AsiaPacific Infrastructure - Apr&May 2015

AsiaPacific

INFRASTRUCTURE April/May 2015

Vol 5 No 2

In this issue

Port politics • Housing crisis • Petroleum prospects Water financing • Local government funding

k.

Any question.

April-May 2015

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Editor Geoff Picken 0212 507 559 geoff@ mediasolutions.net.nz Managing partner Phil Pilbrow 027 564 7778 phil@mediasolutions.net.nz Production manager Jamie Laurie jamie@mediasolutions.net.nz

government P30, P34 Councils have worked with air transport providers to secure regular flights for their communities after Air New Zealand advised its flights to Kaitaia, Whakatane and Westport would cease P33

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ons

The Te Mihi Geothermal Power Station won the Marmaduke Award, which recognises power projects that use innovative methods to solve technical problems P24 Contact Energy celebrated the completion of its Wairakei Investment Programme last year, the same year Te Mihi opened for business P27

Web development Neo Chen 021 507 318 neo@appsolutions.co.nz Publisher Mike Bishara 027 564 7779 mike@mediasolutions.net.nz Subscriptions Digital and print editions free to qualified readers. lisa@mediasolutions.net.nz Overseas rates on request.

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Cities Smart cities could be the solution to the many challenges thrown up by urbanisation in increasingly congested areas like Auckland – Ivan Fernandez P34 Auckland housing is essentially a Ponzi scheme because you need more and more entrants to keep prices rising and that’s exactly what’s happening. The consequences on the young and the poor are diabolical – Leigh Auton P32 Energy Some of the world’s leading energy companies are preparing tenders to explore almost 500,000 square kilometres both on and offshore New Zealand – Simon Bridges P41 An appealing fiscal regime and low above-ground risk makes NZ an attractive proposition for energy explorers – Matt Howell P42 Environment Green walls and roofs can be used to clean water, act as wetlands, insulate buildings, provide much-needed habitats and even clean air as part of air conditioning plants – Graham Cleary P8 Most disasters that could happen just haven’t happened yet, warns the 2015 Global Assessment Report on Disaster Risk Reduction. Economic losses from disasters now reach an average of US$250 billion to $300 billion annually, says Dr Kelvin Berryman P38 2015 Infrastructure Plan The first National Infrastructure Forum set out to help develop the 2015 National Infrastructure Plan. The first objective was to identify any gaps in the plan’s development to date, the second was to engender industry buy-in in the pursuit of a genuinely national document P18

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April/May 2015

Self-driving cars - P19

Technology Using drones in a variety of key local industry sectors could provide nearly $190 million a year in economic benefits – Andrew Shelley and Heather Andrews Transport Cooperative Intelligent Transport Systems link vehicles and road infrastructure to provide numerous safety applications – Paul Gray P14 Electric and self-driving cars do not conform to normal market development processes and will completely displace existing transport technologies and revolutionise the behaviours which accompany them – Tony Seba P19 Water Large scale water storage projects are key to future-proofing the New Zealand economy and kick-starting regional development but new funding models are needed – Andrew Curtis P10-13

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Auckland Ports: You’d think that a Cabinet Minister turning up and addressing a protest – along with Labour’s opposite number – would be a wake-up call to whatever party was in government at the time reckons consultant Dr Joel Cayford P6-7 Auckland Housing: With a form of property madness having enveloped Auckland city, aided and abetted by the media, house prices have gone through the roof, almost literally says consultant Leigh Auton P32 Infrastructure: There was no shortage of opinions at the National Infrastructure Unit and National Infrastructure Advisory Board’s forum to sort out a 2015 National Infrastructure Plan reports NCID senior analyst Hamish Glenn Infrastructure: The Bay of Plenty cannot afford to slash SmartGrowth funding by a considerable amount of $200,000 a year from year three of council’s Long-Term Plan according to Property Council chief executive Connal Townsend P46 Funding: LGNZ published its funding review discussion paper earlier this year as a bit of a conversation starter says chief executive Malcolm Alexander P30 Funding: The dismissive government response to the LGNZ funding review exposes the dilemma that the power imbalance between local and central government creates for local government says Chapman Tripp senior solicitor Jill Gregory P34 Procurement: The government’s rules and principles of procurement are simply an extension of a world-wide raft of changes affecting the way governments seek suppliers and assess tenders for infrastructure projects according to tender specialist Caroline Boot P44 Disaster risk - P38

April/May 2015

www.infrastructurenews.co.nz – 5

COMMENT >> Ports

Dr Joel Cayford

Ports, portents and importance

You’d think that a Cabinet Minister turning up and addressing a protest – along with Labour’s opposite number – would be a wake-up call to whatever party was in government at the time

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dd to that America’s Cup legends Chris Dickson and PJ Montgomery and you’d wonder why something wasn’t being done more quickly at national level about the public policy vacuum within which New Zealand’s ports compete with each other for survival, cutting each other’s throats, and – in the case of Auckland – acting with scant regard to the concerns and interests of other users and admirers of the Waitemata Harbour.

In the late 1980s there was widespread

the provision of high-quality public parks and waterfront spaces. Auckland’s downtown area – now the site of a proposed high-rise development and central rail link tunnel project – is a good example.

Ports of Auckland Ltd (POAL) quickly seized the entrepreneurial opportunities that went with corporatisation and in 1989 released its port plan shown here, which envisaged more than 20 hectares further reclamation into the Waitemata Harbour.

Over the intervening 25 years various

Tauranga will get the bulk of Maersk’s services has been postponed with the global shipping giant denying it was in response to the ports’ proposed merger. Maersk which controls 38 per cent of the container market here - confirmed yesterday either Auckland or Tauranga would be cut from its schedule but did not name which one.” (NZ Herald Report, 12.10.2006) This provides a flavor of what has been happening as publicly owned port companies around New Zealand compete with

“Central government needs to finally recognise the economic damage that is being foisted on the country by its misguided policy that forces port companies to fight each other, inefficiently investing public money in duplicate infrastructure” political support for the idea that New Zealand Harbour Boards be corporatised with a new objective encased in legislation: “to be a successful business”.

Prior to these changes Auckland’s Harbour Board had a track record of acting vigorously in reclaiming land for port purposes, including the development of Auckland’s container terminal.

It also had quite a track record of acting as a real estate business developing surplus reclaimed land and returning tidy profits at the expense of public outcomes such as

POAL Board Chairmen and Chief Executives have gone to bat in support of this plan, which has nevertheless been slowly pared back in the teeth of growing public opposition.

Port eat port But spare a thought for those who have been trying to run a container port anywhere in New Zealand over the past 20 years – and especially the last 10 years.

Consider this news story: “A decision about whether Ports of Auckland or Port of

Ports of Auckland Ltd’s 1989 port plan envisaged more than 20 hectares further reclamation into the Waitemata Harbour 6 – www.infrastructurenews.co.nz

each other for the affections and attentions of powerful shipping companies.

This is a major problem for New Zealand at a national level and for Auckland regionally. Arguably, port infrastructure is at least as important as roading infrastructure, whose development is closely coordinated by the New Zealand Transport Authority.

Shortly after the Auckland supercity was formed new councillors were informed by a working paper that advised of: “…potential for duplication of infrastructure if investment is not co-ordinated….” It went on: “…there is intense competition for container trade between POAL and Ports of Tauranga (POT)…”

I can vouch for that from my experiences as a councillor on the Auckland Regional Council (ARC), which owned POAL through its subsidiary Auckland Regional Holdings (ARH) while I was a councillor from 2004 to 2010.

Councillors received regular confidential updates outlining the negotiating strategy pursued by POAL and ARH in the price war that emerged between Ports of Tauranga (POT) and POAL in trying to gain the Maersk contract, which was heavily driven

by Fonterra’s desire to drive down the costs of its milk fat freight logistics supply chain.

The final price that was offered by POAL to Maersk was little more than $200/container, close to cost, and significantly lower than the handling charges over the Tasman, April/May 2015

which are nearly twice that for the same service.

I well remember the justification for this cut-throat price from those in support: “it’s all about volume…” However, whether it’s a million containers per year or two million containers per year, the mathematician in me is acutely aware that one million times bugger all is still bugger all profit and that throughput would need a whole lot more reclaimed land.

The subsidy is borne by the owners of POAL, by those who need to share the transport corridors with all of these containers – many of which are empty – and by the current and future citizens of Auckland who believe the Waitemata Harbour should be very carefully managed for everybody.

Another news story from the time: “Marsden Pt is now well on track to become the ‘super port’ for New Zealand – regardless of the Port of Auckland’s determination to remain an international facility,” says Northland Port Corporation chairman Mike Daniel.

Mr Daniel told the company’s annual meeting on Friday that all the signs were that at last ‘central government now appeared to recognise the inevitability of a one-stop international deep-water port at Marsden Pt’. All New Zealand’s seaborne imports and exports would eventually come through the deep-water port at Marsden Pt, he said.

Speaking after the meeting he attacked Auckland port for ‘potentially huge over-capitalisation’ in its fight to retain

international status. (Northern Advocate, 30.10.2007) The most reliable information was available in public attacks between ports.

Port eats harbour

store imported second-hand vehicles that currently occupy Captain Cook, and extensions to Bledisloe Wharf if Auckland wants POAL to provide berthage for cruise ships.

So while Mayor Len Brown acts all indignant about secret resource consents and how dare POAL behave arrogantly the fact of the matter is that Mayor Brown’s determination to push through the Central Rail Link has had many consequences.

I think Auckland has long needed this level of threat to its beloved Waitemata Harbour and waterfront public places.

Sleeping citizens are awake, holding their council and port company to account, demanding that public access to and protection of their harbour and its surrounds is paramount, and insisting that expedient deals between public entities take second place.

New Zealand does not need and cannot afford the number of container terminals it presently has. Bigger ships might

need longer wharves but they also need deeper channels.

Does that mean that all our existing ports are now forced to embark on costly and environmentally damaging dredging programmes? Surely not. Auckland Council has recently promised a “stage two Ports study”.

But what is needed is a national study and strategy.

Central government needs to finally recognise the economic damage that is being foisted on the country by its misguided policy that forces port companies to fight each other, inefficiently investing public money in duplicate infrastructure, leading to a situation where shipping companies can hold us all, and our natural harbours, to ransom.

Just before Christmas POAL obtained resource consents from Auckland Council for two 100-metre-long extensions to its Bledisloe Wharf reclamation.

The applications weren’t notified so the public had no opportunity to make submissions.

The backlash has been huge and is growing with judicial review proceedings being filed by public interest group Urban Auckland on the Thursday before Easter.

This is where it gets a little complex. Auckland’s waterfront story today is complicated by the economic growth strategy Dr Joel Cayford is a planning pursued by the Auckland Counconsultant, blogger and cil alongside Ports of Auckland, planning researcher/teacher which it owns 100 percent. at the University of Auckland, Auckland Council has been and a former city and regional determined to get the enabling councillor works for the Central Rail Link project underway in this term of office at any cost. Current plans assume the sale of precious Queen Elizabeth Square waterfront public space to enable a public-private venture of public tunnel and private tower to go ahead.

Compensation for the loss of public space has taken many forms, including the option of moving the cruise ship terminal off Queens Wharf and freeing up Captain Cook Wharf for more public access.

POAL is embroiled in this difficult deal, arguing that it needs Ports of Auckland Ltd wants extensions to Bledisloe Wharf to provide cruise ship berthage if the cruise ship terminal is moved replacement reclaimed land to off Queens Wharf

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www.infrastructurenews.co.nz –7

Environment

Turning green to gold Harnessing the power and beauty of nature is both aesthetically pleasing and profitable

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n overseas trend towards using installing natural vegetation on walls and roofs to solve urban development issues and enhance the value of a project is gradually gaining ground locally – albeit very slowly.

More and more local planners, developers and builders are beginning to realise the enormous potential of green walls and roofs, says Natural Habitat Founder and Chief Rake (Director) Graham Cleary. “Both green walls and roofs can be used to clean water, act as wetlands, insulate buildings, provide much-needed habitats and even clean air as part of air-conditioning plants,” he explains.

Numerous other benefits include: • enhanced employee productivity – up to 12 percent increase in financial terms • an increase in project sales value in terms of tenant and/ or market demand • enhanced public perception

of the company in terms of green branding • up to 70 percent reduction in storm water in Auckland alone • reduced project and community infrastructure cost • savings on insulation and cooling • a marked increase in the lifespan of the roof if greenery is installed • roof gardens can even produce food • saving space.

Given these many advantages it’s little wonder that green roofs and walls are becoming compulsory in First World countries such as France, which recently became the latest to make green roofs mandatory by specifying that new roofs must be covered in plants or solar panels approved by the French Parliament.

“Even in a trimmed-down form, the law is trailblazing and will both change the urban landscape of cities across

Green wall guide

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systems that have their soil green wall is a wall parpacked into a shelf or bag tially or completely covand are then installed onto ered with vegetation the wall mat and structural that includes a growing medimedia, they have to have their um, such as soil. media replaced at least once Also known as living walls or a year on exteriors and apvertical gardens, most green proximately every two years walls also feature an integrated on interiors water delivery system.

Such walls may be indoors or • coir fibre or felt mats – best outside, free-standing or atused on the interior of a buildtached to an existing wall, and ing as they are quite thin and come in a great variety of sizes. cannot support vibrant root Green walls are often consystems of mature plants for structed of modular panels that more than three to five years hold a growing medium and before the roots overtake the can be categorised according mat and water is not able to to the type of growth media adequately wick through used: • structural media – not loose • loose media – “soil-on-anor mats they incorporate the best features of both into shelf” or “soil-in-a-bag”

8 – www.infrastructurenews.co.nz

France as well as potentially inspire other countries to follow suit, especially with the United Nations’ climate summit coming to Paris at the end of the year,” Mr Cleary believes.

Singapore is another centre that has been quick to embrace green wall technology, increasing its green area 28 percent in 30 years to 45 percent of the city area at the same time it doubled its population to 5 million and increased its land area by six percent.

Sadly, despite New Zealand’s “clean, green” image the local infrastructure industry has clearly been slow on the uptake, leaving Mr Cleary and the firm he founded in 1978 to become the leading advocate and provider of integrated landscape management within Australasia.

“Green walls is a growing industry and many people are trying to install them but don’t have the technology or the plant media,” Mr Cleary maintains. “Green roofs are simpler,

and there are therefore more successful players.”

Natural Habitats built the first green roof in 1994 on Auckland’s Quay West project, a cost-effective installation that enabled developer Mirvac to add another four floors. “This green roof was designed as a miniature version of the harbour it overlooks, with islands of planting and established pohutakawa that mimic the form of Auckland’s iconic isles such as Browns, Waiheke and Rangito-

a block that can be manufactured into various sizes, shapes and thicknesses and have the advantage that they do not break down for 10 to 15 years, can be made to have a higher or lower water holding capacity depending on the wall plant selection and are easily handled for maintenance and replacement.

Green walls are found most often in urban environments where the plants reduce overall temperatures of the building caused by the absorption and storage of solar radiation by roads and buildings.

They can also reuse water, purifying slightly polluted water such as greywater by absorbing the dissolved nutrients after bacteria has mineralised the organic components to make

them available to the plants.

Living walls are particularly suitable for cities as they allow good use of available vertical surface areas, but are also useful in arid areas as the circulating water on a vertical wall is less likely to evaporate than in horizontal gardens.

Invented by landscape architecture professor Stanley Hart White in 1938, living walls can also be utilised as urban agriculture, urban gardening or art and are sometimes built indoors to help alleviate sick building syndrome.

Green walls have seen a recent surge in popularity, with 80 percent of the 61 large-scale outdoor green walls listed in an online database constructed in or after 2009 and 93 percent dating from no later than 2007.

Natural Habitats Founder and Chief Rake (Director) Graham Cleary: “Both green walls and roofs can be used to clean water, act as wetlands, insulate buildings, provide much-needed habitats and even clean air as part of airconditioning plants”

April/May 2015

“Green walls have caught on due to the superb and very visible branding they give but green roofs will take over as innovative uses are developed and the real benefits exploited” to,” Mr Cleary explains. “It has been exceedingly successful, earning the developer some $4 million in additional income.”

More recently, The Parc’s 3,500m2 private sanctuary with expansive lawn areas and pool that was constructed in 2002 may still be one of the largest in the country. “The design is visually stunning viewed from the above apartments and provides a degree of separation and privacy for the apartments on the ground level,” Mr Cleary observes.

The structure underneath the garden was designed to support extra weight around the edges of the lawn where extra depth in soil was required for the establishment of trees.

“Growing media was specifically manufactured to be lightweight, while the depth of the lawn within the centre of the

park is only 100mm.”

The Parc installation won numerous awards, including silver in the residential category of the New Zealand Institute of Landscape Architects Awards 2010, and the Lockwood Homes “Best Sustainable Landscape Practice Award” in the Landscaping NZ Awards 2010.

Hand in hand with these achievements, Mr Cleary and his team installed New Zealand’s first green wall at Natural Habitats’ Auckland office in 2009. “It was an experimental indigenous wall that covered approximately 10 square metres,” Mr Cleary recalls. “We now have walls in Tauranga, Hamilton, Wellington and Wanaka and will be as far south as Balclutha by the end of the year.”

