Infrastructure Australia

Infrastructure Funding and Financing Challenges and Solutions

Paul Roe

Director Financing and Funding Policy

Presentation Outline

Infrastructure Australia Overview

Infrastructure funding and financing challenges

Infrastructure funding and financing solutions

2

Role of Infrastructure Australia

3

Adviser to Australian and State Governments and

infrastructure owners on reform & investment

Prioritise projects seeking Australian Government

financial support

Promote domestic and offshore private investment in

infrastructure

Designate projects for access to infrastructure tax

incentive

National PPP Policy & Guidelines

IA Policy Reports

4

Infrastructure Australia

Amendment Bill

5

Main changes:

- abolish position of Infrastructure Coordinator and abolish

Infrastructure Australia Council

- replace with Infrastructure Australia Board and CEO

- establish IA as an independent statutory authority

- conduct National and Northern Australia infrastructure audits

- develop 15-year infrastructure plan

- review all projects where Australian Government contributes >

$100m - social as well as economic infrastructure

- provide advice on delivery of infrastructure projects

s

Infrastructure Funding and Financing

Challenges

6

Infrastructure funding pressures;

Fiscal constraints;

Importance of good project selection; and

Alternative funding and financing sources.

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1

2

3

4

5

6

7

Goal Definition

Problem Identification

Problem Assessment

Problem Analysis

Option Generation

Solution assessment

Solution Prioritisation

The 7-step framework

10

Reform

Demand-side solutions

11

e.g. congestion pricing e.g. working hours

Reform

Supply-side solution e.g. National Managed Motorways

12

Build and non-build

solutions

13

IA CBA template Benefit Cost Analysis Result

Complete the following table:

Real Discount Rate (%)

4% 7% 10%

BCR .... .... ....

NPV ($m, 2013)

i.e. ‘Net Benefit’

.... .... ....

NPV / $ .... .... ....

IRR .... .... ....

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15

16

Difference between Proceeds on

Transfer and Retention Value

17

A$m Transfer Proceeds (Equity Value)

Dividend Retention

Equity Valuation

Difference Difference as % of

Transfer

Ports 6,704 1,015 5,689 85%

Electricity Generation 13,426 5,064 8,362 62%

Electricity Transmission and Dist

31,880 10,015 21,865 69%

Water 37,544 12,082 25,462 68%

Other (Forestry and Freight Rail)

2,403 155 2,248 94%

Total 92bn 28bn 64bn 69%

Source: Infrastructure Australia, Australia's Public Infrastructure—Update Paper—Balance Sheet Impacts of Sell To Build,

December 2013

Asset Recycling Initiative

18

Establishment of a $5 billion fund

15 per cent of the assessed value of the proposed asset

being sold for capital recycling

bilateral transactions agreed trough until 30 June 2016

incentive payments to States and Territories to 30 June

2019.

Infrastructure Australia

Infrastructure Funding and Financing Challenges and Solutions

Paul Roe

Director Financing and Funding Policy