Funding & Financing the Nation’s
Future Infrastructure Projects
Chris Legg
Chief Adviser, Infrastructure and
National Secu...
Outline
• Funding vs. Financing
• Addressing the Funding Challenge
– Budget Initiatives
– Encouraging private sector fundi...
Funding vs. Financing – an important
conceptual distinction
• Funding: Who will ultimately pay for the
infrastructure?
• F...
-6
-4
-2
0
2
4
6
8
14
16
18
20
22
24
26
28
2007-08 2010-11 2013-14 2016-17 2019-20 2022-23
Per cent of
GDP
Per cent of
GDP...
Note: Contributions to income growth in the period 2013 to 2025 are consistent with the forecasts and projections detailed...
Commonwealth Budget - $11.6 billion
infrastructure ‘Growth Package’
• $5 billion Asset Recycling Initiative
• $2.9 billion...
Commonwealth Budget –sustaining record
levels of transport infrastructure spending
0
2
4
6
8
10
12
0
2
4
6
8
10
12
2000-01...
Asset Recycling Initiative –
unlocking State funding
• $5 billion to leverage $38 billion.
• States and territories will r...
Commonwealth Budget – addressing the
Infrastructure funding challenge
Key elements of the Commonwealth’s
approach to Funding
• Redirection of significant levels of recurrent spending
• The Ass...
Road user charges – Productivity
Commission Report
Draft Recommendation 7.2
• All governments should take deliberate steps...
Private Funding offers the potential to
significantly grow the overall Infrastructure
spend
User charging – the story so far…
• User charging already common for much
economic infrastructure
– E.G. Electricity, gas,...
User Charging – not just a funding solution
• Incentives for the efficient use of existing road
infrastructure
• Price sig...
• Infrastructure Australia:
– Governance reforms currently before Parliament
– Rolling 15-year infrastructure plan
– 5 yea...
Private funding means an increasing role
for private finance
• The need to manage timing mismatches
between funding and ca...
Queensland (15)
Airport Link/Northern
Busway $5.1bn
New generation rolling stock
$4.1bn
North South Bypass Tunnel
(CLEM 7)...
Private financing – the emerging
‘Greenfields’ toll roads challenge
Road Transport Infrastructure Development
6 years to 2...
Private financing – challenges for
Governments
• Possible Refinements to the PPP model?
– Too driven by short term conside...
A financing role for the Commonwealth -
WestConnex Stage 2
• Concessional loan of up to $2 billion
• Financing will enable...
The Commonwealth’s potential
financing role – some high level
principles
• Selecting the right projects remains critical
•...
The International Dimension – The G20’s
Infrastructure and Investment Agenda
• Actions to improve domestic investment envi...
Thank You
Questions?
Upcoming SlideShare
Loading in...5
×

Chris Legg - The Treasury - Financing the Nation’s Future Infrastructure Projects

376

Published on

Chris Legg delivered the presentation at 2014 National PPP Summit.

The National PPP Summit is the leading annual event for industry stakeholders to gather and discuss the issues across the national and global PPP markets. The 2014 agenda reviewed current and emerging financing models as well as showcasing best practice strategies for the procurement process, risk transfer and whole-of-life project management.

For more information about the event, please visit: http://www.informa.com.au/PPPSummit14

Published in: Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
376
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
23
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide
  • 5
  • Chris Legg - The Treasury - Financing the Nation’s Future Infrastructure Projects