High profile projects such as the Britomart Precinct eco-art-

Singapore’s Marina Bay Sands SkyPark is a living example of the virtues of installing natural vegetation on walls and roofs to solve urban development issues and enhance the value of a project work that line the east and west end walls and integrate seamlessly into the building fabric and form the focal point of the atrium have helped spread the green wall message.

Using plants in this fashion helps increase mental well-be-

Continued on page 10

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Water

Environment Continued from page 9

expenses including energy.

High quality environments such as these: • help regulate indoor temperatures • shade building walls and windows • reduce energy consumption by 23 percent for cooling and 20 percent for air circulation • dampen noise • remove up to 85 percent of volatile organic chemicals and dust if filtering • create cleaner and better quality air, thus helping increase workplace productivity • act as living works of art.

The Hotel Novotel installation at Auckland Airport illustrated how cultural sensitivities can be incorporated into green walls that also improve indoor air quality by removing air pollutants and improving humidity levels from air-conditioning.

“The green wall was intended to complement the Novotel’s distinctive New Zealand theme

and act as a focus for the bar area,” Mr Cleary says. “The 60m2 of vertical vegetation provides both visual interest and environmental benefits, creating a more comfortable environment to work and relax in.”

Equally importantly, the wall features an array of native New Zealand flora that has special significance to Tainui, who were a partner in the hotel’s development. “Nestled within the wall is Winika cunninghamii - an orchid that grew on a totara which was used to make the hull of a sacred waka belonging to the Tainui people and named Te Winika.”

Visually appealing, attractive and soothing, green installations such as these are deservedly catching the eye of architects, developers and builders throughout the country. “Green walls have caught on due to the superb and very visible branding they give but green roofs will take over as innovative uses are developed and the real benefits exploited,” Mr Cleary predicts.

He is now extolling the virtues of rain gardens, which he sees as the way of the future.

“They’re excellent pieces of simple green technology that like green roofs can greatly reduce the harm of urbanisation, in this case from mitigating the effect of stormwater,” Mr Cleary says. “They’re very popular overseas and are becoming increasingly popular throughout New Zealand.”

10 – www.infrastructurenews.co.nz

Financing challenges holding back development

Large scale water storage projects are key to future-proofing the New Zealand economy and kick-starting regional development but new funding models are needed says Andrew Curtis

F

ree trade agreements, healthy diplomatic ties and close proximity to the fastest-growing nations in the world make quality food exports a unique point of difference for New Zealand.

A reliable water supply for irrigation is critical – it provides the foundation on which a diverse range of crops can be grown.

New Zealand is not short of water – we get two and a half times the rainfall of the British Isles, which has a population of 65 million and we have twice as much water below ground and 100 more above ground when compared to the global average. However we don’t always get the rainfall when we need it – for example, the 2015 summer droughts in East Coast districts.

We also have some of the most sophisticated freshwater legislation in the world and excellent ‘green’ technology. This means we have an opportunity to lead global best practice with modern, environmentally sustainable water storage and distribution infrastructure combined with SMART on-farm water management.

The recent drought in the South Island – a repeat of what happened in the North Island in 2013 - has been a stark reminder of why we should do this. It particularly highlights the importance of harnessing alpine water to combat climate change.

Currently there are 350,000 hectares under investigation which will likely cost around $2.5-3 billion, including off-river dams in Canterbury, Hawkes Bay, the Wairarapa, Otago, Marlborough and Tasman. Realising this by 2025 would see irrigated land contribute an additional $4bn per annum to GDP. But the industry is faced with a big challenge: financing this development. To get a modern water storage and irrigation scheme off the ground involves an initial outlay of hundreds of millions of dollars – approximately $275 million in the case of Ruataniwha or $500 million in the case of Central Plains Water (CPW).

Thus far, irrigation scheme development has been supported by local councils, private investors and water users. Central April/May 2015

Water storage infrastructure assets like Lake Opuha provides recreational opportunities as well as economic benefits ing water storage and irrigation feasible on a national level, the combination of this government investment, some regional investment and farmer debt will not be enough.

Overseas, large-scale water infrastructure is recognised as a well-proven regional economic development tool and as a result is typically 60-80 percent funded by government – Tasmania and Alberta for example – so we are trailblazing.

Looking at future financing options in New Zealand, one of the biggest challenges we have Costs conundrum to work through is the tension Considering the costs of mak- between the commercial terms vestor which helps give comfort to other investors. CIIL encourages investment into the agricultural sector but it’s an investor of last resort and isn’t there to provide ‘go to’ capital.

So far, CIIL has made a $6.5 million secured, second-ranking investment in stage 1 of CPW. CIIL is presently in discussions with the Ruataniwha Water Storage Scheme, however ongoing legal proceedings are creating challenges for this project, Hunter Downs and also CPW stages 2 and 3.

BEST CHOICE FOR WATER STORAGE

required for private capital investment and the traditional ‘co-operative’ nature of irrigation schemes.

The co-operative approach is typically when farmers debt finance their shares in a scheme.

It is unlikely that enough capital can be raised to finance the construction of a new modern, regional, storage-based scheme through this method, particularly given new environmental legislation that requires farming systems, including onfarm irrigation infrastructure, to be of a much higher standard

Continued on page 12

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government has also provided targeted funding through the Irrigation Acceleration Fund ($35 million) and an investment company, Crown Irrigation Investments Limited ($120 million with a $400m overall investment limit).

The Irrigation Acceleration Fund contributes at the early feasibility stages to help proposals get ‘investment ready’ - technically and commercially robust and demonstrating a high level of community support. So far, $27.5 million has been invested in 18 projects.

Crown Irrigation Investments Limited (CIIL) is a bridging in-

www.infrastructurenews.co.nz – 11

Water Continued from page 11 than previously. This increases cost and reduces the ability to leverage debt.

But the co-operative approach works well for irrigation – owners have a vested interest in upgrading and modernising the infrastructure into the future and it is proven that water infrastructure governed and managed by the end users is the most efficient and effective.

The co-operative model is also the most effective at ensuring uptake as farmers buy-in early and become committed to the journey, seeing the benefits of a long-term game.

Private capital seeking pure return is very different, and there is a question as to whether this can work within a scheme’s co-operative framework.

So, what are the options to satisfy both models? Is a hybrid model between co-op and private capital a workable solution? Could an overarching company be created with both co-operative and private investor shareholders within it?

Or could storage infrastructure or the head race be split from the other distribution infrastructure and built through different financing models? In this scenario the dam / head race supplying the water could be owned and managed by the private investors (with a take or pay CPI/PPI linked price for water) and the irrigator builds the distribution system. Lake Coleridge provides an example of such an arrangement, the storage in this case a switch from hydro to irrigation priority rather than a new storage construction.

Another significant – and unique - challenge to getting new water infrastructure off the ground in New Zealand is the ‘uptake challenge’ by new users. All current development proposals are economically sound and affordable if there is full uptake from day one, but the issues arise when there are 200 to 300 potential share-

holders that all need to commit upfront to cover the significant construction costs.

Two options There are two options to address this – either construct the scheme only for those in from the beginning and foreclose future opportunity, or build the infrastructure which will allow for optimal future potential.

Typically, the gap is between the initial capital cost and the 5-10 years that it takes to reach full uptake by shareholders. For new schemes, those that get in first have to fund those that come in later.

This approach used to be achievable as low-cost, low-efficiency irrigation systems could be installed and then upgraded over time as debt was paid down. But new limits-based environmental requirements mean that more investment is now required in efficient systems from day one. The gap is also being compounded by the uncertainty the new limits legislation has created.

Given these increased demands and costs, local and national government need to play a bigger role in helping to plug this uptake gap. One simple solution is the government funds the ‘dry-shares’ and is then paid out as new shareholders come on board and turn them into ‘wet-shares’ – much like the Crown Fibre Holdings initiative.

There is yet to be a scheme built in New Zealand where 100 percent uptake has not occurred in under 10 years and concerns over government providing subsidies to individuals have no substance as each individual shareholder pays their cost (in the context of full uptake in getting water to the farm gate).

New irrigation schemes in New Zealand provide significant public good, but these benefits are not being fully reported or recognised.

12 – www.infrastructurenews.co.nz

Irrigation NZ CEO Andrew Curtis

All the irrigation schemes currently under development provide significant environmental benefits such as river augmentation, aquifer recharge and flushing flows that cleanse the river systems; and also social benefits like providing domestic water supply and offering recreational opportunities on dams.

Under the current scenario, ‘new irrigators’ are being asked to fund new modern infrastructure to fix up yesterday’s issues whilst also providing for the next generations well-being.

This is not equitable and there needs to be a public good contribution made towards such public good aspects. It needs to be recognised that the new irrigators are not the ones that have created the environmental legacy issues.

Long-established irrigation infrastructure has boosted many regions in New Zealand like Central and South Canterbury and North and Central Otago.

For every $1 an irrigator makes at least another $3 is created in the local community.

The wealth of Ashburton, Timaru and Waitaki Districts owes much to the availability of water.

Similarly, the Ruataniwha Water Storage Project has the potential to change the high unemployment and faltering Central Hawkes Bay economy, while also significantly benefiting the main centres of Napier and Hastings. And the same applies for the Wairarapa.

So it is clear that this water supply infrastructure enables the growth and regional development which is urgently needed. This infrastructure is becoming less polarising politically as people start to realise the pragmatic benefits for the country. Water is a natural resource which, if effectively and sustainably managed, can go a long way to future-proofing our economy and ensuring the country has surety of water supply for a range of purposes.

Andrew Curtis is CEO of IrrigationNZ, a membership funded national industry body that promotes excellence in irrigation April/May 2015

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INAP Membrane offer treatment of municipal sewage and trade waste to a very high extent. A membrane bioreactor (MBR) is a biological wastewater treatment system that incorporates a microfiltraFigure 1 Raw and treated tion membrane (typically a 0.1-miwater from an Apex cron low-pressure filter) on the Environmental MBR discharge to remove virtually all suspended solids, bacteria, and protozoa from wastewater.

As well as directly cleaning up the wastewater discharge by filtering out these contaminants, the fact that this system retains 100 percent of the bacteria that are used for reducing the organic and nutrient loading of the wastewater means that typically three times as much organic loading can also be removed in a given size wastewater treatment plant by using the membranes.

Councils quick to recognise the benefits Before

After

Comparison of solids level in MBR tank and treated water The need to prevent further eutrophication of inland lakes and catchments that are already very high in nitrogen and/or phosphorus due to other discharges and agricultural run-off is widely recognised as vital.

With the tight controls on nutrient discharges required, particularly in the central North Island, councils have quickly recognised the significant benefits of MBRs and over time many have retrofitted the SINAP sheets into their existing MBR plants.

Councils are thrilled with the performance of the SINAP flat sheet membranes and have commented not just on their extreme effi-

ciency in dealing with the wastewater but also the cost savings both for the product itself and for the day to day running of their plants.

Combined treatment of septic and tradewaste Other areas that have experienced a significant uptake of MBRs are mixed commercial/industrial sites. A good example of this is wineries, which produce both an industrial wastewater stream of typically 5,000-15,000mg/L BOD5 from the winery as well as high strength sewage from an attached restaurant and/or offices.

Figure 2 Taupo District Council Two separate wastewater Turangi MBR, which has been treatment plants are usually converted to SINAP membranes required in these instances to prevent the industrial wastewater from being contaminated with pathogens from human sewage. Due to the extremely high level of pathogen removal achieved, MBRs can offer a practical option for the combined treatment of these two streams to a level where the treated water can be discharged to surface water or reused for irrigation.

Apex is currently in the process of installing the largest winery MBR in New Zealand. When fully operational this will give the winery in question the cleanest wastewater discharge of any winery in Marlborough.

Dr Matt Savage is a chartered chemical engineer with a Ph.D. in industrial wastewater treatment plant design and a decade’s experience designing and installing a wide range of wastewater treatment plants around the world.

He is a founder and director of Apex Environmental which provides specialist design and build services to the New Zealand water sector.

Industry leaders in wastewater treatment Specialising in design, build, upgrade and optimisation Improving performance and ensuring peace of mind Call for a no obligation consultation sales@apexenvironmental.co.nz P 03 929 2675 www.apexenvironmental.co.nz April/May 2015

www.infrastructurenews.co.nz – 13

Transport

Intelligent travel is safer travel A simple technology may help reduce the increasing number of transport-related injuries while simultaneously reducing traffic congestion and its associated environmental impact

Cooperative Intelligent Transport Systems or C-ITS link vehicles and road infrastructure to provide numerous safety applications including intersection collision, curve speed and red light violation warnings as well as traveller information messages

C

ooperative Intelligent Transport Systems may sound like something out of a science fiction novel but they could become as common as traffic lights if one Australian company has its way.

Cohda Wireless was founded in 2004 by a group of research scientists working at the University of South Australia’s Institute for Telecommunications Research to commercialise their technology, which allows more robust outdoor, mobile broadband communications and is ideally suited for “connected” cars.

“Cars may be safer now than they ever have been but the number of injuries is actually increasing – passive safety technologies such as seat belts and airbags have simply made accidents more survivable,” Cohda CEO Paul Gray explains.

“Meanwhile traffic congestion, and its resulting environmental impact, continues to be a growing problem in cities around the globe.”

The answer, Cohda believed, was to use both vehicle-to-vehicle (V2V) and vehicle-to-infrastructure (V2I) communications to enable cooperation between vehicles and road infrastructure to achieve improvements in the areas of safety, mobility, and the environment (collectively called V2X communications).

“The goal of Cooperative Intelligent Transport Systems or C-ITS is to create wireless communications links between smart vehicles and between these vehicles and smart roads, to allow them to ‘talk’ to each other and so avoid accidents, reduce congestion and be more efficient,” Mr Gray explains.

Wireless wonder The key to C-ITS is IEEE 802.11p, a Wi-Fi standard that uses a dedicated 5.9 GHz frequency and often leads to the misapprehension that C-ITS is a communications system.

“While communications is certainly possible with these systems, they are in essence a wireless sensor system,” Mr Gray says.

The changes introduced into the IEEE 802.11p variant uses a lower bandwidth, making the signals more robust and eliminating the need for electronic handshaking before packets can be exchanged.

For example, as two vehicles approach each other in the V2V Intersection Collision Warning application, they swap sensor data such as position, speed, heading, steering wheel angle, 3D acceleration, and brake status.

This information is shared in a single packet broadcast to surrounding vehicles 10 times

14 – www.infrastructurenews.co.nz

a second, allowing each vehicle to assess threats from other vehicles based on sensors located in the other vehicles.

“As we move towards automated driving, and even autonomous driving, C-ITS wireless sensors will be increasingly important and even essential,” Mr Gray maintains, noting that automated driving depends on the fusion of several sensors.

These include radar, optical and lidar, a remote sensing technology that measures distance by illuminating a target with a laser and analysing the reflected light. “However, all of these sensors are line-of-sight sensors and cannot do better than human senses – assuming the driver is looking in the correct direction,” Mr Gray adds.

“The addition of C-ITS wireless sensors to the sensor fusion extends the sensor horizon beyond line of sight, allowing the sensing of threats around corners, over the crests of hills, and through trucks.”

Safer, smarter, greener C-ITS is thus an emerging market technology that Cohda believes will make road transportation safer, smarter, and greener by providing numerous advantages for both V2V and V2I applications.

V2V applications include: Forward Collision Warning

– warning of collision hazards ahead of the vehicle, such as a slow or stopped vehicle in the lane ahead, even on curved roads Intersection Collision Warning – warning of side-collision hazards as vehicles approach an intersection, even in blind intersections Emergency Electronic Brake Light – warning of a vehicle braking ahead, even when the vehicle is obscured by an intervening truck Do Not Pass Warning – warning of a collision hazard during overtaking manoeuvers, even on curves and hill crests Intersection Movement Assist – warning of collision hazards for stopped vehicles about to enter an intersection.

V2I applications include: Curve Speed Warning – when a vehicle passes a road side unit it is sent a Local Dynamic Map (LDM) containing information about nearby dangerous curves and a warning is generated if the vehicle is approaching one of these curves too fast Red Light Warning Violation – Signal Phase and Timing (SPaT) information is sent from traffic lights to approaching vehicles, and a warning provided if the vehicle is about to violate a red light Security Certificate Updates – every message transmitted in April/May 2015

Cooperative Intelligent Systems or C-ITS will become commonplace in Australasia by 2018-2019 predicts Cohda Wireless CEO Paul Gray C-ITS includes a signature using public key cryptography with a certificate issued by a trusted authority that ensures only authorised messages are acted upon Traffic Probe Snapshots – as vehicles travel they can take regular snapshots of vehicle speed and traffic conditions and these snapshots can be uploaded whenever the vehicle

is in range of a road side unit, turning vehicles into mobile sensors and giving a traffic management centre a near-real-time view of traffic conditions Traveller Information Messages – information currently provided by road side signs, such as variable message signs or variable speed signs, can be brought into the vehicle.

