts, with the added benefit of improving air quality in our major cities. Public transport fleets should be a near term focus for governments, given the difficult decision to continue to buy diesel buses which could still be in service in 25 years.

What is becoming clear is that diesel buses cannot simply be replaced with electric or hydrogen powered ones as they reach the end of their lives. Instead, a whole of system approach is required across the depots, charging infrastructure, grid, batteries and the sourcing of renewable power or hydrogen.

As an integrated system, there is an opportunity to align the investment in new buses with the long-term depot, charging grid and network infrastructure. As with a number of recent privately financed rollingstock projects such as New Generation Rollingstock, the electric buses and associated infrastructure can be owned and managed by long-term investors who are incentivised to meet strong availability and KPI regimes. Such structures will help ensure that governments retain flexibility to tender out operating contracts from time to time on the best possible terms for government. Localisation of bus manufacture also provides an opportunity for local job creation.

15

SOCIAL AND AFFORDABLE HOUSING Demand for social and affordable housing across Australia continues to exceed supply. COVID-19 is likely to put more pressure on governments to provide housing to meet increasing community needs. Despite many models being applied to increase investment in the sector by institutional capital, it is not clear that a consistent and scalable model has been accepted as the best way forward.

At the forefront of this issue is that social housing, and in many cases affordable housing, is simply not economic to build.

It means that the rental income derived from the housing created cannot derive sufficient returns to attract investment.

The government has a number of levers to address the economic imbalance. For example, grants, tax concessions and concessional funding can assist. So can allowing private Build to Rent as part of the development, as it can provide some level of cross subsidy. Where that is not sufficient, the government can provide a level of direct subsidy in these transactions.

however facilitate development of new social and affordable housing where it provides state land but retains the long term interest in the land. With a level of subsidy, tied to appropriate KPIs, a 30 to 50 year concession can provide an opportunity for institutional capital to develop new housing and generate sufficient return. Following this, the land and housing can be transferred back to the State. What investors look for is a level of revenue certainty, which the subsidy can provide alongside rental income from tenants.

Institutional capital can play a role in the social and affordable housing market if the model is right and projects are feasible. A scalable model that includes a level of subsidy over a concession period can help unlock significant investment in the sector.

As the Australian economy looks to rebuild post COVID-19, greenfield infrastructure will provide governments with a very important avenue for job creation and economic stimulus.

Given its benefits to all parties, private finance can continue an important role to play in this recovery.

The other lever government has is land. We know sale of land is potentially a difficult political decision. Government can

FOR MORE INFORMATION PLEASE CONTACT Justin Bailey Regional Managing Director, John Laing E: justin.bailey@laing.com

PA R TN E R S H IP S 2 0 2 0

16

COVID-19 AND CHANGES TO THE DESIGN OF THE NEM Dr Kerry Schott AO | Chair, Energy Security Board

Prior to COVID-19, the National Electricity Market (NEM) was experiencing a major transition as large and small-scale renewable generation entered the market in significant volumes.

In response to this significant increase in variable renewables, the Energy Security Board was tasked by the then COAG Energy Council to recommend changes to the design of the NEM. These changes were to accommodate increasing renewable generation while maintaining reliability, security and affordability.

The scale of growth in renewables that is expected is set out in Figure 1 below. At present, the NEM sometimes runs with 25 to 30 per cent variable renewables. By 2025 the ESB expects this may be closer to 50 per cent.

Figure 1 Instantaneous penetration of wind and solar generation, actual in 2019 and forecast for 2025

THE PROBLEM WITH THE DESIGN OF THE NEM Because of the recent changes in the industry, the design of the NEM is no longer fit-for-purpose. The existing design developed market-based mechanisms and coordinated regulation of monopoly networks across the jurisdictions. In 1998, the NEM brought together the electricity industries in Queensland, New South Wales, the Australian Capital Territory, Victoria, South Australia and Tasmania. It was designed to drive greater efficiencies and better utilisation of resources and has served the nation well until the past decade.

Initially the NEM design was characterised by: • relatively few large thermal generating units • an established transmission network to take that generation to the load (mainly in the cities), and • distribution networks that were one directional and where customers interacted with their energy retailer or local network in a very limited way.

