Transportation needs are growing strongly around the world. Continuing globalisation, coupled with high growth rates of population density and GDP in some regions, means that the flow of goods and people will continue to increase over time. And the demand for transport infrastructure is unlikely to be fully met in the future — if ever. Massive investments are being made or planned, posing huge challenges for all parties involved.
Governments are aware of the need to build a strong infrastructure foundation, but many are facing enormous challenges in devoting sufficient capital resources to such projects. And while the availability of capital for investment in transport infrastructure varies from country to country, companies alike are facing significant hurdles in most places.
Simply shifting all responsibility to private financiers will not be the answer, though. Instead, public authorities and private investors will need to investigate various options for sharing responsibility and risk. Rather than a one-size-fits-all approach, governments will need to identify a range of strategies and work together with private investors to create a win-win situation on individual projects.
Getting transport infrastructure right is critical. The presence or absence of transport networks which facilitate efficient supply chains is already a factor in investment decisions around the world; the ability to offer a solid infrastructure is likely to become an even more important criterion in determining a country's or region's competitiveness in the future. Transport infrastructure remains a deciding factor for the economic prospects of a country.
In Australia, the US$350 million redevelopment of Melbourne's Spencer Street station was among the first Public Private Partnership (PPP) projects to be implemented. Spencer Street station is a world-class station that accommodates interstate, regional and metropolitan rail and bus services. The station has the capacity to handle 30,000 commuters per hour during peak periods. For its financing, the project tapped a mix of sources including funds raised in the capital markets through the use of structural enhancements and equity coverage. Other sources of specialised financing helped nurture the project’s commercial development potential while bolstering support and participation by third-party privatised rail operators.
PwC acted as the lead financial, commercial and strategic adviser to the Victorian Government on its PPP with the Civic Nexus Consortium, the group responsible for the redevelopment of the Spencer Street station. We advised on all aspects of the project, including preparing tender documentation and bid evaluation, ensuring that all requirements were fulfilled in the procurement process, and maintaining adequate competition to achieve value-for-money. In addition, PwC carried out project structuring, option analysis and determination of optimal scope and delivery methods, as well as risk assessment and allocation, development of a detailed financial model and joint preparation of the business case.