Not surprisingly given these benefits, transportation and safety authorities in Europe, the US, Singapore, Korea and Japan have begun trialling C-ITS systems that use identical standards, with some 500 vehicles in Europe alone having been tested on the road.

“Cohda supplies equipment to 60 per cent of the vehicles involved in these trials globally and is also the only company that can supply complete solutions for all three regions,” Mr Gray notes.

The US is currently home to the largest C-ITS trial, the 2,800 vehicles that have been on the road for 18 months in Ann Arbor, Michigan, prompting the

US Department of Transportation’s (DOT) National Highway Traffic Safety Administration (NHTSA) to announce in January 2014 that it will start “taking steps” to enable vehicle-to-vehicle (V2V) communication technology for light vehicles.

This is expected to result in a mandate of C-ITS technology in all new light vehicles in the US with an imminent timeline: 2014 – NHTSA decision to consider dedicated shortrange communications (DSRC) rule-making for light vehicles 2015 – NHTSA decision to consider DSRC rule-making for heavy vehicles 2016 – Federal Highway Administration development of infrastructure deployment guidance 2018 – State Departments of Transportation (DOTs) to install 1st traffic signals with DSRC 2020 – 20 percent of State DOT traffic signals fitted with DSRC. Not to be outdone or left behind, the Dutch, German and Austrian governments have

signed an MOU for the deployment of a corridor of roadside units that will extend from The Netherlands, through Germany, and into Austria. “This has been dubbed The Corridor Project and will support applications such as Traveller Information Messages, Roadwork Alerts, and Emergency Vehicle Alerts,” Mr Gray adds.

The expected time line is: 2015 – first deployments of Corridor Project roadside infrastructure in Europe 2016 – local Road Authority deployments in Average Cities and Connecting Corridors 2018 – full local Road Authorities deployment commences.

Car makers in the US and Europe have been equally quick on the uptake and have begun to release Requests For Quotations (RFQ) for C-ITS systems for production vehicles – indeed, GM has announced that it will offer a V2V system from Delphi Automotive PLC in the 2017 Cadillac CTS that will be

Continued on page 16

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www.infrastructurenews.co.nz – 15

Technology

Transport Continued from page 15 the world’s first V2V-enabled car.

This in turn brings big benefits to Cohda, which is supplying Delphi with a complete software stack comprising 10 safety apps including Left Turn Assist and Intersection Movement Assist; both classified as life-saving apps by the US DOT. “The announcements by GM and Delphi move Cohda from the trial phase to the production stage in the market development of V2X technology,” Mr Gray says.

If and when C-ITS technology becomes standard in the US it will bring immediate benefits, with the DOT estimating that V2V communications can address 79 percent of all unimpaired accidents while V2I communications can tackle 26 percent. “Combined, they can address 81 percent of all accidents,” Mr Gray believes.

The European Commission, meanwhile, has mandated that European Standards Organisations must develop C-ITS standards as part of the Commission’s ITS Action Plan and its ITS Directive. “A consortium of 12 European car makers have also signed a Memorandum of Understanding committing to deployment of C-ITS in production vehicles commencing as early as 2015.”

Closer to home, Cohda has been involved in several trials, including providing 95 of its MK4 anti-collision devices for an Australian Cooperative Intelligent Transport Initiative (CITI) trial on a major port road where most crashes involve heavy vehicles.

The first phase of the five-year trial will include 30 heavy vehicles fitted with Cohda devices for use on a 42km route from Port Kembla, and will ultimately use 85 Cohda on-board units and 10 roadside units.

“This route was chosen to model both built and natural environments, which range from a dual-carriage freeway to a rural road, with country towns

and a hill that descends from 320 metres above sea level to sea level in about six kilometres, before entering Wollongong, Australia’s 10th largest city,” Mr Gray explains.

“We also supplied all the equipment to a rail crossing trial run by La Trobe University in line with our long-term strategy to implement our technology in both the transport and rail industries.”

The university’s Centre for Technology Infusion’s A$5.5 million three-year project to improve safety at level crossings uses Dedicated Short Range Communication (DSRC) that provides wireless communication between trains approaching a level crossing and vehicles approaching the crossing.

“If the system detects the possibility of a collision, a warning message is presented inside the driver’s vehicle,” Mr Gray explains.

“The system has already undergone three large-scale field trials at both regional and urban crossings in the largest-known rail crossing safety study of its kind in the world.”

Sadly there are no imminent New Zealand road or rail initiatives planned, but Mr Gray predicts that C-ITS technology will become “commonplace” in Australasia by 2018-2019.

“Austroads, the association of Australasian road transport and traffic agencies, has had a Cooperative ITS committee actively looking at deployment issues for a few years already.”

Austroads is itself building on the impetus generated in the US, where the Department of Transport is expected to release a Notice of Proposed Rule Making in 2016 with a mandate to come into force 12-18 months later.

“All car makers both in the US and worldwide are currently looking seriously at C-ITS technology, and I am confident that it will become universally accepted within the next decade,” Mr Gray concludes.

16 – www.infrastructurenews.co.nz

Deploying drones brings big benefits

Retail giant Amazon may be planning to use them for deliveries but unmanned aerial vehicles could also boost the efficiency of several local industries

U

sing unmanned aerial vehicles (UAVS) or drones in a variety of key local industry sectors could provide some $151-189 million per year in economic benefits, a recent report claims.

Dairy, sheep and beef farming, forestry and electricity transmission would all benefit in varying degrees according to the Economic Benefits to New Zealand from Beyond-Line-ofSight Operation of UAVs study

by Andrew Shelley Economic Consulting Ltd and Aviation Safety Management Systems Ltd. Forestry would provide some $72-$95 million in benefits, sheep and beef farming $37.6 million, dairy $29 million and electricity transmission more than $1 million, report authors Andrew Shelley and Heather Andrews maintain.

Their analysis for Callaghan Innovation admits that the Civil Aviation regulatory framework in New Zealand currently requires the pilot of a UAV to maintain visual contact with the aircraft at all times, or otherwise to have an observer who maintains visual contact.

However, it also notes that current Civil Aviation Rules governing UAVs do not specifically require the aircraft to remain within line of sight of the pilot

but instead require that each person operating a model aircraft shall “ensure it gives way to, and remains clear of,” all manned aircraft on the ground and in flight.

“There are no automated systems that can currently ensure that manned aircraft are given right-of-way to a level of safety which is considered to be equivalent to that which occurs with conflicting manned aircraft, so the only way that this rule can currently be satisfied is if the aircraft remains within unaided line of sight of the pilot,” the authors explain.

This requirement is further clarified under the proposed new “visual line of sight” Rule 101.209, which requires that a person operating an aircraft under the Model Aircraft Rules “must at all times maintain visual line of sight with the aircraft”.

“There is no explicit requirement under the proposed new Part 102 to remain within line of sight, providing the opportunity for the Civil Aviation Authority to authorise BLOS operations if they are satisfied that the operator can operate to an equivalent level of safety as line-of-sight operations,” Andrew Shelley and Heather Andrews note.

Research and practical experience suggest that line of sight is April/May 2015

Unmanned aerial vehicles could boost the efficiency of several local industries by enabling beyond-line-of-sight (BLOS) operations

restricted to a distance of 500m to approximately 1.4km.”Assuming that UAV operators take measures to enhance the visibility of their aircraft, we assume that a distance of 1km can reliably be seen,” they explain.

“With a visibility threshold of 1km, a UAV can survey a square area of approximately 200ha.”

This is important in terms of pasture measurement and monitoring, where researchers estimate that active pasture management can enjoy a productivity gain of at least 17 percent to farms of all types.

“Although this gain is estimated to exist, a relatively small proportion of farmers employ active pasture management techniques,” the report adds.

The techniques are employed almost exclusively on dairy farms and even then the takeup rate is relatively low, one reason being the time and effort necessary to take regular pasture readings and keep equipment calibrated.

“The use of UAVs operated beyond line of sight would enable farm consultants to regularly obtain relevant imagery for a set of farms and provide the farmer with the information needed to optimise use of pasture via a feed wedge and associated recommendations,” the researchers believe.

April/May 2015

Current methods typically only measure a transect of each paddock, whereas UAV-borne sensors would be able to measure the entire paddock, providing a more accurate estimate of total pasture cover.

Big benefits Active pasture management

by UAVs is estimated to provide over $1 billion per year in benefits comprised of: • direct gains of $857 million per year in export revenue in the dairy sector • an additional $72m per year from a more limited take-up rate in the sheep and beef sector • the ability to fly BLOS results in lower cost UAV surveys could provide additional benefits of $29.0m per year from the dairy sector and $37.6m per year from the sheep and beef sector.

UAVs could be used for any task currently undertaken by manned aircraft in the forestry sector, including providing more accurate estimates of pre-harvest inventory – although there would need to be additional sensor and software development to fully replace manual sampling.

“The actual cutting of trees into logs of highest value appears to be best performed by

computer controlled harvest machinery,” the report concedes. “The selling of logs into higher value uses relies on the pre-harvest assessment of log quality, but it is not obvious that UAVs will be able to contribute to that assessment.”

UAVs provide a “significantly cheaper” alternative than manned aircraft for cut-over mapping when harvesting is underway, but it isn’t obvious that BLOS operations are necessarily required as an operator could potentially fly line-of-sight (LOS) over recent changes to the cutover line.

UAVs could also monitor forest health BLOS as trees grow, when it becomes more and more difficult to find forest locations that enable UAVs to be flown within LOS. “The lower cost of UAVs compared to conventional aircraft allows more regular surveys to be flown, enabling earlier identification of disease,” the report adds.

Similarly, it is estimated that losses from the Dothistroma and Cyclaneusma diseases cause an annual reduction in growth costing some $115m per year. “It is unclear whether early detection would necessarily reduce this value loss, but it could allow for alteration of pruning and thinning regimes,” Andrew Shelley and Heather Andrews remark.

This would potentially avoid the need for the copper sprays used when fungal infections become severe, but which have raised concerns around their effect on the wider environment and particularly aquatic life.

Once disease has been detected, confirmation of disease and strain requires samples to be collected from affected trees, a process which currently requires forestry personnel to

walk to the relevant trees and use a shotgun to shoot down a branch to obtain samples.

A multi-copter with a robotic arm could be flown from the nearest access road to obtain samples, but it would also need to be able to be operated beyond line of sight to be a practical solution.

Similarly, aerial surveys could be conducted to identify pests and weeds and image analysis software may even be able to automatically identify any areas of significant weeds that could then be controlled by a UAV with a spray system.

“Although trials would need to be conducted to establish the level of control possible, it seems reasonable to assume that the gross benefits from control of Dothistroma alone could be in the order of $46m-$69m per year,” the report claims.

The report also observes that New Zealand currently imports approximately $30m of sawn hardwood per year but hardwoods comprise only 2 percent of New Zealand’s forest estate, at least partly because pest infestations can have a significant negative impact on plantation economics.

“Control of pests such as the eucalyptus tortoise beetle could potentially result in displacement of the imports, generating a further net benefit in the order of $26m per year if all sawn hardwood imports could be displaced,” it predicts.

“The potential benefits from controlling other diseases and pests have not been quantified and nor have the benefits from using UAVs for weed control, so the total benefits may, therefore, exceed the aggregate benefits of $72m-$95m.”

Continued on page 18

www.infrastructurenews.co.nz – 17

Technology

Infrastructure Forum

Continued from page 17

Future the focus of first forum

Bright sparks UAVs have already been used by national electricity transmission network operator Transpower and Hawkes Bay, Rotorua, and Taupo electricity distributor Unison Networks; both of which have conducted trials inspecting overhead power lines and the associated transformers and switchgear.

Both companies have determined that there is a significant difference in benefits between LOS and BLOS operations with regard to transmission and distribution system assets. “While LOS operations are possible, they do not create significant additional value over and above existing inspection methods, and in some cases may cost more than a traditional linesman,” the report says.

ing more likely to detect issues with vegetation. “Transpower may also be able to substitute a UAV for the helicopters currently used for patrolling the Cook Strait Cable Protection Zone,” the report adds.

Transpower estimates that it may be able to achieve gains of $1m per annum once suitable UAV systems are available, while Unison Networks’ estimates electricity distribution benefits range from $1.85m per year for UAVs that were centrally located and had to be booked in advance to $6.62m if distribution companies had their own UAVs. Electricity consumers could enjoy an estimated $4.46m to $19.26m per year in benefits from the reduced cost of outages on electricity distribution sys-

“With a visibility threshold of one kilometre, a UAV can survey a square area of approximately 200 hectares” The major benefits for overhead power line inspection BLOS include: • network information • reduced reactive maintenance – better information allows better planning and better targeted proactive maintenance • reduced outage times – the UAV can identify the location of the outage enabling crews to travel directly to the affected area, leading Unison Networks to estimate that the average outage duration per year for their customers could reduce by 10 minutes per year from the current 90 minutes • reduced routine maintenance – the lower cost of UAS relative to helicopters means that inspections can be conducted more frequently and routine maintenance can be better targeted.

A significant proportion of gains for both transmission and distribution were related to vegetation encroachment, with more frequent inspections be-

tems, but the benefits from the reduced cost of outages on the electricity transmission system haven’t been quantified.

In all cases there are additional unquantified gains from having more timely access to more accurate information. “The potential gains from enhanced disease control in forestry require confirmation by trials, and the value of reduced electricity outages from enhanced electricity transmission monitoring has not been quantified,” the report concludes. “Taking those qualifications into account, the economic gain from BLOS operations is estimated to be in the order of $151m to $189m per year.”

Andrew Shelley Economic Consulting Ltd and Aviation Safety Management Systems Ltd were retained

by Callaghan Innovation to quantify the economic benefits of operating UAVs beyond line-of-sight

18 – www.infrastructurenews.co.nz

The National infrastructure Unit and National Infrastructure Advisory Board’s first National Infrastructure Forum had a deliberate purpose – help develop the 2015 National Infrastructure Plan

Google’s two-seater, Self-Driving Car Project could revolutionise urban commuting, potentially putting taxi drivers and taxi-driving apps out of business

T

he free event on 31 March and 1 April attracted more than 200 of New Zealand’s leading infrastructure minds and practitioners and, probably to the surprise of a few of the attendees, asked them to do a bit of work through a series of workshops.

The workshop setting achieved two objectives. The first was to identify any gaps in the plan’s development to date as well as strengthen content already included. The second was to engender industry buyin in the pursuit of a genuinely national document.

In addition to the workshop sessions, which mainly focused on the arcane world of policy development, the forum comprised a series of presentations to update the industry and spark discussion.

Notable among these were two very candid and often colourful political perspectives on decision-making, one from the Minister of Finance and another from the Mayor of Horowhenua, speaking on behalf of Local Government New Zealand. The two elected representatives were at pains to emphasise the complexities of infrastructure policy, including public perception and with respect to balancing competing objectives.

Two Ministries of the Crown provided briefings to the forum.

The first from the Ministry of Transport outlined the complex forecasting environment confronting transport authorities; the second was a presentation from the Ministry of Business, Innovation and Employment on procurement policy.

Additionally, there were presentations on asset management and regional collaboration, as well as a breakout session where attendees separated into resilience, capital markets and social housing sub-groups.

The most provocative presentation came from New Zealand Council for Infrastructure Development CEO Stephen Selwood, who floated the idea of a statutorily independent national infrastructure commission.

Replicating similar initiatives proposed in the UK and underway in Australia, the commission concept is designed to undertake a triennial review and audit of New Zealand’s infrastructure needs with a view to building long-term political consensus on nation-building infrastructure development.

A lively debate was ignited when one attendee interpreted independent analysis and review as a challenge to electApril/May 2015

Mercedes is one of many major manufacturers working on developing self-driving vehicles, envisioning an interior that is essentially a large room with rotating chairs for socialising ed government sovereignty and others questioned whether there was a need for strengthened independent infrastructure advice when officials already provide this function.

The NZCID chief retorted that independent advice both enhanced democratic decision-making by improving accountability and was required because official advice is too easily overlooked within the context of complex long-term, decision-making. It’s fair to say there was no lack of substance for discussion heading in to drinks a short time later.

Predictive presentation If the national infrastructure commission was the most provocative, the most sensational presentation of the forum came from visiting Stanford University futurist Tony Seba. His message was quite simple: electric and self-driving cars are “disruptive” technologies. That is, they do not conform to normal market development processes and will completely displace existing transport technologies and revolutionise the behaviours which accompany them.

His predictions were radical. On the basis that the cost of lithium-ion batteries is falling by around 15 percent per annum (which following the completion of the Tesla “gigafactory” is likely, if anything, to increase), he projects that the cost of electric vehicles will fall below the average cost of a new American-sold car by 2017 and perform significantly better.

By 2022, electric vehicles will be cheaper than the cheapest April/May 2015

combustion engines and, thus, all new cars will be electric by 2030.

He also highlighted the recent announcement by the Nissan CEO that the company would produce a fully autonomous (i.e. self-driving) car by 2018. Mr Seba’s own university expects to have an autonomous car on campus later this year.

As is the case with the rapidly falling cost of batteries, Mr Seba drew attention to the exponentially decreasing cost of autonomous technology, underlining his thesis that these vehicles will be cost-competitive with conventional vehicles within the foreseeable future.

