Wellington Northern Corridor Transmission Gully Public Private Partnership (PPP) Presentation to the Building & Construction Conference 24 September / 22 October 2015 CRAIG NICHOLSON (Principal Project Manager - Transmission Gully)
Presentation Summary Presentation will cover: Strategic context Overview, history and scope of Transmission Gully Overview of NZ PPP s Transmission Gully PPP model Project progress Focus will be on our experiences / lessons learnt
Strategic Context - National Roads of National Significance: Puhoi to Wellsford Auckland Western Ring Route Victoria Park Tunnel Waikato Expressway Tauranga Eastern Corridor Wellington Northern Corridor Christchurch Motorways project 3
Strategic Context Wellington Region Eight project sections: Airport to Mt Victoria Tunnel Basin Reserve Transport Improvements Terrace Tunnel duplication Ngauranga to Aotea Quay Linden to Mackays (Transmission Gully) MacKays to Peka Peka Peka Peka to Otaki Otaki to Levin
Transmission Gully - Historic Development 1919 1940 s 1980 s 1995-96 2004-06 First known reference - Interest by local MP reported in Evening Post newspaper U.S. Marines stationed at Paekakariki - Urban myth about offer to build Transmission Gully MoW/WRC GATS Study - Desktop study concept route design & cost estimate Designation Process - Designation established, but resource consents not sought Western Corridor Transportation Study - Compared alternative strategies (across all travel modes) - Consultation showed strong public preference for TG - Western Corridor Plan adopted by RLTC, GWRC & Transit NZ
Transmission Gully - Recent Development 2007-08 2009-11 2011-12 2012-14 July 2014 Detailed Investigations & Scheme Assessment - Compared options and determined Preferred Alignment Preparation of Consent Applications - Detailed assessment of environmental effects Board of Inquiry Process - Hearing of technical evidence and public submissions PPP Contract development - PPP proposals sought, evaluated and negotiated PPP Contract let
Route Overview
Key Features of the Project Project Scope: MacKays Crossing to Linden (27km) Motorway design standards Interchanges rather than intersections Minimum of two lanes in each direction with median barrier Extra crawler lane on steep uphill sections Associated link roads Kenepuru link road (state highway ramp ) Two local road links to/from eastern Porirua
Project Challenges Major construction challenges: Earthworks ~ 6.5M m 3 earthworks Cut heights up to ~ 70 m Reinforced soil embankments (~ 4 km), some up to 40-50 m high Significant number of bridges (~ 30) Cannons Creek Bridge 260m long, ~ 60m high Careful management required of environmental effects Impacts on other Infrastructure: Transpower, Vector (Gas), GWRC (Bulk Water) Existing SH1 & SH58
PPP Definition in New Zealand A long term contract for the delivery of a service, where the provision of the service requires the construction of a new asset, or the enhancement of an existing asset, that is privately financed on a non-recourse basis, and for which full legal ownership is retained by the Crown.
26 Treasury Standard Form PPP Contract PPP Team established in the Treasury: Owners of the Standard Form PPP Contract aimed at providing consistency across NZ PPP portfolio Key features covered: Lease arrangements Completion (full or partial, testing, service commencement) Events (extension (construction), intervening (operations)) Change mechanism (incl. profit margin) Unitary Charge, Refinancing Step-in, Termination, Disputes Hand-back
NZ Transport Agency: Treasury Standard Form PPP Contract Adopted Standard Form PPP Contract for Transmission Gully Treasury resource embedded in TG project team throughout procurement phase Sought consistency with previous PPP contracts 27
The Transport Agency s Procurement Portfolio
Model Form: Traditional vs PPP Procurement Traditional (Output based) Model: The client sets the specification, to match desired outcomes No recourse if desired outcomes not met Contractual constraints reduce the potential for innovation PPP (Outcome based) Model: Pay for the outcome/performance you get Need to let go of output based approach Can be hard to define everything you want
Payment Profile: Traditional vs PPP Procurement
PPP Model Philosophy: The Transport Agency s PPP Model Long term contract (30+ years) to design, construct, finance, maintain and operate the project. Long term collaborative relationship to deliver the key project outcomes. Transfer design, construction and operational risk to PPP consortium, which is incentivised to bring innovative and efficient approaches, including whole of life asset management. Pay quarterly Unitary Charge for 25-years following road opening, based on availability and performance. Does not transfer demand risk (i.e. payments don t depend on toll revenue).
The Transport Agency s PPP Model PPP model structured to achieve full road availability and delivery of four project outcomes: Safer journeys Reduced travel time; Improved travel time reliability and resilience; and Satisfied Customers.
PPP Performance Regime Drives Good Performance Abatements of quarterly unitary payment for any reduction in either road availability or required performance levels. Availability Average Speed
Transmission Gully PPP Procurement PPP Procurement Process and Timeframes: Detailed PPP Business Case approved by Cabinet Nov 2012 Expressions of Interest (5 received) Jan - Mar 2013 Shortlist (of 2) announced Apr 2013 Request For Proposals (RFP) released May 2013 Interactive tender period June Sept 2013 Proposals received Oct 2013 Preferred Bidder announced Dec 2013 Contractual negotiations Dec 2013 July 2014 Contractual & Financial Close (i.e. contract signing) July 2014
Transmission Gully PPP Structure Wellington Gateway Partnership Consortium Structure PPP Consortium Structure: Consortium / SPV Manager Leighton Contractors NZTA Wellington Gateway Partnership Equity Investors Debt Provider / Financial Advisor* ACC (45%) BTMU Design & Construction Operations & Maintenance InfraRed (45%) Debt Providers Bank Group LHJV (Leighton Contractors / HEB Construction JV) *to Financial Close Ventia (formerly Leighton Contractors Leighton Contractors) Leighton Contractors (10%)
Transmission Gully PPP Financial Outcomes Affordability Threshold (AT) Sought best offers below AT in RFP Public Sector Comparator (PSC) Equivalent cost using Transport Agency s normal procurement options Held as commercial in confidence until PPP contract was executed Final negotiated contract value NZTA purchased a number of additions to WGP s initial commercial, D&C and O&M offerings $830M NPV $875M NPV $850M NPV
Delivery Phase Programme Contractual Milestone Dates: Sod turning Sept 2014 Site office establishment & enabling works Jan 2015 Main construction Jan 2016 Open for traffic Apr 2020 End of operating period (and unitary payments) Apr 2045
Lessons / Learnings 38 A number of learnings for NZTA (and for other horizontal infrastructure ): Crown guarantee Performance regime Property acquisition programme Risk allocation Form of sub-contracts and risk transfer Current Puhoi to Warkworth PPP procurement, using the learnings from TG
Questions?