This market context and existing technology drove the key design choices for the NEM:

Source: AEMO, Integrated System Plan, 2020. Central scenario and Step Change scenario

The need to redesign the NEM continues despite COVID-19 – and if anything has intensified. This is due to the economic impacts of COVID-19. Retail revenue is down significantly as customers struggle to meet their bill payments and disconnection to manage this risk is neither a moral or regulatory permitted option.

Revenue from generation is also down for two reasons. First, most business customers have cut back their operations and working from home has not replaced that demand. Second, the wholesale electricity price has fallen, partly in response to the entry of so much low-cost renewable power into the NEM.

PA R TN E R S H IP S 2 0 2 0

• energy-only spot market with significant constraints through the market price cap, price floor, and cumulative price threshold • open connection access to networks for generators • monopoly regulated networks • contracting and spot markets to link physical needs of the system to financial interests of participants, and • a limited market for a small number of ancillary services to keep the system in a secure operating state.

17

CHANGES IN THE NEM Technology and market conditions have now changed substantially. The main three changes include: 1. Consumer relations: In the original NEM design, customers are regarded as passive unless they are one of the few business customers (like a smelter) with a very large demand profile. Customers in the original NEM interact with their retailers to pay their bills (or sometimes switch), and they interacted with their local network only when there was an outage.

Customers now have smart appliances, and possibly solar PV on their roof and an associated battery. They may even be owners of an electric vehicle. These technology changes make for a different relationship with retailers and networks, as customers have services of value that can be incorporated into the market. Much of this change has been caused by digital improvements in equipment and is not solely related to the energy industry.

Customers can sell their excess generated energy if the network is designed to manage two way flows. Services like frequency could be sold by customers to assist with system security if the market design permitted. Since customers can now manage their demand, they could be rewarded for demand response, which is very valuable at certain times of

day and during certain seasonal conditions. In aggregate, this customer response (probably through aggregators) would help the system operator shape load to meet available supply- alongside traditionally managing supply to meet demand.

2. Increased volatility and uncertainty: The substantial increase in large and small-scale variable renewables is accompanied by volatility and uncertainty in the market.

When variable renewables are available, they are the lowest cost form of power but this availability is weather-dependent and not always predictable, meaning market prices are more volatile and uncertain.

Variable renewables are displacing more costly thermal generation and with that various essential services are being removed from the market. These services are typically valued properly at present as they have been provided as complementary energy services by the thermal generators. A new market design would value frequency control, inertia and system strength more appropriately.

3. Need for capital replacement: As plants become commercially unviable and retire over the next 10 to 15 years and beyond, the energy and essential services they provide will need to be replaced. Changes in the market are shown in Figure 2 below.

Figure 2 Thermal generation is exiting the NEM

Source: AEMO and AEMC material prepared for the ESB, 2020

Most of the current generation fleet is aged thermal generation, for which maintenance and operating costs tend to increase with the age of the plant. The integration of variable renewables exacerbates this challenge as their dispatch limits the time that thermal generation can be dispatched, thus further constraining revenue. This commercial viability issue has been exacerbated by the economic impacts of the pandemic. For many aged coalfired generators, financial viability was difficult before COVID-19 and is now worse, with the likelihood of early retirements greater.

Further, as many investors in variable renewables know, the transmission system is not yet configured to meet their connection needs. It was built decades ago for thermal generators in very different locations. The anticipated transmission investment needs are set out in AEMO’s Integrated System Plan, which has just been updated for 2020 and released. Investment in the required upgrades is underway and will continue.

FOR MORE INFORMATION PLEASE CONTACT Dr Kerry Schott AO Chair, Energy Security Board E: kerry.schott@gmail.com

PA R TN E R S H IP S 2 0 2 0

18

VICTORIAN GOVERNMENT INFRASTRUCTURE POLICY REFORMS An Nguyen | Executive Director and Head of Partnerships Victoria – Infrastructure Delivery Group, Victorian Department of Treasury and Finance

Recognising the vital role infrastructure will play in driving Victoria’s economic recovery from the coronavirus (COVID-19) pandemic, the Victorian Department of Treasury and Finance (DTF) is undertaking a comprehensive infrastructure policy reform agenda to enhance the planning, procurement and delivery of the Victorian Government’s significant infrastructure program.

The joint review aligns with Victoria’s coronavirus pandemic response by reforming procurement processes and contracting models to deliver projects that support economic stimulus. It will be overseen by an Expert Panel, comprising of a select number of Australian infrastructure experts, who will provide independent advice and recommendations for policy reform options.