The cost comparison, however, is only one aspect of the disruptive equation. Mr Seba also noted that autonomous vehicles are already better drivers than people. This is relevant not only from a safety perspective, but an efficiency perspective as well.

Autonomous vehicles which communicate with each other and the network are theoretically capable of staggeringly large efficiency improvements.

Mr Seba cited one source that estimated that at any given time 95 percent of motorway space is unused due to the need for safe following distances, separated lanes and shoulder room.

But that’s not all: because cars are parked around 96 percent of the time, the need to own a car in an environment of autonomous vehicles is greatly reduced, if not removed completely. Mr Seba estimates there will be 80 percent fewer cars on the road as a result.

Nissan says its XchangE self-driving concept car may be on the road as early as 2020

The picture created by Mr Seba’s musings is therefore of a world as early as the 2020s where only collectors own a car.

Fleets of self-driving electric cars patrol the streets day and night, putting them within seconds of all urban households.

They are hailed through a phone app, produce no carbon emissions and no pollutants (depending on the fuel source for electrical generation).

At 8am, three lanes of conventional motorway traffic are filled with perhaps eight autonomous vehicles side by side, centimetres away from other vehicles travelling at 120km hour. Vehicles automatically and seamlessly make way for others and lights go green as cars approach.

And that’s just the transport system. The mind can easily wander into what happens to other networks. Does land use become denser as spare road space and car parks are converted and redeveloped, or do people migrate further away from urban centres to enjoy the rural life and sleep on a fully reclined bed on the way to work?

Do we stop investing in roads and public transport or do we simply redirect investment to suit autonomous vehicles, perhaps straightening roads so that we don’t get motion sickness while we watch movies on our daily commute?

It should be noted that Mr Seba is at the more radical end of transport technological foresight, but the amenity and cost advantages of existing trends suggest it is his timing rather than his thesis as a whole which

is contestable.

Nonetheless, his opening image of New York in 1900 with only one car on a horse-filled street followed by that same street in 1913 with just one horse and a traffic jam was extremely potent. He no doubt was unaware that the average age of New Zealand’s car fleet is around 13 years, but in one moment dispelled a common perception that the changes before us will conform to our existing expectations of gradual change.

It is within this context that the National Infrastructure Unit is charged with developing the 20-year vision for New Zealand’s infrastructure. The team will be very happy that no big unforeseen issues emerged over the two days, but at the same time there was little indication of what response government is considering to manage dramatic potential changes to infrastructure demand within the life of this plan.

Treasury officials will rightly feel satisfied that they achieved their goals, but if the international keynote presenter is to be believed a whole new infrastructure plan may be required to help negotiate a very unclear infrastructure future.

Given the diverse range of possibilities, conventional wisdom needs to be tested and scenarios developed. Business as usual could otherwise turn out to be very expensive.

Hamish Glenn is Senior Policy Advisor at the New Zealand Council for Infrastructure Development

www.infrastructurenews.co.nz – 19

Pukapuka.

Solar System. Cook Islands.

Photo courtesy of Teina Rongo.

SAFE, SMART, EFFICIENT INFRASTRUCTURE THAT BUILDS BETTER COMMUNITIES. McConnell Dowell, well known for its ability to deliver complex infrastructure in difficult environments is supporting PowerSmart in the construction of twelve solar generation systems in the Cook Islands and Tuvalu.

BUILDING

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PIPELINES

RAIL

TUNNELLING

Cover Story

A project of national significance, Te Mihi is one of two new geothermal power stations planned by Contact Energy to replace the aging Wairakei Power Station complex, Romy Udanga reports

Key to the success of the Te Mihi project has been harnessing the different skills of each of the joint venture partners McConnell Dowell provided much of the construction expertise SNC Lavalin contributed procurement and commissioning expertise Parsons Brinckerhoff provided the engineering and design for the project with ongoing technical support to the procurement and construction activities April/May 2015

www.infrastructurenews.co.nz – 21

Cover Story

T

he Te Mihi Geothermal Power Station is a key element in Contact Energy’s Wairakei Investment Programme – a planned series of investments that safely and sustainably expands the use of the Wairakei steam field.

One of New Zealand’s leading generators of geothermal electricity, Contact Energy currently provides around five percent of the country’s total energy from its geothermal operations in the Taupo region.

As such, Te Mihi is not only an important addition to Contact’s geothermal assets it is also a project of national significance, given that renewable energy plays such an important role in New Zealand’s energy supply system.

The country already generates around 75 percent of its electricity from renewable sources and by 2025 aims to increase this to 90 percent, with geothermal energy scheduled to play an ever-expanding role.

Currently the second mostused fuel for renewable electricity generation after hydro, it has become increasingly important since New Zealand became one of the first countries in the world to develop large-scale geothermal electricity generation in the 1950s.

Wairakei is an iconic symbol of New Zealand’s prowess in this technological area, having been the first geothermal plant of its kind in the world to generate power from both steam

and water when it was commissioned in November 1958 with a capacity of 175 MW. “Te Mihi is a continuation of Wairakei’s legacy,” says McConnell Dowell Construction Manager Michael Buckland. “As New Zealand’s largest geothermal power station, it is a success story for New Zealanders.”

Global team work Te Mihi incorporates advanced, second-generation technology to produce 20 to 25 percent more electricity than the same amount of geothermal fluid consumed by Wairakei, enabling output from its predecessor to be decreased by 40MW to 132 MW as planned, resulting in a net increase of about 120 MW.

The 166 MW Te Mihi Geothermal Power Station was established on an 18-hectare greenfield site and delivered by the McConnell Dowell, SNC Lavalin, and Parsons Brinckerhoff joint venture (MSP JV).

Requiring 600 staff during the peak of construction, the Te Mihi project involved the manufacture and installation of $250 million worth of plant and equipment, including two 83 MW turbines from Toshiba Corporation in Japan, and $60 million in subcontracts.

A specialist procurement and logistics team with experience from large scale power schemes in the US, Australia, and Europe was brought together to manage 194 vendors worldwide, while the JV management team

“Te Mihi is an example of a global team working together to develop a local solution that is smart, safe and efficient” Mr Buckland says that as a construction company it has been immensely rewarding for McConnell Dowell to be part of building a renewable energy project that is delivering to design expectations.

“This was a high-profile complex project which provided many learning opportunities and the successful delivery of the plant was a great credit to everyone involved,” he says.

“Te Mihi is an example of a global team working together to develop a local solution that is smart, safe and efficient.”

22 – www.infrastructurenews.co.nz

worked continuously to best use each JV partner’s talents – even bringing international experts overnight when required.

McConnell Dowell was fortunate to be part of a delivery team that included SNC Lavalin and PB Power, Mr Buckland believes. “Aligning with like type organisations with similar cultures is a critical success factor, particularly when constructing complex and demanding projects,” he explains. “As is having the constructor and the designer in the same room so that efficiencies in time and cost are

quickly realised.”

Another important element to the success of any project is working in close association with clients. “We were fortunate that we had a client such as Contact Energy, who wanted to be involved in the project and committed the people and resources to support the project,” Mr Buckland adds.

Another factor is vendor selection and management. “A huge effort went into evaluating and selecting suppliers and subcontractors for the Te Mihi project.”

Physical works at Te Mihi were completed in January 2014, with 2 million work hours injury-free, and the project was formally handed over to Contact Energy on May 2, 2014 following a final testing and commissioning period.

Efficient and reliable Flexibility lies at the heart of Te Mihi’s design, the plant‘s two 83 MW steam turbines having been designed to make the best use of steam and maximise capacity provided by the vast network of pipes that connects it to the Wairakei steam field, increasing overall efficiency and generation reliability.

“The reliability of the supply of electricity is important for us all and we pride ourselves in ensuring the plant is available to generate whenever it is required,” Contact Energy Major Project Delivery General Manager Frank Geoghegan says.

April/May 2015

McConnell Dowell Construction Manager Michael Buckland Te Mihi alone can generate enough electricity to power over 160,000 Kiwi homes – that’s the whole of Wellington city, he notes. “Through the Wairakei Investment Programme we have also further increased the flexibility of our generation portfolio and lowered our overall fuel costs for generations,” Mr Geoghegan adds. “We have improved the resilience of our business, and for investors we have secured a strong, sustain-

able financial future.”

The Te Mihi station design delivered by Parsons Brinckerhoff is significantly more advanced than the existing Wairakei station and is much more environmentally sustainable than its predecessor, using cooling towers to reuse the water in the steam field rather than expelling by-products from steam processing into neighbouring waterways.

“From an environmental per-

consents, leading to noise mitigation strategies including the low-noise fans used for the cooling towers, increased cladding density on the turbine hall and three layers of rubber noise absorption baffles.

spective, Te Mihi has been designed to ensure that geothermal water used by the station is re-injected, reducing its impact on the local environment,” Mr Geoghegan comments. “The increase in renewable generation, subject to hydrology, will allow us to use our gas-fired generation less and reduce our greenhouse gas emissions.”

Another key driver of Te Mihi’s design was the very low noise limits specified in the project

Creative complexity The sheer scale of the Te Mihi project was the main challenge in construction, Mr Buckland

Continued on page 24

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Cover Story Continued from page 23 says. “This was complicated further by integration of the respective disciplines and the constraints of the work site,” he explains. “At times civil, mechanical and electrical works occurred simultaneously – often directly above, below or adjacent to one another – so

balancing safety with productivity was a key focus for the site team.”

A classic example of the complexity involved was the construction of the 100m long, 25m wide and 30m high turbine hall that houses the two turbines, condensers and generators and

Award-winning design

T

he Te Mihi Geothermal Power Station was a fitting recipient of the 2013 Marmaduke Award, which recognises power projects that use innovative methods to solve technical problems.

The double-flash technology selected for Te Mihi produces approximately 25 percent more power from the same amount of geothermal fluid currently used at Wairakei.

In addition, the plant design features an evaporative cooling system and eliminates the condensate discharges to the Waikato River, thereby reducing the plant’s environmental footprint in the region.

The design of the dual flash system uses steam released from the geothermal brine at low pressure levels.

As the high-pressure liquid found at depth rises to the surface, the pressure decreases and the water flashes into a two-phase, 80 percent water

and 20 percent steam mixture.

The geothermal fluid is separated into intermediate pressure (IP) steam and brine at the centralised separators by the separated geothermal water (SGW) system.

Both are piped to the power station, where the separated brine is flashed in the low-pressure SGW system to generate low pressure (LP) steam, which is injected into the steam turbine.

The double-flash technology provides steam at two different pressure levels for introduction into a separate IP and LP steam turbine on the same shaft to drive the generator.

The exhaust steam is condensed using evaporative cooling towers and the liquids collected by the SGW systems are recycled by re-injection back into the geothermal reservoir.

Unique to geothermal plants, some non-condensable gases such as CO2 and H2S are dis-

24 – www.infrastructurenews.co.nz

utilised huge volumes of concrete and steel to support the massive weight of the elevated turbines/generators –the foundation slab alone is 1200mm thick.

Below ground, the building is constructed from reinforced concrete slabs, walls and col-

umns that all sit on top of the 65, 10m deep by 0.8m diameter reinforced bored piles that were used because of the difficult ground conditions.

Above ground, the structure is constructed from large structural steel universal columns and universal beams, features con-

solved in the geothermal water and remain in the steam so gas extractors were installed to remove them before discharge to the atmosphere.

A unique feature of Te Mihi is its novel acidifying of the re-injection brine to eliminate the system reliability problem caused by caustic LP-separated geothermal water, which is wellknown for its propensity to scale re-injection pipes (block the pipes with dissolved minerals), wells, and other equipment, causing lengthy plant shutdowns for repairs and clean-cut.

were completed for the foundations and slabs of the two steam turbines.

Other large pours included the basement slabs and the 14.5 m pedestal columns, which required up to five testing and quality control personnel operating within tight tolerances.

Due to the 1.2m thickness of the slabs, Firth designed specialised mixes to deal with the heat of hydration.

The water/cement ratio had to be carefully controlled and the mixes included fly ash to keep the temperatures down due to the mass of the slab.

A 40 mm aggregate for these mixes was also used as opposed to a 19 mm aggregate to help reduce shrinkage and cracking.

This excellent work in designing and producing specialist concrete mixes for the Te Mihi project saw Firth receive an innovation award at the New Zealand Ready Mix Concrete Awards in 2013.

Specialist concrete A specialist concrete mix using local materials for use in the geothermal ground conditions was also developed in conjunction with supplier Firth Industries and the JV. Over a 12-month period, Firth Industries produced in excess of 18,000m3 of extremely high-specification concrete.

Some extremely large pours -four x 400m3 and two x 300m3 –

April/May 2015

crete floors and is 27.4m tall.

The turbines and generators sit on top of a large 2m deep reinforced concrete table, which in turn stands approximately seven metres above ground.

The basement is seven metres below ground level, so the two-metre square columns are 14m tall and were cast in two separate lifts.

The pouring of each turbine table involved four months of intensive design, planning, temporary works and construction. Bolts were cast into the turbine table to locate and fix the turbines and generators in place, a bolt template was fabricated and placed above the table from which approximately 100 bolts were hung and cast in place, and the bolts were set to within +/- one mm to provide the necessary tolerance for the mechanical installations.

A key risk for any power station is the potential for fire so the entire turbine hall was constructed from costly intumescent coated steel and fire-fighting equipment was strategically located throughout the building.

Logistics challenges Mr Buckland says ensuring the timely arrival of each of the key items on site was critical to the success of the Te Mihi project.

“A dedicated logistics coordinator managed the transport of each of the critical items from their international supplier to the Te Mihi site – a role which involved an extremely high level of planning and accuracy,” he adds.

For example, the 190-tonne turbine units were ordered from Toshiba Japan in March 2011 and began their six-week journey by ship in April 2012. Their safe arrival at the port in Tauranga was followed by the logistical challenge of getting them to the Te Mihi site.

A crane was used to lift the unit from the ship to a 25m truck and trailer unit – a process which took 36 hours and 30 people to coordinate. Five tractor April/May 2015

units (three trucks pulling and two pushing) and a procession of vehicles in front and behind made the three-day trip from Tauranga to Taupo – a journey that would normally take less than two hours. The units were so heavy and delicate that the trucks could only travel at three kilometres per hour over the infamous Kaimai ranges.

The weight of the trucks and turbine units also tested the existing roading infrastructure, with a temporary bailey bridge having to be built over a rail crossing near Matamata as the existing bridge wasn’t strong enough to take the weight. A kitset bridge of temporary concrete panels was constructed an hour before the truck was due

to arrive and was immediately disassembled once the truck had passed over.

Once the unit arrived safely on site, hydraulic jacks were used to lift and slide the units into position.

The “template” for the turbine had already been constructed prior to the turbines’ arrival, enabling installation over their hold-down bolts without any issues.

Additional to the turbines, condensers and generators, a further 85 containers of equipment were brought to the site from many locations around the world with direct communication with the ships allowing real-time tracking and programming of resources to match ar-

rival times at the port.

In addition, insurance representatives were present during key transfers such as transport from the factory to the ship and from the ship to site to verify the quality of major items such as the turbines.

A tracking monitor was placed on the turbines to monitor any disturbance and provide continuous data on the location and condition of the units so that the exact location, date and time of any damage would be recorded.

These cumulative measures proved so successful that throughout the whole process

Continued on page 26

www.infrastructurenews.co.nz – 25

Cover Story

Continued from page 25 there wasn’t one incident where damage was sustained or delays experienced that had an effect on the construction programme.

Teething troubles The project negotiated many twists and turns on its route to completion, the JV having signed the engineering, procurement and construction (EPC) contract on February 22, 2011 – the day of the Christchurch earthquake.

This meant a readjustment of work schedules and resources to regain project design and construction schedule losses incurred due to the earthquake, including implementing a night shift for the turbine installation to accelerate the programme throughout construction.

Originally intended to be operating in mid-2013, Te Mihi was delayed by the vendor’s design and supply of the turbine’s lu-

brication system and the hot well pumps that supply the two 83 MW turbines, which were installed in September and December 2012 respectively.

Looking back at the delay, Mr Geoghegan says it is “al-

responded quickly to remedy the situation and apply their local and international expertise to devise solutions, get the project back on track and deliver a quality product to Contact.”

Mr Buckland says that part of

“The Te Mihi power station is now performing better than business case expectations which, combined with changes to the existing Wairakei resource consent, are expected to increase overall geothermal generation to over 1,600 GWhours in the second half of 2015” ways disappointing” when a project hits a snag and gets delayed. “However, when managing large complex projects like this it is not unexpected that there will be challenges presented along the way,” he admits. “When problems were uncovered the project teams

26 – www.infrastructurenews.co.nz

operation, maintenance schedules and supply management,” he says.

During the commissioning of the power station, Contact Energy’s plant operators were integrated into the commissioning team, which fostered relationships, enabled the power station to be successfully commissioned and allowed for knowledge transfer.