    1. 1. Funding & Financing the Nation’s Future Infrastructure Projects Chris Legg Chief Adviser, Infrastructure and National Security
    2. 2. Outline • Funding vs. Financing • Addressing the Funding Challenge – Budget Initiatives – Encouraging private sector funding? • Addressing the Financing Challenge • The International Dimension – Australia’s G20 Agenda
    3. 3. Funding vs. Financing – an important conceptual distinction • Funding: Who will ultimately pay for the infrastructure? • Financing: Mustering the up-front resources needed, to be repaid over time by the funding
    4. 4. -6 -4 -2 0 2 4 6 8 14 16 18 20 22 24 26 28 2007-08 2010-11 2013-14 2016-17 2019-20 2022-23 Per cent of GDP Per cent of GDP Receipts (LHS) Payments (LHS) Underlying cash balance (RHS) Budget year -1.5 -1 -0.5 0 0.5 1 1.5 -1.5 -1 -0.5 0 0.5 1 1.5 Per cent of GDP Per cent of GDP Fiscal challenges for all Governments Sources: 1990-91 to 2011-12 ABS Cat. No. 5512.0; 2012-13 State and Territory Final Budget Outcomes; 2013-14 Mid-year Budget updates for NSW, QLD, SA, TAS, ACT and 2014-15 Budgets for VIC, WA and NT. Aggregate cash position of the States Source: 2013-14 MYEFO 2013-14 MYEFO payments, receipts and underlying cash balance
    5. 5. Note: Contributions to income growth in the period 2013 to 2025 are consistent with the forecasts and projections detailed in 2014-15 Budget Statement 2. The hatched area represents the additional labour productivity growth required to achieve long run average growth in real gross national income. Source: ABS 5204.0 and Treasury. -1 0 1 2 3 4 -1 0 1 2 3 4 1960s 1970s 1980s 1990s 2000 to 2013 2013 to 2025 Percentage points contribution, annual average Percentage points contribution, annual average Net foreign income Labour utilisation Labour productivity Terms of trade Per capita income Living standards – Australia’s challenge
    6. 6. Commonwealth Budget - $11.6 billion infrastructure ‘Growth Package’ • $5 billion Asset Recycling Initiative • $2.9 billion for Western Sydney • $3.7 billion added to Infrastructure Investment Programme – East West link (II), Perth Freight link, Toowoomba 2nd Range Crossing, North South Road Corridor – Black Spot Programme – Roads to Recovery Programme
    7. 7. Commonwealth Budget –sustaining record levels of transport infrastructure spending 0 2 4 6 8 10 12 0 2 4 6 8 10 12 2000-01 2002-03 2004-05 2006-07 2008-09 2010-11 2012-13 2014-15 2016-17 2018-19 $billion $billion Previous transport infrastructure commitments Additional transport infrastructure commitments
    8. 8. Asset Recycling Initiative – unlocking State funding • $5 billion to leverage $38 billion. • States and territories will receive 15% of the price of the asset sold if all the sale proceeds are allocated to new infrastructure – Which adds to productive capacity, has clear net positive benefit and taps private sector investment where possible. • Proposed asset sales will be included on the National Infrastructure Construction Schedule
    9. 9. Commonwealth Budget – addressing the Infrastructure funding challenge
    10. 10. Key elements of the Commonwealth’s approach to Funding • Redirection of significant levels of recurrent spending • The Asset Recycling Initiative • Reintroduction of indexation of fuel excise and hypothecation • Looking to test scope for increased private sector funding – E.G. User Charging
    11. 11. Road user charges – Productivity Commission Report Draft Recommendation 7.2 • All governments should take deliberate steps towards implementing institutional reforms in the road sector for cars and other light vehicles that improve project selection processes, facilitate greater adoption of direct user charging mechanisms, and more directly link road charge revenue with future spending on roads. Draft Recommendation 7.3 • Australian Government funding or other forms of assistance (such as loans and government guarantees) for public infrastructure that is provided to local, State and Territory Governments should be conditional on the following: – … evidence that the relevant government has efficiently used opportunities for users and other beneficiaries to fund the infrastructure through measures such as user charges, betterment levies and property development charges
    12. 12. Private Funding offers the potential to significantly grow the overall Infrastructure spend