Using learnings from past projects, international best practice and responding to the impacts from the coronavirus pandemic, these policy reforms seek to leverage significant government infrastructure investments to drive economic recovery and support a strong construction industry.

Separately, DTF is also completing a review with the Victorian Major Transport Infrastructure Authority on project packaging and delivery strategy, including procurement and delivery models for transport infrastructure mega-projects.

COORDINATED PROCUREMENT REVIEWS DTF and New South Wales Treasury are conducting a joint review of their major infrastructure procurement processes.

This is an opportunity to share experiences, leverage best practice and enhance policy alignment across the two jurisdictions, establishing a greater degree of consistency among the two markets.

PA R TN E R S H IP S 2 0 2 0

These reviews will inform and shape updates to key Victorian Government infrastructure policies and guidance. DTF intends to engage extensively with government and industry stakeholders in these reviews, recognising their participating role in the State’s infrastructure agenda and ensuring a set of targeted and deliverable reform options be developed.

19

PUBLIC PRIVATE PARTNERSHIPS POLICY REFORMS The Partnerships Victoria policy, established nearly 20 years ago, provides the foundation for delivery of PPPs in Victoria. The policy has served to facilitate successful delivery and operation of a significant number of iconic projects in various sectors.

A key factor in its long-standing success is the strong commitment by successive Victorian Governments to maintaining the currency and fitness for purpose of the policy framework. Partnerships Victoria has evolved over time to improve project outcomes, including the swift responses to the Global Financial Crisis a decade ago and release of the Standard Project Deeds and associated commercial principles in more recent times.

PPPs and other traditional procurement approaches continue to play a key role in delivering and ensuring value to the State for the right projects.

DTF is currently updating the PPP policy and guidelines to reflect lessons from recent projects and to meet the changing industry and economic circumstances. This will include reviewing how particular risks are allocated and managed during delivery of projects, improvements to the way projects are procured and contracts are managed, and increasing early and ongoing collaboration with industry.

CONSTRUCTION CONTRACT STANDARDISATION In conjunction with the Victorian Government’s release of the Public Construction Procurement Framework in July 2018, a number of standard form construction contracts were developed.

DTF is progressing a second phase of standardisation to further reduce the number of bespoke contracts and enhance the current suite of standard contracts. Model clauses will be developed with optionality to suit project complexity, scale and objectives. The intent is to encourage greater use of standardised contracts to increase speed to market, improve consistency in treatment of contract terms, reduce transaction costs and build capability in contract administrators.

MARKET-LED PROPOSAL REFORMS Market-led proposals provide an opportunity for Victorians to benefit from a broad range of new ideas and innovations in the delivery of infrastructure and services. Proponents approach the Victorian Government for support and approval of their proposals and pre-submission meetings are regularly undertaken to discuss new initiatives.

The Market-led Proposals Guideline is currently being reviewed to consider further improvements to the assessment process and reduce assessment timeframes for proponents.

FOR MORE INFORMATION PLEASE CONTACT An Nguyen Executive Director and Head of Partnerships Victoria – Infrastructure Delivery Group, Victorian Department of Treasury and Finance E: an.nguyen@dtf.vic.gov.au

PA R TN E R S H IP S 2 0 2 0

20

BUILDING VICTORIA’S FUTURE: WILL THE PANDEMIC SLOW US – OR GROW US? The Victorian Department of Transport is responsible for planning, building and operating Victoria’s integrated transport system. Our vision is to meet the aspirations of Victorians for a transport system that is simple, connected, accessible, reliable, sustainable and safe, while supporting a productive and growing economy.

RECORD INVESTMENT Our Major Transport Infrastructure Authority is delivering the biggest infrastructure investment program in Victoria’s history – Victoria’s ‘Big Build’. More than $70 billion is being invested to meet estimated future demand for more than 23 million journeys a day and a tripling of freight by 2050.

These projects include the city-wide Level Crossing Removal Project, the new Metro Tunnel, major arterial road and suburban train line upgrades and extensions, the West Gate Tunnel, North East Link, and the Regional Rail Revival, which will see upgrades across every regional passenger line in the state.

THE IMMEDIATE IMPACT OF THE PANDEMIC When the coronavirus (COVID-19) began to spread in Victoria, as an essential service, transport operations ensured that frontline workers in health and other important sectors continued to have access to jobs.