Te Mihi Power Station was built under an “engineering procurement and construction” (EPC) contract that required skilled navigation and management by experienced practitioners. It was part of a wider $775m investment programme which included constructing the new Te Mihi geothermal power station, installing a biological treatment facility (the bioreactor) at the existing Wairakei power station, and further de-

the JV’s post-delivery commitments to the Te Mihi project is a one-year commitment to provide ongoing support for the project that included providing comprehensive operating and maintenance manuals along with operator training. “This has proved invaluable in plant Continued on page 28

April/May 2015

Cause for celebration

C

ontact Energy celebrated the completion of its Wairakei Investment Programme in 2014, the same year Te Mihi opened for business.

“This significant investment in our geothermal resource included building the Te Mihi power station and steam field connections as well as developing the Wairakei Bioreactor, drilling a number of new wells and expanding the Wairakei steam field,” says Contact Energy Major Project Delivery General Manager Frank Geoghegan.

Two steam turbines, designed to generate 83 MW each, allow for maximum generation capacity of 166MW, 24 hours a day, seven days a week. “The project has lived up to that requirement and has been performing very reliably since the start of commercial operation in early May 2014.”

So much so that Contact Energy Chief Executive Dennis Barnes announced in his half-

April/May 2015

year statement in January 2015 that the Te Mihi power station is “now performing better than business case expectations which, combined with changes to the existing Wairakei resource consent, are expected to increase overall geothermal generation to over 1,600 GW-hours in the second half of 2015. We have integrated the Te Mihi Geothermal Power Station into our generation portfolio, increasing renewable generation from 68 percent to 76 percent of our total output.

“Work completed during an extended outage at Te Mihi has improved the performance of the plant to a level above the business case which, combined with improved availability across the remainder of the portfolio, is expected to further reduce our cost of energy.”

Contact also introduced a geothermal schools pilot programme at six local Taupo schools as part of its community programme to help children learn more about geothermal energy and has developed a

Minecraft version of Te Mihi.

“We worked with the tangata whenua, Ngati Tuwharetoa (iwi/tribe), and Oruanui Ki Te Rangiita (hapu/sub-tribe) on the official opening of Te Mihi, and commissioned local Maori carver Delany Brown to create a pou or monument, which now stands at the entrance of Te Mihi,” Mr Geoghegan adds.

“We also had a community day, whereby we invited neighbours to look around Te Mihi before the official opening.”

www.infrastructurenews.co.nz – 27

Cover Story

Continued from page 26 veloping the Wairakei steamfield to ensure its ongoing care and sustainability.

Mr Buckland says EPC is relatively new to the NZ construction industry. “But it can be attractive for clients wanting certainty of price and time of completion as well as one single point of responsibility,” he believes. “But there are advantages and disadvantages for all parties in this type of contract.”

The EPC model brings high levels of risk for the contractor, which becomes responsible for designing, buying and guaranteeing a finished product and service within an agreed time frame while providing the owner with a reduced risk profile.

EPC contracting also offers

the potential for improvement through innovative design across a range of areas such as reliability, productivity, durability, maintainability and cost; the opportunity to integrate constructability into the design, and focuses the team on design-to-function as well as design-to-cost. “Risk is a key factor in EPC and it is important that everyone understands how risks are allocated,” Mr Buckland says. “It won’t suit every client but it will be a good fit for some.”

McConnell Dowell met Contact’s need to source a delivery team with EPC experience by looking to secure a partner with international expertise – not just on working with EPC

28 – www.infrastructurenews.co.nz

on infrastructure projects but in applying the EPC model to construct power plants. “SNC’s inclusion in our team provided Contact Energy with the best possible international experience,” Mr Buckland says.

Mr Geoghegan says the second project in the pipeline for the Taupo region may also be implemented by way of an EPC, Contact having gained consents for a 250 MW geothermal development on the Tauhara steam field that the company believes is New Zealand’s “most attractive” new generation option.

The Tauhara development could power homes and businesses or provide direct industrial heat or energy supply and

will be progressed when market conditions allow. “When we do decide to implement the project we will consider using the EPC model again,” Mr Geoghegan says.

The Te Mihi Geothermal Power Station has therefore not only provided another feather in the cap for both client and contractor, but also added further steam to New Zealand’s drive to generate the majority of its energy from renewable resources.

Romy Udanga is a Contributing Editor to AsiaPacific Infrastructure magazine

April/May 2015

Construction >> Sponsored article

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Architects Warren and Mahoney have designed a high quality commercial building that is sensitive to the new Christchurch context of building safety, business continuity and sustainable design.

The base-isolated building is designed to achieve a five star Green rating under the NZ Green Building Council scheme, employing sustainable building practices ranging from efficient thermal and solar performance to management of construction waste.

The design team includes an Accredited Professional and three sustainable design practitioners. The three buildings will be oriented towards the different sun conditions.

The timber used will be Forest Stewardship Council (FSC) approved and it is estimated 90 percent of the compactable site waste will be recycled.

The development is being built by one of the country’s largest construction companies, Arrow International (NZ) Ltd.

Arrow’s expertise in complex projects and seismic technologies is proving key to delivering the Awly Development.

With almost three kilometres of piling in the ground the structure will be sitting on 100 base isolators bringing the structure up to 180 percent of the new building standard.

There are 83 piles under the ground, each 1.2m in diameter with an average depth of 35m.

When put end-to-end the piles measure nine times the height of the Auckland Sky Tower.

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Base isolation is the most advanced seismic technology in the world. In an earthquake the building will slide 0.5 metre each way and then move back into place.

“Historically we haven’t often seen this system used in private projects because of the cost, but the family behind Awly Investments were adamant that their design team came up with a building that is as strong and as earthquake-proof as they can achieve in New Zealand,” says Andrew McKenzie, Christchurch Director of Arrow International.

Above the ground, the structure comprises 1,000 ton of reinforcement steel and 1,143 ton

of structural steel.

Including reinforcement, the amount of steel in the structure is equivalent to that used in high-rise buildings over 20 storeys.

The façade of the complex is a glass curtain comprised of 7,000 square metres of glass – the same size as a rugby field.

This is the same technology as used on The Kansai International Airport, Osaka.

When the city was hit by a magnitude 7.0 earthquake, almost everything was destroyed but not a single pane of glass broken in this curtain glass wall.

The development is in the heart of the much sought after western bank of the Avon River with the Convention Centre, Avon River Park and the Cultural and Performing Arts Precincts all nearby.

The complex looks onto the historic Provincial Chambers and is bound by Durham St, Gloucester St and Armagh St. The site was previously home to URS House and Amuri Courts and has been owned

The building sits on 100 base isolators bringing the structure up to 180 percent of the new building standard by family firm Awly Investments Ltd since 1996.

Considerable effort has been made to remain sensitive to this landmark site and with completion due in the second half of 2015 the development will quickly assume appropriate landmark status.

Build for Success April/May 2015

www.infrastructurenews.co.nz – 29

Comment >> Funding Review

Starting a conversation about funding LGNZ published its Local Government Funding Review discussion paper earlier this year as a bit of a conversation starter, says Malcolm Alexander

Malcolm Alexander CEO LGNZ

A

key purpose of the paper was to encourage Kiwis across the country to think about the wide range of services delivered by their council, and in particular to think about the level of service they expect from council-provided infrastructure (especially roading and water infrastructure, the value of which runs to many billions of dollars).

Having understood the breadth of what councils de-

In fact the paper at no point ever argues for that.

The paper instead effectively proposes a redistribution towards local government of a small proportion of the taxes central government already collects – for example, the revenue central government collects from GST on councils’ rates bills – or asking that local government be able to rate central government-owned property which enjoy the ser-

communities prepare for a future beyond mining and to help fund the infrastructure paid for by ratepayers that supports mining activity. Again the argument is only for a small proportion of the royalties. Such a programme is common overseas.

The breadth and value of local government services provided to communities is extensive and often for less than the cost of a household’s annual electricity bill. But the costs of

incomes with limited ability to absorb rate increases.

LGNZ thinks this is an issue that is worth a national conversation. In particular how we as a country can think more innovatively about funding tools that might deliver better value than our reliance on property tax.

Innovation and efficiency also is a theme of our funding paper. Many commentators said that that is what the local government sector should be focussing on and we agree.

In fact the sector is doing just that.

But our research shows that it probably will not be enough.

This is unsurprising as silver bullets rarely exist in the real world. It is only through a

“It is only through a grown-up conversation about choices, level of services, and how to optimise the mix of funding tools to ensure that New Zealand’s communities can continue to prosper and grow, that real progress can be made” liver for their communities the country could then have a rational debate about how best to sustainably fund these services into the future. Feedback has come from all corners.

There has been considerable comment that LGNZ’s purpose in initiating a debate about funding is part of some nefarious plan to raise the tax burden on the country. Absolutely not.

vices funded by local ratepayers (essentially a subsidy from local ratepayers to central government).

This approach builds on our earlier “Royalties for Regions” policy where (with the support of some in the mining community) we have argued that local communities should benefit from mining activity carried out in their areas both to help those

providing these services are rising and the big mover is in roading and waters infrastructure, where the large bulk of ratepayer money is spent.

At the same time New Zealand faces over the next twenty years or so real challenges arising from demographic change.

Here the big challenge for funding is that many more people than now will be on fixed

grown-up conversation about choices, level of services, and how to optimise the mix of funding tools to ensure that New Zealand’s communities can continue to prosper and grow, that real progress can be made. www.lgnz.co.nz Phone: 04 924 1200 Email: info@lgnz.co.nz

The costs of providing local government services are rising and the big mover is in roading and water infrastructure, where the large bulk of ratepayer money is spent

30

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Apollo PVC-O PVC-O pipes have increased mechanical completed using properties providing a larger inside diam- standard mechanical eter while delivering up to 25 percent more fittings flow or storage in the water main asset.

The main was installed in the road reserve while using the same structural trench design as for other buried flexible pipes - the same mechanical fittings were used to make connections onto the pipe.

New gravity sewer, Oamaru, Humber to Thames St Installation of 150mm RESTRAIN PVC Pipe, using a Ditch Witch JT4020 Horizontal Directional Drill (HDD) rig. The drill shot was installed beneath two 19th century heritage buildings, at a depth of six metres - open trench methods were not usable due to the historic nature of the surrounding environment. The project was challenging - softer native soil conditions were expected - however a layer of rock was struck early in the drill shot which required another HDD rig designed for tough rock conditions.

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The pipeline was pulled out into the mangrove swamp by hand New Plymouth District Council as Novafuse is much lighter than traditional polyethylene pipe. A Bobcat pulled the pipe to its final position in the swamp, where Sewer rising transfer main, Oakura to New Plymouth In the past, Oakura’s sewage has been treated by septic tanks the contractor was able to complete cold solvent cement joint on each property. Sub-divisional growth and the transient popu- flange connections to join to other pipe work. lation during holiday seasons prompted the installation of a community sewage reticulation system. Raw sewage is now transferred For technical services Iain McNaught 027 243 3000, Frank through a twin pipeline, 11 Km, DN150 rising sewer main, back O’Callaghan 027 495 4523, Todd Randell 027 211 4838

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31

Comment >> RMA Reform

Will RMA sort the housing crisis?

Housing

Leigh Auton Director Auton & Associates Spare a thought for Minister Nick Smith in trying to get a handle on the housing crisis in Auckland

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ith a form of property madness having enveloped the city, aided and abetted by the media, house prices have gone through the roof, almost literally.

Daily the NZ Herald and other media breathlessly report another spectacular increase in house prices. The implication is that these increases reflect a great public good.

Saner voices however, such as NZEIR principal economist Shamubeel Eaqub, describe Auckland’s housing as “essentially a Ponzi scheme because you need more and more entrants to keep prices rising and that’s exactly what’s happening in the housing market”.

The consequences of Auckland’s housing madness on the young and the poor are diabolical. Today it is no longer possible for large numbers of people in Auckland to access the property ladder, nor is it easy to rent.

The social impacts of failing to adequately house, at affordable prices, will live with Auckland and New Zealand for a long time.

And when the house-price madness bursts, all New Zealanders will feel the pain.

Unfortunately, and while the potential options for the central government are wide, Minister Smith’s political options are in my opinion limited unless he can persuade his colleagues to break out of their philosophical straitjacket.

The option being explored by Minister Smith is to change the Resource Management Act (RMA) to address the housing crisis. As I have commented previously, I don’t believe this will have any meaningful impact. Many governments have argued, and made changes to our planning laws to make it easier to deliver better outcomes for business and communities. The 1953 and 1977 Acts respectively gave way to the RMA 1991 to better encapsulate environmental principles of sustainable management.

Interestingly, the former Acts managed to 32

provide a framework for adequate housing availability and affordability through a number of decades, as has the RMA for a good period of its existence. In my opinion, sustainable management, if interpreted and applied correctly, already provides direction to policy makers to take into account economic, social, cultural and environmental outcomes in the provision of land for housing. Maybe the key issue is how the Act is being applied, rather than how it is written?

Shamubeel Eaqub argues that Auckland prices are being driven up by a number of factors, including tight land supply, the high cost of building, lack of infrastructure supply and high net migration. I would add a lack of central government support for building, or supporting the building of, lower cost housing, which has for almost a century been a role of the state.

Optimistic options So let us look at a few options for the government, some of which as noted may be philosophically out of reach but which may need to be reworked. Firstly, I would advocate for a central government national policy statement on urban land supply. Minister Smith has indicated that this would need a change to the RMA to enable, and if this is so, I would support a change to that extent.

The policy statement needs to direct councils and policy makers to provide adequate land and infrastructure for housing, employment and commerce. There is a need to free up more land, whether green field or brownfield, and the need is urgent.

Additional measures already introduced, such as the Special Housing Areas (SHA), will only be effective long-term if there is a national policy framework around the supply of urban land. Currently the incentive to be a SHA lies in land banking to get capital gain. This needs to be changed.

Secondly, and to address the issue that many housing and business developers see as a major impediment, the government

may need to be more active in the practice of planning. In particular, this needs to be at the sharp end of policy definition, but significantly at the actual consenting of development.

This has been partly tried in the past, but needs to be more embedded with central and local officials working together so that each party understands the processes and develops a common culture and understanding around development. If the Minister wants to effect change, I would argue that this is a key area in which to focus. As a minimum, it will help central government better understand the complexities at the coal face.

I agree with Minister Smith when he expresses a need for a greater focus on economic imperatives, but as I have argued I believe this focus is already contained in the RMA. Certainly when I was a local government practitioner I was clear that the RMA and Local Government Act required me to do so.

However, I do think it is valid that many in my planning profession focus far too much on design and amenity outcomes, ignoring the ‘cost’ that many of these rules have on economic well-being. Too many rules are cast in the name of good urban design, however defined, with little appreciation that business, employment or wealth creation can often be negatively impacted or foregone. The cost of doing business for many can be too great. If the rules are too plentiful and overly prescriptive, the ‘money’ will go elsewhere.

I have little doubt that the cost of housing has been driven up in part by rules which purport to lead to good environmental outcomes but end up denying the young and the poor access to housing.

My third pitch is that the current government needs to get serious about supporting public housing. Minister English has advanced social housing, owned and administered by the largely not-for-profit sector to provide housing for the socially and April/May 2015

economically disadvantaged.

I support the aspiration of the government’s social housing initiative but being involved on several boards with interests in such housing, I know it will be slow and dependent on significant central government support.

In the meantime it is imperative that the central government builds, or financially incentivises, the building of more low-cost public housing. Without such support, the deteriorating impacts on the young and poor will continue to escalate exponentially, especially in the larger cities.

Interestingly the central government does have the ex-

pertise on tap, as in the Hobsonville Land Company and in the Tamaki Redevelopment Company in Auckland, but these need to be significantly expanded in order to deliver housing ,including public housing, on scale.

There are other areas of government policy that would help Minister Smith out of the housing crisis, including an assessment of the impact of migration on the Auckland housing market. While not all the additional 75,000 extra Auckland residents in the last two years were migrants, the ability of any council to plan for these additional people is an enormous challenge. Indeed it is almost

impossible to build infrastructure at a rate to accommodate such population growth without major central government support.

For the sake of completeness I would add to Minister Smith’s bucket list the need to provide a suite of measures to tackle housing speculation, including a fairer taxation regime on capital gains, measures to address the uncompetitive material supply market and increasing the supply of qualified tradespeople. The minister may want to enquire into the quality of the new million-dollar houses being built in some of the newer housing subdivisions, but that is another story.

I do not envy the minister in sorting out the housing crisis enveloping our largest city.

Most of the cards lie with the government however, most of which in my opinion will need to be dealt.

I just happen to believe that simply changing the RMA will not deliver on more affordable or available housing.

Leigh Auton has 35 years’ local government experience and is a chairman/director/trustee on several boards and provides consulting advice to public and private sector companies

Council collaboration secures regular regional flights Councils have worked with air transport providers to secure regular flights for their communities after Air New Zealand announced in November that its flights to Kaitaia, Whakatane and Westport would cease because customer demand could not sustain its 50-seat aircraft

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owever, the local government sector has successfully and proactively worked together to find alternative solutions for each of these communities: Far North District Council arranged with Great Barrier Airlines for daily flights between Kaitaia and Auckland Whakatane District Council worked with Air Chathams to arrange a locally branded service between Whakatane and Auckland Buller District Council negotiated with Sounds Air to secure new flights between Westport and Wellington.

