05/02/2023 Brisbane Airport Link Tunnel Case Study, Presented by Audrey Mwala, Malawi

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Queensland, Brisbane Airport Link Tunnel- Case study

Presented by:Audrey Mwala

Director Project Finance & Risk AnalysisThe Public Private Partnership Commission, Malawi.

05/02/2023 Brisbane Airport Link Tunnel Case Study, Presented by Audrey Mwala, Malawi

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Brisbane Airport Link Tunnel•One of Australia's largest ever road project•Connects Brisbane’s northern suburbs with CBD, airport, the Clem7 and Inner City Bypass•Cuts out 18 traffic lights •Cuts out 20 minutes of driving time.•Eased congestion on north side of Brisbane•A world class piece of infrastructure that will support Brisbane’s growth in decades ahead.

05/02/2023 Brisbane Airport Link Tunnel Case Study, Presented by Audrey Mwala, Malawi

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The Project

• A multi-billion investment in toll road and tunnel• A 6.7km multi-lane road• Electronic free-flow toll road • Has a 5.7km tunnel from the city to the Airport.

05/02/2023 Brisbane Airport Link Tunnel Case Study, Presented by Audrey Mwala, Malawi

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The PPP Project Capital Structure

• Total capital; AUD4,889 m construction cost AUD3,400 m.

• Capitalized with an initial (IPO) of AUD1,226m

• sponsor equity AUD200 million,• a dividend reinvestment plan

$AUD361m • State contributions of AUD47 million• Bank debt of AUD3,055 million.

05/02/2023 Brisbane Airport Link Tunnel Case Study, Presented by Audrey Mwala, Malawi

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PPP arrangement

• A 45 year PPP contract• Financial structure assumption:– The loan facility will be refinanced– Asset revaluations were forecast– Reinvestment of profits

• SPV: BrisConnection consortium• The contractors: Thiess and John Holland Group. • Operator: BrisConnections

05/02/2023 Brisbane Airport Link Tunnel Case Study, Presented by Audrey Mwala, Malawi

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Construction challenges• complex design • multi levels for various transport requirements • dual tunnels located at a depth of between 40 to

50 metres underground• complex tunnelling in urban areas• constantly changing dynamics due to:

– ground conditions and – customer requirements.

• Encountered significant cost and time overruns, • The cost was borne by the contractors.

05/02/2023 Brisbane Airport Link Tunnel Case Study, Presented by Audrey Mwala, Malawi

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Operations-Brisbane Airport link

• Was opened in July 2012• An average of 47,802 vehicles using the Link

each day, • About half of the original forecasts daily

traffic of 90,000 vehicles. • Traffic figures falling even when the ride was

free.

•

05/02/2023 Brisbane Airport Link Tunnel Case Study, Presented by Audrey Mwala, Malawi

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Marketing Incentives • Extensive marketing • Phased-in toll regime • An initial toll free period which ended

in October 2012• Discounted tolls of $2 and $2.50.

05/02/2023 Brisbane Airport Link Tunnel Case Study, Presented by Audrey Mwala, Malawi

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Challenges• Higher cost of funds GFC 2008• Building costs blew out - Leighton Holdings

posted a yearly loss of more than $200 m• Overblown traffic forecasts -47,802 vehicles vs

original forecasts of 90,000 vehicles.• Dropping traffic• Debt higher than project value, more than $3 b • Debt compared to toll revenue was

unsustainable.

05/02/2023 Brisbane Airport Link Tunnel Case Study, Presented by Audrey Mwala, Malawi

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Why low traffic• Drivers in Brisbane simply don’t like tolls• Not enough drivers saw the benefit in saving time• Seen as a privilege not a need to use the Tunnel.• People drive less, there is a decline in vehicle km

travelled by Australians per person recently• Young people get their licences later than before • Telecommuting • E-shopping

05/02/2023 Brisbane Airport Link Tunnel Case Study, Presented by Audrey Mwala, Malawi

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Efforts made to save the company

• BrisConnections board entered negotiations in November to restructure the debt

• Lenders were not prepared to support any of the restructure proposals.

• Government ruled out any taxpayer funded bail-out.

05/02/2023 Brisbane Airport Link Tunnel Case Study, Presented by Audrey Mwala, Malawi

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Result

• A trading halt in November when BrisConnections’ board entered into negotiations restructure the debt

• BrisConnections went into voluntary administration• Its lenders decided to put the Airport Link Tunnel's

operator into receivership.• Investors took quite a haircut. • The tunnel continued to operate as normal

05/02/2023 Brisbane Airport Link Tunnel Case Study, Presented by Audrey Mwala, Malawi

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Possible solutions• Refinance their debt• Government waiver of penalties

(liquidated damages)• Contract renegotiation• Waivers• A taxpayer funded bail-out.

05/02/2023 Brisbane Airport Link Tunnel Case Study, Presented by Audrey Mwala, Malawi

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Lessons learnt• The project vehicle failed but Queensland got a brand new asset

that will continue to support Brisbane’s growth into decades ahead.• Need for a reassessment as to how such projects get built in the

future.– Demand risk sharing– Independent recheck of the traffic forecast report– Force majeure events to include genuinely unforeseen challenges by any

reasonable experts• Be comfortable with the current worse case scenario

– Avoid assuming success based on possible future restructuring of the finance

• Prior markets demands tests• Continued communication on project progress with the public

especially the residents where the tunnel passed• Government responsibility, PPP is simply an alternative not a way

out for Govt to negate their responsibility

05/02/2023 Brisbane Airport Link Tunnel Case Study, Presented by Audrey Mwala, Malawi

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Canada LineThe first Transit PPP project in North America

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The Project• A $2 billion fully automated 19.5

kilometre-long regional rapid transit line in the Metro Vancouver region of British Columbia, Canada.