Given the scale of Victoria’s food production, and the role of Port of Melbourne as Australia’s busiest container port, keeping Victoria moving was of critical importance to the nation.

Continuing construction was also critical in transport infrastructure delivery, with stringent health and safety measures in place to ensure works could continue.

BUILDING THROUGH THE LOCKDOWN To stimulate economic recovery, the Victorian Government announced the $2.7 billion Building Works package to support projects and jobs in metropolitan and regional Victoria. The package includes funding for maintenance and upgrades of roads, public transport infrastructure, active transport, pier and jetty upgrades, rubbish and graffiti removal, and management of vegetation along road corridors.

When the Stage Four restrictions came into place in early August, the Victorian Government allowed critical infrastructure projects to continue. Victoria demonstrated that large-scale PA R TN E R S H IP S 2 0 2 0

21

infrastructure projects can be delivered safely in this environment by installing strict measures. These include temperature screening, increased cleaning, additional personal protective equipment, contactless pre-start sign-in, daily health screening of workers, staggered shifts and break times, on-site testing programs, and rapid response plans for positive cases.

REFORM AND INNOVATION We are using this time to implement reform and introduce innovation to help keep our transport systems flowing when restrictions ease and demand resumes.

Technology, including the installation of CCTV cameras, wireless travel time sensors and real-time message boards in high congestion areas, is helping us get more from our existing infrastructure. It is also enabling our transport management control centre to better deal with incidents more quickly and commuters to plan their journeys accordingly.

We are also creating smarter intersections and testing new ways to harness real-time data. We want to help people make more informed choices about their transport – putting confidence and safety at the helm of travel across Victoria.

LOOKING TO THE FUTURE We are working closely with our construction industry, unions and contractors to ensure Victoria’s Big Build continues as safely and smoothly as possible. With revised procurement practices in place, we are broadening employment opportunities across the community and looking to our social enterprises and businesses including the tier two, three and four markets.

2021 UITP GLOBAL PUBLIC TRANSPORT SUMMIT In 2021, Victoria will host the Global Public Transport Summit for the International Association of Public Transport (UITP). This summit is the world’s largest event dedicated to sustainable mobility, and will be held from 14 to 17 December 2021. We hope you will join international and local sustainable transport leaders to delve into the future of mobility. Now, more than ever, it is important that we come together as a global industry to innovate and grow.

FOR MORE INFORMATION PLEASE CONTACT Department of Transport Corporate Stakeholder and Industry Partnerships E: DoTCorporate@transport.vic.gov.au

PA R TN E R S H IP S 2 0 2 0

22

A STRONGER TOMORROW: SPEARHEADING A NEW ERA OF INFRASTRUCTURE PLANNING FOR WESTERN AUSTRALIA Kate Zappa | Acting Senior Communications Officer, Infrastructure WA

Since its establishment in July 2019, Australia’s newest independent infrastructure agency (‘I-Body) has established a Board, written and published a paper mapping out how it proposes to develop WA’s first 20-year planning blueprint, and travelled the state learning about different regions’ and industries’ infrastructure priorities.

Embracing the “enormous appetite for change” has been key to Infrastructure WA (IWA)’s success according to its Chairperson, John Langoulant AO.

IWA’S ROLE AND REMIT IWA’s establishment was intended to enhance transparency on infrastructure matters, improve the planning process and quality of business cases being prepared in Western Australia, build greater certainty and confidence among private sector investors, and support jobs growth in the state.

Under the Infrastructure Western Australia Act 2019 (IWA Act), IWA is tasked with preparing a 20-year State Infrastructure Strategy at least every five years. It will also coordinate Western Australian submissions to Infrastructure Australia, provide advice to the WA Premier on infrastructure priorities, funding and financing, and provide advice and assistance to state government agencies and Government Trading Enterprises. It will also assess major infrastructure proposals and provide advice to the government prior to investment decisions being made.

The IWA Board, comprising six representatives from the private sector along with four Directors General from key state government agencies, reports directly to the WA Premier.

MAPPING OUT THE ROUTE TO SUCCESS As the State Infrastructure Strategy will serve as the foundation for IWA’s advice to the Western Australian Government, IWA’s Board and staff recognised the need to secure input from as many of its stakeholders as possible prior to its development.

“Having consulted with other I-Bodies, we understood the value that could be gained by mapping out the way we thought developing a Strategy would work best, using it as a means for robust discussion,” said Mr Langoulant.