    13. 13. User charging – the story so far… • User charging already common for much economic infrastructure – E.G. Electricity, gas, water and sewerage, communications networks, airports, ports, public transport, car parks • But a piecemeal approach for roads – Little recourse outside of selected major roads in Sydney, Brisbane and Melbourne − Applied to individual roads, rather than to a road network − Little or no debate about possible regulatory framework
    14. 14. User Charging – not just a funding solution • Incentives for the efficient use of existing road infrastructure • Price signal to help ensure the right projects are built – Targeting scarce public funding to projects with public benefits that cannot be reflected in market pricing
    15. 15. • Infrastructure Australia: – Governance reforms currently before Parliament – Rolling 15-year infrastructure plan – 5 yearly infrastructure audit • Cost Benefit Assessment of projects, with funding over $100m • Asset Recycling eligibility criteria • Consideration of PC Report Selecting the right projects –the other key policy elements
    16. 16. Private funding means an increasing role for private finance • The need to manage timing mismatches between funding and capital expenditures • The case for a mix of private and public financing – Benefits of private sector discipline – Closing market gaps and addressing market failures – Addressing viability gaps through mix of finance and funding
    17. 17. Queensland (15) Airport Link/Northern Busway $5.1bn New generation rolling stock $4.1bn North South Bypass Tunnel (CLEM 7) $3.2bn Gold Coast Rapid Transit $1.1bn New South Wales (31) Victoria (45)South Australia (7) New Royal Adelaide Hospital $2.9bn Education Works (6 Schools) $193m RailCorp Electric Suburban Rail Carriages $3.6bn Western Sydney Orbital (M7) $1.54bn Royal North Shore Hospital Redevelopment Stage 2 $1.1bn Lane Cove Tunnel $1.1bn Tasmania (3) Risdon Prison Redevelopment $100m Western Australia (10) Mundaring Water Treatment Plant $360m Midland Public Hospital $360m CBD Court Complex $235m Northern Territory (2) Darwin Prison $495m Darwin Convention and Exhibition Centre/Waterfront redevelopment $108m. Australian PPP experience Victorian Desalination Plant $5.7bn Melbourne City Link $1.8bn Eastlink $2.6bn Peninsula Link $849m Tasmania
    18. 18. Private financing – the emerging ‘Greenfields’ toll roads challenge Road Transport Infrastructure Development 6 years to 2008 6 years to 2014 Next 6 years (proposed) Quantum of road infrastructure developed Government funded contributions $0.8 Bn Government grant leverage ratio: 22x $2.7 Bn Government grant leverage ratio: <1x ? Greenfield patronage risks ~100% with private sector 100% with public sector ? Source: AquAsia $19 Bn $2.6 Bn $25 Bn
    19. 19. Private financing – challenges for Governments • Possible Refinements to the PPP model? – Too driven by short term considerations? Improving patronage forecasts. Lowering bid costs, etc • Welcoming unsolicited bids • Creating and sustaining a pipeline of investment opportunities • Impediments to institutional investors, e.g. Super Funds?
    20. 20. A financing role for the Commonwealth - WestConnex Stage 2 • Concessional loan of up to $2 billion • Financing will enable the acceleration of this stage of the project by up to 18 months • Complements $1.5 billion in grant funding that the Government committed at MYEFO • Signals Commonwealth’s willingness to consider alternative financing arrangements
    21. 21. The Commonwealth’s potential financing role – some high level principles • Selecting the right projects remains critical • Sharing of risks between project participants should be transparent • State Governments and private sector partners should not be ‘crowded out’ • The Commonwealth’s role in infrastructure projects should be reported transparently
    22. 22. The International Dimension – The G20’s Infrastructure and Investment Agenda • Actions to improve domestic investment environments – Comprehensive Growth Strategies to raise the level of G20 output by at least 2 per cent above the currently projected level in the next 5 years. • Supporting long term investment financing – Improving the planning, prioritisation, evaluation and funding of projects – Greater transparency and certainty for investors • Government can play a catalytic role in promoting infrastructure investment • Deepening domestic capital markets and improving access to global capital markets • Multi-lateral Development Bank work in support of these priorities
    23. 23. Thank You Questions?
    1. A particular slide catching your eye?

      Clipping is a handy way to collect important slides you want to go back to later.

    ×