LGNZ President Lawrence Yule says this is a strong example of the sector collaborating, which highlights the good work that councils do for communi-

ing with each other about these challenges and have held joint discussions with Air New Zealand and the Prime Minister.

The flights that councils have

“The flights that councils have secured for these regions will be very beneficial to their communities” ties. “Ease of travel between regional New Zealand and our cities helps to enable regional business people to successfully conduct business,” Mr Yule says.

“Mayors of districts where air transport services are under threat have been communicat-

secured for these regions will be very beneficial to their communities.”

The flights councils have secured also make it easier for locals who have moved out of the area for work to return home to visit family and friends and help keep these airports open for

other essential air services such as the travel of medical staff.

The council initiatives followed Air New Zealand’s review of regional aircraft operations as it sought to address the challenges of poor operating economics of its 19-seat fleet while leveraging economies of scale from its 50- and 68-seat fleets.

Air New Zealand decided to exit its 19-seat fleet by August 2016 and announced it would suspend services to Kaitaia, Whakatane and Westport following revelations that its subsidiary Eagle Airways was losing $1 million a month operating the smaller fleet.

why are things not happening as you planned?

Thirty years of research has shown that 70% of all major change efforts in organisations fail to deliver the expected results in the medium to long term – frequently due to a lack of engagement and commitment by the people directly involved.

Contact PeopleCentric to find out how we can help you engage your people and develop a productive and safe workplace climate.

April/May 2015

www.peoplecentric.co.nz

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Comment >> Branding

Local Government

Jill Gregory senior solicitor,

Unstoppable force meets immovable object?

Chapman Tripp The dismissive response to the funding review published this summer by Local Government New Zealand exposes the dilemma that the power imbalance between local and central government creates for local government

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he Prime Minister batted away the need for new funding options, suggesting that if councils wanted more money for infrastructure investment they could always borrow it or sell off some of their assets.

“Fair point”, said the New Zealand Herald, adding: “Councils that are prone to bleating about their need of new forms of taxation are usually the last to take a hard look at their property holdings and ask whether they could make better use of the public capital”.

The Herald further argued that, although property rates may not be “perfectly equitable”, they had the virtue of high visibility - creating a political discipline in a system where accountability is otherwise relatively weak because the lack of strong party affiliations in local government means that the intense scrutiny associated with adversarial, partisan politics is missing or diminished.

Positive voices, outside local government, were few and faint. But, while Local Government New Zealand (LGNZ) will undoubtedly be disappointed at the reaction, it will probably not be surprised.

As the discussion paper acknowledges, this is a battle local government has fought (and lost) many times: “Ever since its establishment in 1842, the funding of local government has been a problematic issue.

It has become a matter of such concern that a considerable number of funding reviews have been undertaken over the past 65 years, with all reviews highlighting the need for councils to have additional funding sources to complement rates”.

LGNZ’s chances of a sympathetic hearing are not assisted by widespread perceptions (sometimes actively cultivated by central government) that local government spending is out of control or by the fact that since 1994 rates per capita have increased at

twice the rate of the Consumer Price Index.

This is a damning statistic which is often used against local government, in many ways unfairly because the CPI measures price movements on goods and services purchased by private households.

But, as LGNZ CEO Malcolm Alexander pointed out recently, local government’s spending profile is different to that of the average household – “We buy bitumen, not Weet-Bix” – and its costs rise about two percentage points a year faster than the CPI. Two other points worth noting: • although rates have risen sharply against the CPI, they have remained relatively constant both as a percentage of GDP and as a proportion of household income • and according to LGNZ, councils account for about 10.5 per cent of all public expenditure but raise only 8.3 per cent of

“The immovable object which has so far frustrated local government’s attempts to expand its funding base is that the risks of reform for central government are direct and immediate while the benefits are diffuse and by no means certain”

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April/May 2015

public revenue. This would suggest that local government, for all of its alleged extravagance, is relatively under-funded in comparison to central government.

The immovable object which has so far frustrated local government’s attempts to expand its funding base is that the risks of reform for central government are direct and immediate while the benefits are diffuse and by no means certain.

How to ensure that any new revenue raising tools are used to reduce rates rather than simply to supplement them? And, just as important, would ratepayers understand the connection or just obsess about the new taxes or user charges?

But there are forces in play which may overcome this resistance, not immediately but further down the track.

The composition of local government funding varies widely from council to council, demonstrating that there is significant flexibility within the current regime. For example, for every $10 collected in rates, the Far North collects $2 in user charges; Napier, $5; Auckland, $6 and Hurunui, $9.

But, on an aggregate basis, rates currently account for 49 per cent of council revenues across the country compared to just 15 per cent from user charges, which is the next highest source of revenue.

A number of cost pressures are developing which make this heavy reliance on rates no longer sustainable.

April/May 2015

Chief among these are: 1. Impending, large infrastructure costs Local government owns and operates almost as much essential infrastructure by value as central government. In many towns and cities, a high proportion of these assets date back to the post World War II building boom so are now more than 50 years old and will soon require replacement.

ritorial authorities are expecting a decline in their populations by 2031. Debt-funded development, which essentially spreads the costs onto future generations, makes sense in jurisdictions where the population is expected to rise or to remain steady but not where it is expected to fall.

4. Higher expectations

Consumer demands and regulatory requirements are both trending upwards.

A clearer indication of the scale and Two examples of this are: scope of this impact should become avail- • the “National Bottom Lines” for freshwaable later this year when the Parliamentary ter management, which are to be impleCommissioner for the Environment reports mented by 2025, will require many local on those parts of the coastline and those councils to upgrade their Three Waters infrastructure networks which are most infrastructure, particularly their waste and vulnerable to a 30-centimetre rise in the storm water systems average sea level – this being the quan- • and the legacy of the Canterbury earthtum which the Intergovernmental Panel on quakes, which has underlined the imporClimate Change says is already “locked in” tance of resilience in buildings, utilities regardless of any actions undertaken by and infrastructure services. Upgrading governments to reduce emissions. capacity to meet these new standards will be an expensive business.

3. Demographics Consultation on the LGNZ report closed As the large Baby Boomer cohort enters on 27 March. Submissions will be incorporetirement, the dynamics around using a rated into a final report which LGNZ promproperty-based tax will change complete- ises will propose a strategy and a longly because many retirees will be asset rich term sustainable funding model. but cash poor. Eventually, they will have to cut their cloth to suit their circumstance by Jill Gregory specialises in environmental, downsizing but – inevitably – there will be resource management and public law some stickiness in this process. info@chapmantripp.com Additionally, 32 of New Zealand’s 78 ter- www.chapmantripp.com 2. The effects of climate change

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Cities

Making cities smarter Could becoming a “smart city” help solve Auckland’s myriad problems?

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mart cities could be the solution to the many challenges thrown up by urbanisation in increasingly congested areas like Auckland such as environmental issues, resource management and pressure on infrastructure.

Urban environments built on “intelligent” solutions that enable cities to transform, support and manage rapid change, smart cities are developing rapidly with more than 26 expected to be operating globally by 2025.

This burgeoning global smart city market is estimated to be worth US$1.565 trillion by 2020, driven by the increasing interconnectedness between departments, cities and citizens that is the crux of the smart city concept.

Smart cities must adopt at least five of eight “smart parameters” – energy, building, mobility, healthcare, infrastructure, technology, governance and education – with leading contenders such as Amsterdam already executing projects in energy, mobility and governance.

Governments of cities such as Amsterdam are therefore transforming from a traditional model of a silo-based organisation to a more collaborative, integrated service delivery model, says Ivan Fernandez, Industry Director for Australia & New Zealand for global growth consultant Frost & Sullivan.

He predicts that cities will collaborate to drive smart city innovation. “Technology and ecosystem convergence, collaboration and partnerships between stakeholders from different industries such as energy and infrastructure, IT, telecoms and government, will also expedite the delivery of integrated services,” Mr Fernandez forecasts.

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Smart the new green Smart energy is the fastest growing market segment and is being driven by the large-scale adoption of smart grids and intelligent energy solutions that will see smart energy make up 24 percent of the total global smart city market in 2025, growing at a CAGR of 28.7 percent from 2012-2025.

This is already happening in Australia, with the Victorian Smart Grid Project having installed more than 2.5 million meters in homes and businesses across the state to make it more than 90 percent complete by early 2014. “Flexible pricing commenced in September 2013 to manage peak demand and this has eliminated estimated bills.”

Internationally, distributed energy generation is estimated to have more than doubled in the last 10 years and strong growth is expected to 2020, corresponding to nearly half of the increase in total electricity use. “The game changer will be electricity storage; it will help manage peaks, drive renewable energy uptake and support EV infrastructure,” Mr Fernandez believes.

Sensorisation of things Another key technological enabler for sensible cities is the Internet of Things (IoT), which will facilitate new innovative public and private services that will be cost-effective, efficient and sustainable, and will help cities overcome many of the challenges associated with rapid urbanisation.

Sensors will be increasingly found in everyday objects and devices, providing real-time visibility and control while enabling better dissemination of information to residents and improving the efficiency of services.

This process is already well un-

derway, with the 20,000 sensors installed across the Spanish city of Santander offering environmental monitoring, smart irrigation, transportation monitoring, electronic displays, and parking sensing capabilities.

This “ClouT” initiative aims to leverage cloud and IoT technologies to improve resident interaction with city services, improve energy and resource efficiency, enable new business models, attract investments and generally create a more cohesive and supportive society.

The ClouT Participatory Sensing Application, for example, shares sensor information via mobile devices and provides subscribers with city-related notices such as entertainment events as well as disruption of city services and traffic incidents by geographical regions and proximity.

Similarly, Norway’s Steinkjer Town is introducing IoT by implementing a low-power radio infrastructure in symbiosis with the existing WiFi and mobile network to develop and test smart living applications to control home appliances, home reminders, non-intrusive monitoring applications of seniors living alone, and smart community enablers.

Miniaturisation, wireless-enablement and sensor interoperability are other key industry drivers that have allowed sensors to be part of building management systems. “The global market for sensors used in building automation systems in 2012 was US$1.75 billion, and this is expected to rise to about US$2.7 billion in 2016,” Mr Fernandez observes.

These smart buildings will make up seven percent of the total global smart city market in 2025, growing at a CAGR of 4.1 percent from 2012-2025. “There are plans in Brisbane for a CBD District Cooling System - a cen-

Frost & Sullivan Industry Director for Australia & New Zealand Ivan Fernandez: “Yet, while the potential is huge, the challenge faced is finding funding and developing the right business model, as many cities in the Western world don’t have the finances available to take on some mammoth-sized projects” tralised water chilling system which replaces air conditioning chillers and cooling towers in individual CBD buildings and will chill water during off-peak periods to supply CBD buildings during the day, yielding considerable energy savings.”

Many cities around the world have already made significant investments or plans to invest in various smart city technologies such as energy and resource sustainability, socio-demographic, healthcare, transportation, and security.

“This trend towards sensible cities will continue to grow and the Internet of Things is expected to play an integral part in supporting the efforts to make cities smarter and more sensible by providing information visibility for city planning and enabling the efficient, seamless and sustainable provision of new services,” Mr Fernandez predicts.

Recover, reuse, recycle Smart infrastructure will make up 11 percent of the total global smart city market in 2025 and will include sensor networks as well as digital water and waste management. “Forty eight percent of all waste in Australia April/May 2015

goes to landfill, while in Sweden that number is one percent,” Mr Fernandez notes. “Sweden actually imports 80,000 tonnes of rubbish every year to meet their energy requirements.”

Australia’s 90 percent urban population is amongst the highest globally, resulting in large cities continuing to grow and expand their limits and increasing the complexity of waste management transportation and logistics for city councils.

Many Australian states and city councils have already adopted the zero-waste mantra and are actively working to reduce the amount of waste being sent to landfills. “This trend is expected to increase innovation in the recycling sector in Australia.”

Renewable energy is the fastest-growing source of electricity generation globally, with Frost & Sullivan estimating that 20 percent of energy produced in smart cities will be renewable by 2030. “Strong political, public and industry backing for renewable energy on account of improved environmental outcomes and energy security is the single biggest driver,” Mr Fernandez observes, “though increased price volatility of conventional energy sources is also decisive.”

It is estimated that globally about 15 percent of a household’s energy needs are contained in the waste bin that is sent to landfill every week, and waste-to-energy offers a tangible means of diverting waste that has to go to landfill. “Based on existing proven technologies, for example, mass combustion delivers substantial energy recovery rates of 500-700

kWh/tonne of MSW over and above existing landfill gas to energy installations of 100-150 kWh/tonnes.”

Australia’s East Rockingham Waste to Energy Plant, for example, will generate 18.5MW from construction and demolition waste, commercial and industrial waste, municipal solid waste and green waste. “Councils and wastewater utilities are seeking to monetise waste and technology is making smaller waste to energy (WTE) plants viable,” Mr Fernandez notes.

Most industrial companies have already identified that the best waste minimisation strategy is to address the issue at the source by modifying the production process in order to reduce the amount of waste in the first place. “Recycling and reuse of material will continue to be a key waste minimisation strategy, however these will increasingly become secondary to waste avoidance.”

This type of By-product Synergy (BPS) underpins the concept of ‘industrial ecology’ - a holistic view of industry in which organisations exchange energy and material between one another rather than operating as isolated units. “Industrial ecology promotes a shift away from traditional open, linear systems towards closed loops and inter-dependent relationships of the kind found in nature,” Mr Fernandez explains.

“Essentially there has to be a shift in focus from merely removing waste from client facilities to actively assisting in reducing the amount of waste generated, which in turn will require a change in the current business model as well, where clients could potentially be charged based on the amount of waste reduced.”

Smart city market players

market potential of $1.5 trillion globally for the smart city market in terms of energy, transportation, healthcare, building, infrastructure, and governance.

“If one compares that to GDP of nations in 2014, it will sit above the GDP of Spain, thus making it the 12th largest GDP in the world,” Mr Fernandez says.

“Yet, while the potential is huge, the challenge faced is finding funding and developing the right business model, as many cities in the Western world don’t have the finances available to take on some mammoth-sized projects.”

Smart city projects are seen as complex processes that should consider all the systems of the city, conceptualising cities as systems of systems and networks, making the role of technology players fundamental.

The ability to provide a multi-technology approach able

Overall, Frost & Sullivan research estimates a combined Continued on page 38

Smarter cities a growing necessity

ute to two-thirds of the world Population growth is driving account for up to 81 percent economy and 85 percent of to 60 percent before 2025 with the trend towards smart cities: of total population. global technological innovathe Western world reaching 80 tion percent urbanisation • the world’s population is sev• cities like Seoul account for en billion strong and expand- • around 58 percent of the approximately 50 percent of • today’s cities already collecing steadily South Korea’s GDP while Butively consume 75 percent of world’s population or 4.6 bildapest and Brussels each acthe world’s energy and are lion people are expected to • 50 percent of the world’s popcount for 45 percent of their responsible for 80 percent of live in urban areas by 2025 ulation is now living in urban country’s GDP energy-related carbon impact areas • the urban headcount in deon the environment. veloped-region cities could • this is expected to accelerate • cities are expected to contribApril/May 2015

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Cities

Environment

Sustainable development reduces disaster risk

Continued from page 37

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to add intelligence to different city systems is a key focus for companies seeking to be leading players in these projects.

“In addition, the ability to stay innovative in the approach to the city, and in the way technologies are used, is very crucial.”

Four main models will enable companies to engage with city authorities and utilities to tap into this burgeoning market: Build Own Operate (BOO), Build Operate Transfer (BOT), Build Operate Manage (BOM) and the Open Business Model (OBM).

OBM is expected to foster the most innovation due to its flexibility and scalability, which lets the city planner allow any qualified company or business organisation to build city infrastructure and provide city services. “The city planner, however, will impose some regulatory obligations,” Mr Fernandez cautions. “Given the size and complexity of smart city projects, the ability to leverage public-private-partnerships (PPPs) will be critical.”

Whatever the model, the mega trend of smart cities is set to power urban development for the next decade and will drive demand for response, storage, multi-energy networks, smart devices and new business models.

“As cities strive to become smart, sustainable and secure, 38

they require innovative products, service and solutions, which then calls for an extension in business development models, including public-private partnerships,” Mr Fernandez says.

“Although early benefits are enticing more cities to adopt these initiatives, the rate of transition will vary and the intent to deploy will need to be balanced against the decision to rectify energy, security and public service issues such as traffic and safety with public concerns regarding privacy issues, customer reactions to inconsistent messaging and unclear standards.”

He believes governments of cities such as Auckland should create a Smart City Stakeholder Group, encourage open collaboration and build digital infrastructure such as eServices and eHealth. “The private sector on the other hand, should evaluate their role in the smart city market; build a ‘City as a Customer’ strategy; identify potential partners, business models and consortiums; develop capabilities in data analytics and cloudbased services; and develop services as a business model,” Mr Fernandez concludes.