PA R TN E R S H IP S 2 0 2 0

23

The result was IWA’s first publication, A Stronger Tomorrow: State Infrastructure Strategy Discussion Paper, released in late June 2020.

This document made it clear that the Strategy would focus on both infrastructure projects and programs as well as nonbuild solutions such as policy, regulatory, pricing, technology, procurement, skills, and governance reforms.

The IWA Chairperson explained that IWA would focus primarily on “proposals and issues of strategic or significant nature and larger-scale projects and programs”.

A TOP-DOWN, BOTTOM-UP APPROACH IWA is proposing to take a hybrid approach when developing this first Strategy, focusing on a predominately bottom-up assessment for its recommendations for the next five to ten years, and a largely strategic top-down assessment over the 11 to 20-year period.

“Given the backdrop of uncertainty created by the COVID-19 pandemic, we were impressed to see so many people really moving beyond short-term timeframes to think about the issues that we need to address over the next ten to 20 years,” he added.

NEXT STEPS Although the formal consultation period for the Discussion Paper concluded at the end of August 2020, IWA’s program of engagement is ongoing and will continue to shape the recommendations contained within its first draft of the Strategy.

IWA will continue to test its approach and recommendations via a working group with key state government agencies, an external reference group comprising industry leaders, and an expert panel.

IWA is working to publish its draft State Infrastructure Strategy in mid-2021.

A baseline assessment of existing and planned infrastructure, as well as information supplied by government, industry and the community, will be used to inform the Strategy. Scenario planning will also be used to help assess how future changes could impact long-term infrastructure needs and outcomes.

IWA has also set out ten draft objectives that relate to areas it could focus on when developing its Strategy. These include objectives such as: • supporting a strong, resilient and diversified economy, • maximising regional strengths to unlock strategic opportunities for Western Australia • addressing climate change and increasing resilience, and • embracing technology, data and digital connectivity.

STARTING THE CONVERSATION “It was really critical that IWA was able to hear from those stakeholders who rely on the state’s infrastructure for their wellbeing and prosperity and the quality of the conversations we’ve had since the Discussion Paper was released have been really quite remarkable,” Mr Langoulant said.

Easing restrictions in Western Australia meant that IWA was able to visit all ten Western Australian regions across July and August 2020. In total, IWA hosted 15 half-day workshops with more than 450 participants. This has enabled the IWA team to take a deeper dive into localised perspectives and priorities.

“While there were recurrent themes – particularly in relation to things such as digital connectivity, security of water supply, and transport – we also heard about regional and sectoral challenges and solutions,” Mr Langoulant said.

A NEW CEO AT THE HELM IWA’s Chief Executive Officer, Phil Helberg, commenced his appointment in August 2020.

With more than 25 years of local and international experience in planning, delivery and management of infrastructure in both the public and private sectors and as a former Deputy Director General at the Western Australian Department of Finance, Phil led the delivery of the state’s non-residential building program in excess of $1 billion in value, while driving significant sector-wide reforms in infrastructure planning and development.

FOR MORE INFORMATION PLEASE CONTACT Philip Helberg Chief Executive Officer, Infrastructure WA E: enquiries@infrastructure.wa.gov.au

PA R TN E R S H IP S 2 0 2 0

24

Advising for impact.

Developing for the future.

At Macquarie Capital, we’re transforming legacies into future opportunities.

From advising on the expansion of the historic Snowy Mountains Scheme with Snowy 2.0 to the transformative Cross-River Rail Tunnel Stations and Development PPP, we’re delivering landmark results for Australian cities and communities.

Awarded World’s Best Investment Bank in Infrastructure at the 2020 Global Finance Awards and Gold Sponsor/Developer of the Year at the Partnerships Awards 2020, we’re enabling opportunity for clients and partners, from origination to execution.

For more information please contact: John Pickhaver Head of Infrastructure and Energy and Co-Head of Macquarie Capital, Australia and New Zealand John.Pickhaver@macquarie.com +61 2 8232 5049 macquarie.com

None of the Macquarie Capital entities nor the Green Investment Group are authorised deposit-taking institutions for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 (MBL). MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities.

Infrastructure Partnerships Australia Suite 3.03, Level 3, 95 Pitt Street Sydney NSW 2000 PO Box R 1771 Royal Exchange, NSW 1225 infrastructure.org.au