In 2018 the NSW Government’s twenty-year Strategy, Building Momentum State Infrastructure Strategy identified projects, policies, and strategies to deliver infrastructure to meet the needs and aspirations of a growing population and a growing economy. Through projects such as Sydney Light Rail, Northwest rail, and the health and innovation precincts, this commitment to infrastructure was estimated to increase the economy by $11 billion in 2036 and by $45 billion in 2056. The aggregated benefits from enhanced productivity, employment, lower travel times and improved health and education and services were estimated to be over $100 billion.
With infrastructure as the backbone of our City and a key driver of economic growth the focus on infrastructure including the recent call from the Reserve Bank Governor, Dr Phil Lowe, for the nation’s two biggest states to commit an extra $40 billion to major projects in a two-year spending surge was no surprise.
The heavy lifting to deliver a pipeline of infrastructure projects is not solely a matter of government investment. It requires investment and partnership from the private sector and a market that enables that participation.
Marie Vinnell is Managing Director, Head of infrastructure Asia Pacific, Societe Generale Australia, has been overseeing financing of a wide range of major infrastructure projects around Australia and overseas. She believes that in the Covid climate there continues to be a market for private sector participation financing projects, it will however come down to the allocation of risk and risk appetite. Knowing that current market conditions gives rise to uncertainty, the need for clarity, communication, and commitment as to the risks and the allocation of the risks is critical. Debt and equity markets naturally shift relative to market conditions and but there remains an appetite for private finance market to participate in the city-building projects that will not meet the growing needs of Sydney’s population and economy.
There continues to be an appetite for private sector participation through Public Private Partnerships (PPP). A recent Report on social infrastructure by the University of Melbourne commissioned by Infrastructure Partnerships Australia, indicated that after twenty-five years PPPs not only deliver on the service promised but were preferred over traditional operated facility.
Simon Nicholls Executive General Manager, Pacific Partnerships, is an advocate for the PPP model. He stresses that PPPs are important for economic recovery and can provide the certainty of timing, scope, and procurement to facilitate speed and cost of delivery. He highlights that PPPs are a model that has been tested and optimized over many years and projects whereas ‘new’ models become ‘prototypes’ that have the potential to increase uncertainty. The challenge he sees is that PPPs are used for complex, city changing, high profile projects. This means that these projects have a higher delivery risk and are often more visible. However, these challenges lie in the project rather than the funding model so that should governments be looking for governments looking to enhance or accelerate projects during these times the focus should be enable innovation through technical solutions rather than the commercial model.
Delivering on the infrastructure pipeline including transformational projects such as the Western Harbour tunnel – Northern Beaches link and the Metro West rail are critical to the recovery and revitalization of the City and the economy. Through a clarity and balancing of risk and a leveraging of procurement models that are tried and tested there can be greater certainty for both the public and private sector to participate.
Sydney Business Chamber held an online forum with Marie Vinnell, Managing Director, Head of Infrastructure Asia Pacific, Societe Generale Australia Limited and Simon Nicholls, Executive General Manager, Pacific Partnerships on Monday 24 August 2020.