“For smart cities to work, begin with the end in mind and tailor the technology solution to the city’s DNA – not the other way round.”

ost disasters that could happen haven’t happened yet, warns the 2015 Global Assessment Report on Disaster Risk Reduction (GAR15) prepared by the UN Office for Disaster Risk Reduction (UNISDR).

The report states that economic losses from disasters are now reaching an average of US$250 billion to US$300 billion annually, but believes this can be mitigated significantly.

GAR15 estimates that an investment of US$6 billion annually in disaster risk management would result in avoided losses of US$360 billion over the next 15 years, noting that this is just 0.1% of total forecast expenditure of US$6 trillion annually on new infrastructure.

“For many countries, that small additional investment could make a crucial difference in achieving the national and international goals of ending poverty, improving health and education, and ensuring sustainable and equitable growth,” the GAR15 states.

Governments need to be setting aside US$314 billion every year to meet annual average losses from just earthquakes, tsunamis, tropical cyclones and river flooding; a major “lost opportunity” for financing poverty reduction programmes in the areas of health and education.

GAR15 also found that the majority of governments are too focused on managing disasters rather than tackling the underlying drivers of disaster risk such as poverty, climate change, the decline of protective eco-systems, poor urban planning and land use, and lack of building codes, which contribute significantly to the creation of risk.

A new metric developed for the report calculates that 42 million life years were lost annually in internationally reported disasters between 1980 and 2012, over 80 percent in low and

Dr Kelvin Berryman, Director of the Natural Hazards Research Platform at GNS Science: “Earthquakes, droughts, floods, and storms are natural hazards, but the unnatural disasters are deaths and damages that result from human acts of omission and commission”

middle-income countries – a development setback on a par with the toll wrought by tuberculosis.

The mortality and economic loss associated with extensive risks (minor but recurrent disaster risks) in low and middle-income countries are trending up, with losses in 85 countries and territories equivalent to US$94 billion in the last decade alone.

These extensive risks are an ongoing erosion of development assets, such as houses, schools, health facilities, roads and local infrastructure. “However, the cost of extensive risk is not visible and tends to be underestimated, as it is usually absorbed by low-income households and communities and small businesses,” the report adds.

Future disaster losses represent an existential threat for small island developing states (SIDS), which are expected to lose on average 20 times more of their capital stock each year in disasters compared to Europe and Central Asia.

The expected annual losses in April/May 2015

SIDS are equivalent to almost 20 per cent of their total social expenditure, compared to only 1.19 per cent in North America and less than 1 per cent in Europe and Central Asia.

Similarly, many countries, including Algeria, Chile, Indonesia, Iran, Madagascar, Pakistan and Peru, would not pass a stress test of their fiscal resilience to a 1-in-100-year loss.

“Their limited ability to recover quickly may increase indirect disaster losses significantly,” GAR15 warns.

If this risk were shared equally amongst the world’s population, it would be equivalent to an annual loss of almost US$70 for each individual person of working age, or two months’ income for people living below the poverty line.

Climate change will increase expected future losses and is already modifying hazard levels and exacerbating disaster risks through changing temperatures, precipitation and sea levels, amongst other factors.

“By 2050, it is estimated that 40 per cent of the global population will be living in river basins that experience severe water stress, particularly in Africa and Asia,” GAR15 predicts. “In the Caribbean basin, climate change will contribute an additional US$1.4bn to the expect-

ed annual losses from cyclone wind damage alone.”

The ecological footprint from the unsustainable overconsumption of energy and natural capital now exceeds the planet’s biocapacity by nearly 50 percent – for example, coastal wetlands declined by 52 per cent between the 1980s and early 2000s. “Other critical regulatory ecosystems such as mangrove forests and coral reefs are also degrading at a rapid pace,” the report adds.

The effects of climate change are not evenly distributed, however, affecting different countries in different ways.

“For example, the risk from wind damage would double in Anguilla and increase fivefold

Floods and other natural disasters have been part of life since time immemorial anticipated. For example, losses in maize production from a 1-in-25-year drought in Malawi could be 23 percent higher

“There is a very real possibility that disaster risk, fuelled by climate change, will reach a tipping point beyond which the effort and resources necessary to reduce it will exceed the capacity of future generations” in Trinidad and Tobago while Mexico would actually see a reduction in its risk.”

Although climate change is very likely to have an overall negative effect on yields of major cereal crops across Africa, strong regional variability is

from 2016 to 2035 than they were from 1981 to 2010.

Given that agriculture contributes 30 percent to Malawi’s GDP, this could push the country over a resilience threshold in terms of the national economy as well as poverty. However, in

the Rift Valley in Kenya and in Niger, where agriculture generates 30 and 38 percent of GDP respectively, the losses would actually decline in the same climate change scenario.

Growing global inequality, increasing hazard exposure, rapid urbanisation and the overconsumption of energy and natural capital now threaten to drive risk to dangerous and unpredictable levels with systemic global impacts.

The richest two percent of the world’s adult population now own over 50 per cent of global wealth, whereas the bottom 50 per cent own less than one per cent of global wealth. An

Continued on page 40

New international framework for disaster risk reduction

A

far-reaching new framework for disaster risk reduction with seven targets and four priorities for action was adopted at the UN World Conference on Disaster Risk Reduction held recently in Sendai, Japan.

Signed off by representatives from 187 UN member states, the Sendai Framework for Disaster Risk Reduction 2015-2030 was welcomed by Margareta Wahlström, the Secretary-General’s Special Representative for Disaster Risk Reduction and the Head of the UN Office for Disaster Risk Reduction.

April/May 2015

“The adoption of this new framework for disaster risk reduction opens a major new chapter in sustainable development as it outlines clear targets and priorities for action which will lead to a substantial reduction of disaster risk and losses in lives, livelihoods and health,” she believes.

The framework outlines seven global targets to be achieved over the next 15 years: • a substantial reduction in global disaster mortality • a substantial reduction in numbers of affected people • a reduction in economic loss-

es in relation to global GDP • substantial reduction in disaster damage to critical infrastructure and disruption of basic services, including health and education facilities • an increase in the number of countries with national and local disaster risk reduction strategies by 2020 • enhanced international cooperation • and increased access to multi-hazard early warning systems and disaster risk information and assessments.

The four priorities for action focus on:

• a better understanding of risk • strengthened disaster risk governance • more investment • and more effective disaster preparedness and embedding the ‘build back better’ principle into recovery, rehabilitation and reconstruction.

The new global agreement on disaster risk reduction updates the Hyogo Framework for Action that was adopted in January 2005 and was the first global agreement to explain in a comprehensive manner how to reduce disaster losses.

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Commentary

The 2004 tsunami proved yet again how dangerous and destructive nature can be

New Zealand and the Pacific Rim are particularly prone to potentially deadly earthquakes

Continued from page 39

haviour, as those who gain from risk rarely bear the costs. “As such, new risks have been generated and accumulated faster than existing risks have been reduced.”

An enormous volume of capital is expected to flow into urban development in the coming decades, particularly in South Asia and sub-Saharan Africa, and some 60 percent of the area expected to be urbanised by 2030 remains to be built. “Much of the growth will occur in countries with weak capacities to ensure risk-sensitive urban development,” GAR15 warns.

Managing the risks inherent in social and economic activity requires a combination of three approaches:

increasing concentration of wealth, accompanied by depressed real wages and cuts in spending on social welfare and safety nets, is expected to lead to growing risk inequality across territories and social groups.

Socially segregated urban development in turn generates new patterns of disaster risk, as low-income households are often forced to occupy hazard-exposed areas with low land values, deficient or non-existent infrastructure and social protection, and high levels of environmental degradation.

The continuous “mispricing of risk” threatens the future as global investment tends to flow to locations that offer compar-

ative advantages, including low labour costs, access to export markets, infrastructure and stability.

Investment decisions rarely take into account the level of hazard in those locations, and opportunities for short-term profits continue to outweigh concerns about future sustainability.

“As a consequence, large volumes of capital continue to flow into hazard-prone areas, leading to significant increases in the value of exposed economic assets,” the document explains.

The continuous mispricing of risk means that consequences are rarely attributed to the decisions that generate the risks, creating perverse incentives for continued risk-generating be-

A New Zealand perspective

T

he recovery from Cyclone Pam in Vanuatu will be the first test for the ambition of the Sendai Framework, according to the man at the head of New Zealand’s natural hazards research effort.

“New Zealand has the capacity to offer technical assistance to Pacific neighbours to firstly scope the issues of sustainable development in the face of natural hazards and climate change, and in partnership develop effective risk management options,” says Dr Kelvin Berryman, Director of the Natural Hazards Research Platform at GNS Science. “New Zealand 40

needs to continue and extend its pro-active role in assistance on this topic.”

He also believes that there is a pressing need to engage “much more” with the business sector in developing effective approaches to reducing the risk of disasters. “Already businesses, particularly the large ones, undertake better risk management practices than most of the public sector,” Dr Berryman observes. “And the public sector must acknowledge that it is private enterprise that keeps people in jobs, business thriving and ultimately our towns and cities alive.”

The insurance industry is at the forefront of this sector, especially in New Zealand with its deep insurance penetration, but the formal arrangements for Disaster Risk Reduction (DRR) need to go further to engage with the largest employers and the regional chambers of commerce.

“There should be further dialogue - for a short while - to instigate a national conversation and action plan to advance New Zealand as the most pro-active country embracing DRR as a cost-effective and sustainable approach to turning disasters into lesser impacts, so that the

• prospective risk management, which aims to avoid the accumulation of new risks • corrective risk management, which seeks to reduce existing risks • compensatory risk management to support the resilience of individuals and societies in the face of residual risk that cannot be effectively reduced.

Otherwise, as UN Secretary-General Ban Ki-moon notes, the world is playing with fire. “There is a very real possibility that disaster risk, fuelled by climate change, will reach a tipping point beyond which the effort and resources necessary to reduce it will exceed the capacity of future generations.”

nonsensical expression ‘natural disaster’ disappears from our vocabulary,” Dr Berryman maintains. “Earthquakes, droughts, floods, and storms are natural hazards, but the unnatural disasters are deaths and damages that result from human acts of omission and commission.”

He stresses that DRR means ‘reducing the risk of disaster’.

“In other words, looking forward to when disasters are not disasters, but instead events of lesser impact,” Dr Berryman adds. “The idealistic future is one of improved land use planning, engineering, and a well-informed public and private sector that can cope and in fact prosper in the face of adversity.”

April/May 2015

Energy

Energy and Resources Minister Simon Bridges: “I believe the unprecedented momentum we have seen in recent years will continue”

Big blocks offer plenty of potential

Some of the world’s leading energy companies are preparing tenders to explore almost 500,000 square kilometres both on and offshore New Zealand

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he annual tender for oil and gas exploration permits has been launched

by Energy and Resources Minister Simon Bridges.

Block Offer 2015 covers a total acreage of 429, 298 square kilometres and includes: • three onshore release areas spanning 4,093 square kilometres - one in the Taranaki Basin and two in the West Coast Basin • four offshore release areas in the Reinga-Northland Basin, Taranaki Basin, Pegasus Basin, and Great South-Canterbury Basin comprising 425,205 square kilometres.

Each of the blocks has distinct characteristics, raising hopes that significant discoveries will boost a sector that is New Zealand’s fourth-largest export and brings in around $700 million each year in royalties and taxes.

For example, the release area in the Northland-Reinga Basin that covers 186,181 square kilometres and has a lot in common with the Taranaki Basin is still largely unexplored – despite seismic data that stretches back to the 1960s.

“The potential of this frontier basin is now beginning to be understood; Statoil were awarded their first permit in the basin for Block Offer 2013 and April/May 2015

successfully bid for a second permit for Block Offer 2014,” Mr Bridges says.

In contrast, the Taranaki basin has a strong history of success and there is significant potential remaining both for oil and gas discoveries. “Block Offer 2015 includes one release area in offshore Taranaki that includes over 53,000 (53,253) square kilometres.”

Two permits were granted in

der-explored.”

Two permits were granted to Anadarko in the Pegasus Basin for Block Offer 2012, while last year’s Block Offer saw three 15-year petroleum exploration permits granted in these basins to a joint venture between Chevron and Statoil, and one to OMV. Block Offer 2015 includes an offshore release area of almost 142,000 (141,757) square kilo-

“Our geology offers interesting mature opportunities as well as exciting frontier ones, our infrastructure is excellent and our policy and regulatory regimes are both to highest environmental and health and safety standards” offshore Taranaki for Block Offer 2012, two again for Block Offer 2013 and four more for Block Offer 2014. “Clearly, the industry is aware of offshore Taranaki’s potential,” Mr Bridges believes.

The offshore release area in the Pegasus and East Coast basins that cover a fraction over 44,000 square kilometres are considered to be among New Zealand’s most exciting, with both prospective for oil and gas. “The Pegasus Basin is relatively unexplored, and the offshore East Coast Basin is un-

metres across the Great South and Canterbury Basins, the former having seen exploration activity since the early 1970s.

“Both basins are considered prospective for gas condensate and oil,” Mr Bridges says.

“Since the first Block Offer, when Shell received a permit in the Great South Basin, we have seen continued interest: Block Offer 2013 saw Woodside and NZOG each granted permits in this basin.”

The onshore release areas are equally positive, with an area of just over 1,000 square

kilometres in the Taranaki Basin that is New Zealand’s first petroleum success story. “The basin is prospective for oil, gas and condensate, and has been producing oil and gas commercially since the early 1900s.”

The Taranaki Basin includes 20 producing fields and 11 of the 35 permits granted over the last three years have been in onshore Taranaki. “Clearly its potential is still great,” Mr Bridges adds.

Two onshore release areas are in the onshore West Coast Basin that is prospective for oil, gas and coal seam gas with discoveries dating back to the early 20th century – one of about 2,000 square kilometres and the second of over 1,000 square kilometres. “Last year Mosman received two permits in the West Coast basin for Block Offer 2014, in addition to their existing permit at Petroleum Creek.”

The tender will close on 30 September 2015 and permits for Block Offer 2015 will likely be granted in December 2015, boosting the minister’s belief the opportunities New Zealand has to offer remain a compelling proposition for both existing and new participants.

“Our geology offers interesting mature opportunities as well as exciting frontier ones, our infrastructure is excellent and our policy and regulatory regimes are both to highest environmental and health and safety standards,” Mr Bridges says. “I believe the unprecedented momentum we have seen in recent years will continue.”

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Energy

Competing on the world stage New Zealand’s appealing fiscal regime and low above-ground risk makes it an attractive proposition for energy explorers, a leading analyst told the Advantage New Zealand Petroleum Summit 2015

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osts, above-ground risk and attractive permit terms ensure New Zealand compares favourably with most other oil exploration jurisdictions although the low oil price is curbing investment somewhat, argues Matt Howell.

“New Zealand’s government take from all water depths, shore types and regimes, for example, sits comfortably under 50 percent and well under the international average of 60 percent,” he notes. “It’s more attractive than both Papua New Guinea and Australia, which hover around the international average, and bettered only by Taiwan, South Korea and Japan in Asia-Pacific.”

The country is also handily placed in terms of aboveground risk (AGR), which is divided into three distinct sections: • access – state involvement, contract sanctity, regulation, geopolitics and corruption • development – labour activism, natural disasters, political stability, security, environment and supply chain/local content • commercialisation – infrastructure, OPEC compliance, domestic requirements and currency risk.

Each of these 15 elements is given a ranking, with politically stable New Zealand scoring a healthy 4.60 out of five, the same as Australia. “The lowest risk is the Netherlands at 4.93 and the highest is Syria at 2.27, so New Zealand is perceived as a comparatively low-risk exploration environment from an above-ground perspective,” Mr Howell adds. “It scores equally well when it comes to AGR versus government take, comparable to the Netherlands, the US and the UK.” Added to this are the country’s labour costs, which are up to 40 percent lower than Australia’s,

42

for example, for key personnel such as environmental advisors and senior project engineers.

“This cost advantage is mitigated to some extent, however, by exploration and development charges such as the mobilisation costs for rigs and seismic equipment from Australia and Singapore.”

Permit terms of up to 15 years also make New Zealand an attractive option for global explorers looking for frontier plays to add to their portfolio Mr Howell says, by giving firms confidence that they will have the time to evaluate their blocks without fear of arbitrary rule changes while ensuring they are less exposed to changing market conditions. “The downside is the potential for warehousing areas for future development and less certainty on timing of drilling activity in the newer basins that the Crown is keen to promote,” he adds.

These diverse elements translate into excellent exploration prospects, but there is perhaps “limited” potential in the Taranaki Basin given other discoveries have only added “rel-

Wood Mackenzie Research Analyst Matt Howell: “Oil developments are robust and small pockets onshore have been developed quickly while larger fields offshore have been developed and expanded” • East Coast Basin Offshore – six blocks with an average size of 7,022 square kilometres and the last of three E&A wells drilled in 2004 • Taranaki Basin Offshore – 18 exploration blocks with an average size of 1, 975 square kilometres and 90 E&A wells drilled, the last this year • Taranaki Basin Onshore – 15 exploration blocks with an

“New Zealand is perceived as a comparatively low-risk exploration environment” atively small” volumes to the major developments at Kapuni, Maui and Pohokura. However, this could change very quickly if explorers unlock a new play.