• Connects downtown Vancouver, Vancouver International Airport, Central Richmond in British Columbia.

• Provides efficient, fast, reliable transportation, addresses congestion and boosts the cities’ sustainability and economic competitiveness.

• Provides additional transportation capacity equal to 10 major road lanes

• Construction began in October 2005 • Was completed and opened in August

2009

Brisbane Airport Link Tunnel Case Study, Presented by Audrey Mwala, Malawi

05/02/2023 Brisbane Airport Link Tunnel Case Study, Presented by Audrey Mwala, Malawi

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The infrastructure• The Canada Line project consists of: • An underground tunnel from Waterfront

Station • An elevated guideway climbing from south

of 64th Avenue to Sea Island and Vancouver International Airport and south to central Richmond

• A park-and-ride facility at the Bridgeport Station

• Bus exchanges at Bridgeport, Marine Drive and Richmond-Brighouse Stations; and

• A total of 16 stations along the 19.5-kilometre route:

05/02/2023 Brisbane Airport Link Tunnel Case Study, Presented by Audrey Mwala, Malawi

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Project Financing• The project was expected to cost $2.054 billion• Funding was provided by government and a

private partner • Public contributions come from:• Government of Canada: $450 million• Government of British Columbia: $435 million• Vancouver Airport Authority: $300 million• TransLink: $334 million• City of Vancouver: $29 million• The private sector InTransitBC has invested $750

million

05/02/2023 Brisbane Airport Link Tunnel Case Study, Presented by Audrey Mwala, Malawi

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Project Preparation and selection• The VfM analysis found that the PPP option

offered significantly higher value for money than public sector procurement.

• The key value factors in the winning PPP proposal were:– significantly lower construction costs (The PPP

construction cost savings were $85 million in net present value. i.e. PSC $2.054b vs PPP bid $1.76b)

– similar operating and maintenance costs,– enhanced service and – higher projected ridership and revenue.

• The net present value of the transaction in 2003—when the deal closed—was $1.47 billion.

05/02/2023 Brisbane Airport Link Tunnel Case Study, Presented by Audrey Mwala, Malawi

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Value for Money (VFM) Drivers• This project demonstrates value for

money because of:• Fair and competitive procurement process • Efficient and effective risk allocation• The project is being delivered through a

performance-based contract• The public benefit from

– private sector capital, – innovation and – efficiency as well as from – private sector’s interest in a successful

system over the long term.

05/02/2023 Brisbane Airport Link Tunnel Case Study, Presented by Audrey Mwala, Malawi

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Risk allocation• The private consortium assumed the

bulk of construction and operating risks

• The regional transportation authority bore:– property acquisition risk– ridership revenue risk because:– it controls the transportation system and – related marketing and – is responsible for setting fare levels and – integrating train and bus schedules.

05/02/2023 Brisbane Airport Link Tunnel Case Study, Presented by Audrey Mwala, Malawi

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The PPP structure

• InTransitBC was a preferred party to design, construct, and partially finance the system,

• It owns the train vehicles, • It operates and maintains the Line under an operating license from the Greater

Vancouver Transportation Authority through to the end of the agreement.• The Greater Vancouver Transportation Authority:

– owns the line, – collects all fare revenues – Sets system-wide transportation policies and fare levels.

• InTransitBC was awarded a 35-year contract• A combination of public and private monies funded construction.• Completed several months ahead of schedule in August 2009

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InTransitBC Remuneration

• During the construction period, InTransitBC was paid after achieving identified milestones.

• During the operating period, payments are made for the achievement of performance targets such as:– train frequency, – safety, cleanliness and – ridership.

05/02/2023 Brisbane Airport Link Tunnel Case Study, Presented by Audrey Mwala, Malawi

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Implementation challenges• The PPP approach was new in the community, it generated

considerable debate at the regional government level; • Unions made PPPs an issue, opposed private involvement in

what they believe is govt’s role• Unions argued that the process did not allow plans to be

developed with public consultation, it limited discussion to abstract parameters, leaving design details to private partner.

• Opponents believe it was politically motivated and that it would cost more money because of the private involvement

• Opponents have claimed that the approval process was undemocratic and dishonest

• Cambie Street experienced significant loss of business due to disruptions during the construction phase i.e. One side of the street was cut off from traffic and parking was affected

05/02/2023 Brisbane Airport Link Tunnel Case Study, Presented by Audrey Mwala, Malawi

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Performance of the Line• Performance traffic target was

anticipated at 100,000 per day in 2013 and 142,000 boarding's per day by 2021,

• But ridership has grown with average of 83,000 per day in September 2009,

105,000 per day in March 2010, and over 136,000 passengers per weekday in June 2011

• During the 17 days of the 2010 Winter Olympics, the line carried an average of 228,190 passengers per day.

05/02/2023 Brisbane Airport Link Tunnel Case Study, Presented by Audrey Mwala, Malawi

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Benefits• Provided protection for the public

from cost overruns and • Provides quality rapid transit service• Since the completion of the Canada

Line, the line has been linked to rising property values along Cambie Street and in Richmond.

05/02/2023 Brisbane Airport Link Tunnel Case Study, Presented by Audrey Mwala, Malawi

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Critical success factors• A robust competitive process and an

extensive evaluation process• Procured a partner with the necessary

experience to manage the assigned risks• Private sector innovation-

– innovative tunnel design and – a service plan that would generate more

revenue from higher midday ridership• Communication- the need to continue to

communicate and educate on both the government side and the public about PPPs

• The project cost was on budget and ahead of schedule