“Major recent resource adds have been from infill drilling and/or reservoir re-modelling,” Mr Howell observes.

Key New Zealand exploration areas include: • East Coast Basin Onshore – seven exploration blocks with an average size of 1,551 square kilometres and 78 exploration and appraisal (E&A) wells drilled to date, the last in 2014

average size of 142 square kilometres and 367 E&A wells drilled, the last in 2014 • the Great South & Canterbury Basins – eight exploration blocks with an average size of 7,793 square kilometres and 36 E&A wells drilled, the last in 2014.

Other countries offering large amounts of acreage include: • Croatia – 36,822 square kilometres offshore and 14,585 square kilometres onshore on offer or under application • Myanmar – 200,578 square kilometres awarded offshore in 2014 and a further 128,182

square kilometres still open • Mexico – 16,797 square kilometres awarded offshore in the first permit round • Australia – 82,316 square kilometres offshore in the Bight Basin, with a further 25,766 square kilometres on offer.

All in all, New Zealand compares more than favourably with its overseas competitors and still offers plenty of potential to global exploration companies such as recent entrants Chevron, Woodside and Statoil and previous permit holders Shell and Anadarko. “Only 47,983 square kilometres have been awarded out of some 405,179 square kilometres on offer, so there is still a lot of opportunity.”

Overall, Mr Howell believes the local energy industry is in good shape. “Oil developments are robust and small pockets onshore have been developed quickly while larger fields offshore have been developed and expanded,” he says.

The majority of gas production, meanwhile, is from larger fields that have been on stream since at least mid-2000s. “These fields can be tied into existing, April/May 2015

open-access pipeline infrastructure, but the reserves have been unlocked in many fields.”

In addition, the current low gas-price environment could hinder future development, particularly offshore, and while LNG export could be a viable option for frontier discoveries there are definitely challenges such as the competition within the global LNG market and potential New Zealand energy security issues that would need to be overcome.

The oil price tumble placed capital allocation firmly under the microscope, potentially restricting development in frontier areas such as New Zealand.

“Tight oil growth in the US offset exceeded unplanned outages and OPEC has maintained production so lower prices are expected to persist for the foreseeable future,” Mr Howell predicts.

This in turn has meant a slow start to mergers and acquisition as buyers and sellers can’t agree on fair value. “The first half of this year will be quiet, but we expect increased dealflow in the second half,” Mr Howell adds.

The decreased cash flow has had other adverse consequences, with over US$60 billion in 2015 cash flow wiped out in the Asia-Pacific region. “As a result, there has been downward pressure on industry/service costs with companies looking to cut costs across the board,” Mr Howell concludes.

“Pre-sanction projects have been delayed and drilling budgets reduced, further curtailing exploration activities until such time as the oil price recovers.”

Matt Howell is a Research Analyst at Wood Mackenzie, a global energy, metals and mining research and consultancy group with an international reputation for supplying comprehensive data, written analysis and consultancy advice April/May 2015

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COMMENT >> Management

Latest trends in infrastructure tendering – and how to exploit them Caroline Boot Managing Partner Plan A The government’s rules and principles of procurement are simply an extension of a world-wide raft of changes affecting the way governments seek suppliers and assess tenders for infrastructure projects

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lever clients and suppliers will watch the latest international procurement trends and adjust their bidding and evaluating behaviour to keep at the front of the pack – but what are these trends?

False economies

First and foremost, there’s widespread recognition that the cheapest is seldom the best. The greatest value for money is achieved by looking at the solution that offers a balanced optimum of economic, social and environmental benefits.

Where weightings are provided in requests for tender (RFT), we are seeing price weights are reducing and the value of quality, innovation, environmental and community benefits are now better recognised.

For example, local authorities recognise that they can explicitly favour local suppliers, especially if their strategy documents support this concept. Keeping employment and infrastructure spend within the region is top of mind and is a logical priority, especially in provincial towns.

Whole-of-life costs Increased focus on whole-of-life considerations is another growing trend. For example, a recent study showed that the cheaper upfront costs of imported steel (compared with domestically produced steel) should be offset by an additional 20 – 30 percent on top of the tender box price. These real costs accrue from additional quality assurance checks, loss of employment, and the expenses of offshore servicing for infrastructure that come with that imported product.

With this awareness, responsible clients will look carefully at the potential hidden costs that accompany too much short-term focus on tender box savings.

Healthy, balanced industries There is growing recognition that our nation has been founded on the backs of SME 44

companies with big visions, who enjoyed an industry climate over the majority of the past 100 years that provided opportunities for small companies to punch above their weight. The worthiest have grown and prospered, and form the backbone of our infrastructure industry today.

It would be short-sighted, therefore, for clients to place too much emphasis on aggregating or bundling projects to form large ones that only large companies can gather the resource and systems to manage. With the implementation of the first tranche of NZTA Network Outcome Contracts, we’ve seen the mandate for 20 percent subcontracted works introduced to balance the reduction in opportunities for smaller players.

The problem is that even if they are awarded subcontracted works, SME companies still have little opportunity to grow their management systems and capabilities or their track record within the shadow of the controls imposed by Tier One and Tier Two head contractors.

Clever clients are now actively working to provide a range of opportunities for small, medium and large companies, because

they can see that this is the only way to guarantee long-term competitive tension in their supplier markets.

Today’s RFTs are not cookie-cutters Because every contract is different, with unique risks and opportunities to add value, the information sought in every tender must be customised to the job in hand. It’s a simple and obvious fact that in order to get what you want, you have to ask questions that enable you to find it.

Clever buyers are doing just that – putting time and effort into planning their procurement activities, so that they only ask for what’s necessary to distinguish the great bidders from the good ones.

Proud pioneers The other thing that’s always been the hallmark of successful companies down under is their passion for innovation. The pioneering spirit that brought Number 8 wire as the perfect solution for just about every problem on the farm extends today to Australasian companies breaking ground in just about every industry - water, roads, telcos, electricity, vertical construction, IT and April/May 2015

even health, social services, and education.

This love of inventiveness and innate resourcefulness is in our DNA. It’s the reason why Kiwi and Aussie companies in so many industries are coming up with ground-breaking technologies, methods and solutions that accelerate, reduce costs, increase safety or prolong the lives of the assets they create and maintain.

The beauty of it is that clients see this too, and not surprisingly, they want a piece of it.

A recent major roading tender had literally dozens of suggestions for alternatives, all from just three short-listed bidders.

The client assessed every one of those alternatives, determined its value, and selected a smorgasbord of techniques that together will create huge material and tangible benefits for the users of the assets, both immediately and in the long-term.

That thirst for innovation is worth paying for, especially if it reduces whole-of-life costs of the assets. And government clients are finding ways to encourage it and recognise it in their tender scoring methodologies.

Advice for suppliers So how can smart supplier companies position themselves to take advantage of this new era in procurement? The secret is to recognise that the way clients procure infrastructure is inexorably changing to a regime that’s more firmly based on whatyou-know rather than who-you-know.

Contracts that were once awarded on the basis of past performance only, plus

a strong relationship between the people involved, now must be formally tendered within a competitive environment. And now that price is not the only factor under consideration, it’s essential that companies who are good at what they do learn a new type of marketing.

No longer reliant on handshakes, corporate boxes at the cricket, or golf games, tendering now requires high levels of articulate written descriptions. Describing the successful projects you’ve completed, your track record for innovation and how you’ll extend that to deliver step-up results, and the extraordinary depth of talent that you bring to managing the project and its stakeholders is now essential to winning tenders. Unless, of course, you want to buy the work.

Where clients are excited by long-term benefits and innovations, they are equally repelled by indications that their suppliers may be difficult to work with. Including page upon page of tags within your tenders is a sure-fire way to fast track the response to the reject pile.

While minimising tags is a no-brainer, there are other more subtle ways of communicating that you’re cooperative, professional and great to work with. Endorsements from other clients, simple and direct language throughout your bid response, adherence to your clients’ instructions, and formatting that makes the document easy to navigate and understand are all valuable contributors to that vital message of goodwill and efficiency.

Make no mistake – tendering is changing, and the news is good for both sides of procurement. More balanced decision-making, more opportunities for innovation, and a keen appreciation for long-term value for money are all drivers that will ultimately deliver healthy infrastructure solutions for generations to come.

A wall of work For the rest of this year, there’s a wall of work coming our way via tenders. To clients – create every opportunity for your suppliers to demonstrate that their solution brings the best you can possibly get for your infrastructure dollar. Ask the right questions, and you’ve got a far higher chance of finding the right supplier.

And for suppliers – this is your chance to strut your stuff! Make your responses stand out from your competitors with clever solutions, clear language, careful compliance with what your client wants, and a polished, easily understood document. Good luck with your tenders!

Caroline Boot is the Managing Partner of Plan A Tender Specialists and Clever Buying ™. She and her colleagues are dedicated to improving the skills and tools used by both clients and suppliers engaged in tendering.

For more information, see www.plana.co.nz or www.cleverbuying.com or phone 0800 752 622.

For the latest in Infrastructure innovation, case studies and news plus the same for Local and National government activities, visit our website www.infrastructurenews.co.nz April/May 2015

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COMMENT >> Infrastructure funding

Cutting funding counterproductive Connal Townsend Chief Executive Property Council NZ

Strength of SmartGrowth

Infrastructure is fundamental to the character of a city and wields the power to make or break it

I

t can attract educated, skilled young people who come looking for work and a better life, or it can drive out people who are fed up with sub-par conditions.

Cities around the world are subject to harsh judgment based purely around the efficiency of their infrastructure systems.

That’s why the Bay of Plenty cannot afford to slash SmartGrowth funding by a considerable amount of $200,000 a year from year three of council’s Long-Term Plan (LTP). The suggestion has been tabled as part of Bay of Plenty Regional Council’s Draft LongTerm Plan for 2015-2016.

This would be most unwise as it would render the council incapable of meeting its joint commitment to implement the SmartGrowth Strategy 2013. By its own admission, it will also impede the council’s ability to meet its economic objectives.

SmartGrowth is a spatial plan for the Western Bay of Plenty sub-region, one of the fastest-growing areas in the country; and is an initiative set up to enable collaborative and integrated work on the sub-region’s issues by bringing the Regional Council, Tauranga City Council, Western Bay of Plenty District Council and tangata whenua together.

Its spatial planning offers a collective focus and provides advocates for a unified goal that is greater than the sum of its individual parts and beyond the range of the traditional role of local authorities.

Just as other parts of the country are grappling with disjointed and messy jurisdictional rules and regulations, the Western Bay of Plenty needs SmartGrowth to promote streamlined planning processes that transcend regulatory boundaries.

SmartGrowth provides the high-level strategic blueprint for the multi-billion dollar public and private sector investment in the sub-region over the next 40-50 years; cutting SmartGrowth funding will send negative investment signals to government and the private sector and in turn will have negative impacts on economic growth in 46

the region. This will be particularly detrimental to local areas with ageing populations that are declining.

Inspirational initiative

Communities SmartGrowth Partner Forums • Strategic Partners Forum

Tauranga City Council

Government Agencies

• Housing Affordability Forum

The $200 million Re• Property Developers Forum gional Infrastructure Western • Combined Tangata Bay of Plenty Fund set up by the Whenua Forum District Council Building our futures together • Population Aging council, with support Technical Advisory from Quayside HoldGroup • Social Sector ings Limited co-estabForum lished over the last few Businesses Future Forums • Environment Forum years, was an inspira• Youth Forum • Rural Forum tional initiative.

• Learning Forum Tangata The council has alBay of Plenty Whenua Regional Council located $40 million to the tertiary campus and marine precinct in Tauranga, Scion Innovation Centre in Rotorua and Opotiki’s harbour funding hiatus” proposed in the draft LTP. transformation project. These are all brilWe can’t get slack with appropriateliant projects that will encourage business, ly funding infrastructure. It’s where these economic and social progress. funds come from that determine greater These projects will generate substantive longer-term gains for the region, such as employment opportunities and region- increased investment, development and al revenue; for example the Bay of Plenty economic growth.

Tertiary Partnership website states that the The Regional Infrastructure Fund plays a Tauranga Tertiary Campus “is expected to small but important role in filling a signifgenerate $133m annually in regional reve- icant infrastructure funding vacuum in the nue and more than 600 extra jobs.”

Bay of Plenty. This issue is not exclusive to The New Zealand Institute of Econom- this region and spans the whole of New ic Research believes the Scion Innovation Zealand.

Centre alone has the potential to create The development sector and Property thousands of jobs and increase export Council have been petitioning the governearnings by up to $1 billion. The fund is only ment for some time now, most recently via contributing $2.5 million towards construc- the Productivity Commission, seeking altertion and fit-out, which is a no-brainer. These nate ways of funding infrastructure around are the types of projects, investments and the country. Everybody will benefit. decisions we need to see around the whole country.

The Property Council NZ represents the The council now wants to replenish this interests of the commercial property fund, which is fair enough. Dividend in- investment industry – including come from Quayside Holdings Limited’s commercial, industrial, retail and investment in Port of Tauranga provides a property funds great opportunity to do this over a period enquiries@propertynz.co.nz of time - a better option than the “new www.propertynz.co.nz April/May 2015

LAST WORD >> Politics

Black clouds to provide silver lining?

Evans Young Director Hopper Developments As I write, I’m still coming to terms with one of New Zealand’s blackest weekends since the last one

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inston Peters has just blackened National’s eye in Northland, the Aussies gave the Black Caps a lesson in cricket, the Bulls humbled the Crusaders in South Africa, Sydney showed the lack of depth in the Phoenix, the Broncos spoilt the Warriors 20th anniversary celebrations and Fiji dealt to the NZ 7s in Hong Kong.

While we can live with the Northland by-election result, the across-the-board demolition of Kiwi sporting teams in all codes truly shows how low we sank – fortunately, the expected (and duly delivered) whitewash in the by-election is likely to have a more lasting and defining impact on our collective consciousness.

When a 9,000 majority turns to a 4,000 loss it signals more than mid-term by-election apathy – it’s more akin to a rout. This was a loud message to Wellington that the natives are restless and a few token beads and axes (or new bridges) are no longer sufficient to maintain the historic status quo, blind obedience and a hereditary right to rule.

What we can now expect is a nationwide political stocktake to identify the wavering (quavering?) and/or weakness in the electorates, particularly the ‘minor’ or rural electorates. Past practices of announcing largesse just before the vote failed dismally in Northland and were aggravated by the Prime Minister’s fit of pique when he advised “we were going to do more, but aren’t going to tell you now”. What you don’t know you won’t miss, and any government spending in Northland now is going to be looked at suspiciously, or worse, credited to Winnie.

So what does this promise for the public at large? If you’re in Auckland or Christchurch, nothing. Northland has demonstrated that rural New Zealand is tired of being told how well the metropolitan centres are doing, and even less impressed by the antics of Mayor Brown in carping, demanding and April/May 2015

reverse flipping on all manner of subjects requiring large amounts of tax or ratepayers’ money, and involving train sets, wharves, house prices, convention centres or alternative revenue streams.

I’m the greatest!

Who wants to take me on?

Preservation priority Expect to see central government belatedly recognise the fragility of its hold in the provinces, the looming infrastructure renewal bubble, the unrealistic reliance on dairy to sustain rural economies, the dwindling rural population as jobs and youth migrate to “Auckland”, the growing number of superannuants and their unrequited demand for increased health and support services as they, unreasonably, continue to live longer.

Add to this an inability to drive through its cornerstone RMA reform, and the need to respect the views of minor support parties, and we can look forward to a sustained period of unadulterated self-preservation.

Expect to see money made available for long ignored roading projects, rural water

“When a 9,000 majority turns to a 4,000 loss it signals more than mid-term by-election apathy – it’s more akin to a rout”

ate, they may find themselves coloured by the perceived ‘we know best’ attitude that has crept into the top table in Cabinet. Too many fumbles, too few successes.

To misread the mood of the electorate to the extent shown in Northland is starting to suggest a complacency or arrogance that needs to be tempered. The only way to achieve this will be to recognise that, while a third of the population may live in Auckland and half our exports pass through Ports of Auckland, Auckland of itself is not New Zealand and represents less than 10 percent of our land area. Fully 90 percent of the country is feeling unloved, uncared for and taken for granted.

Will this lesson be learnt? I don’t know.

Will central government try to show they understand the issues besetting the country as a whole? Yes. Will this lead to loosening of the purse strings? Without doubt.

Will Auckland share in the spend-up?

Doubtful.

schemes, subsidies for water and wastewater infrastructure upgrades, and rural health initiatives – all in traditional electorates that have been quietly ignored or tolerated while the emphasis has been focused on the bigger picture (read Auckland).

I’m not suggesting these new spending priorities will all be a direct response to the Northland vote, although the size of the swing may be causing some ‘blue’ eyes to be watering – rather I’m of the view that the back bench may read the signs and decide Tel: 09 427 0015 that if they don’t act now and show some Email: evans@hoppers.co.nz individual flair and concern for the elector- www.hoppers.co.nz

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