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High Speed Rail Phase 2 / 291

Staged delivery

6.1 Rationale and methodology for system stagingThesizeandcomplexityofanHSRprogram,togetherwiththeoverallestimatedcapitalcost,aresufficienttoconcludethatitwouldneedtobedeliverednotasasingleproject,butinaseriesofstages.

Astagedapproachwouldreducetheupfrontfundingdemandsandallowforfuturefundingtobestaggered.Itwouldalsoallowrevenuetobegeneratedonsectionsofthesystemastheyarecompleted.

Theoptimaltimingandorderofstagesisprimarilydrivenbypassengerdemand,economicconditionsandfinancial(funding)considerations.ThischapterdescribestheassessmentofthestageddeliveryofafutureHSRsystem,drawinguponthetravelmarketsanalysispresentedinChapter 2,thecommercialappraisalpresentedinChapter 7andtheeconomicappraisalpresentedinChapter 8.

ThedemandassessmentandtheanalysisofHSRsystemalternativesandalignmentshaveidentifiedfiveprimaryroutesegmentsalongtheeastcoasttravelcorridor,connectingthemajorcentresofexpectedfuturedemand:• Brisbane-GoldCoast.• GoldCoast-Newcastle.• Newcastle-Sydney.• Sydney-Canberra.• Canberra-Melbourne.

TheoptimalstageddeliveryofafutureHSRprogramhastoconsiderthesequencingandtimingofconstructionofeachofthesefiveprimarysegments,basedonaconsiderationofneteconomicbenefitandthefinancialimplicationsofthevariousoptions.

6.

Chapter 6 Staged delivery

Theneteconomicbenefitisassessedusingcost-benefitanalysis(CBA),whichseekstoprovideacomprehensiveassessmentofthecostsandbenefitstousersandoperatorsofHSRthatcanbevaluedinmonetarytermsovertheevaluationperiod.Italsoincludesanassessmentofexternalities,suchasenvironmentalimpacts,accidentcostsavingsanddecongestionbenefits.Thisanalysisisconductedforeachpotentialstage.Performanceisassessedusingtheeconomicinternalrateofreturn(EIRR)andtheratioofeconomicbenefitstocost(theeconomicbenefit-costratio,orEBCR).Chapter 8providesmoredetailonthebackgroundtotheCBA.

Financialimplicationsareassessedbybringingtogetherallcostsandrevenuesfortheevaluationperiodonarisk-adjustedbasis.Thismeansthatestimateshavebeenadjustedtoallowforthevariabilityincomponentsofforecastrevenuesand

costs.Thefinancialperformanceofstagingoptionsisassessedintermsofthefinancialinternalrateofreturn(FIRR)andthefinancialnetpresentvalue(FNPV).Chapter 7providesmoredetailontheassessmentoffinancialimplications.

6.2 Individual segment economic performanceACBAwasundertakenforeachsegmentalongthepreferredHSRalignment,toassessthecomparativeeconomicperformanceofeachsegmentifitweretocommenceoperationin2035onastand-alonebasis(i.e.ifeachsegmentwasoperatedindependently1).TheresultsforeachsegmentarepresentedinTable 6-1.Costsandbenefitsaremeasuredinpresentvalues,discountedatfourpercent.AnexplanationofthevariouseconomicmeasuresandfurtherdetailontheeconomicanalysisisprovidedinChapter 8.

Table6-1 Analysisofsegmentperformance(presentvalue(PV),$2012,$billion,patronagein2035,4%discountrate)

Sydney- Newcastle- Brisbane- Gold Coast- Canberra-Canberra Sydney Gold Coast Newcastle Melbourne

Passengers(millions) 5.6 4.2 1.3 1.6 5.1

Passengerkilometres 1,204 460 124 607 2,007(millions)

Distance(kilometres) 283 134 115 606 651

Totalcosts 22.2 17.2 10.2 35.2 29.9

Totalbenefits 20.4 7.4 1.9 3.7 19.8

EIRR 3.8% 1.3% -0.8% -2.9% 2.6%

EBCR 0.9 0.4 0.2 0.1 0.7

Ofallthesegments,Sydney-Canberraperformsbestonastand-alonebasis,butnoneofthesegmentswouldgeneratesatisfactoryeconomicreturnsasstand-alonelines.

1 NotethismeansthatthecostsandbenefitsoftheindividualsegmentscannotsimplybeaggregatedinTables 6-2and6-3.InTable 6-1eachsegmentisassumedtobeindependentlyoperationalin2035forthepurposesofdeterminingthefirststage.ThespurtoCanberraisthereforeincludedinboththeSydney-CanberraandtheCanberra-MelbournedatabutwouldonlybeincludedoncewhenLine1asawholeisconsidered.Inaddition,theconstructionoftheSydney-Melbournelinewouldbeintwostages(Sydney-CanberraandCanberra-Melbourne),withtheformeropeningin2035andthelatterin2040.Thediscountedcostwouldalsoreducebecauseofthetimingdifferences.


Table 6-2comparestheperformanceofthe surprisingly,theresultsimprove,ascompletionstand-alonesegments(Sydney-Canberraand ofthefullcorridorallowsaccesstotheSydney-Canberra-Melbourne)withtheperformanceof Melbournemarket.acompletedSydney-Melbournecorridor.Not

Table6-2 AnalysisSydney-Melbournesegmentperformance(PV,$2012,$billion,4%discountrate)

Stand-alone segment performance Sydney-Melbourne

Sydney- Canberra- (including Canberra Melbourne Canberra)

Passengers(in2035)(millions) 5.6 5.1 23.7

Passengerkilometres(in2035)(millions) 1,204 2,007 13,557

Distance(kilometres) 283 651 894

Totalcosts 22.2 29.9 46.5

Totalbenefits 20.4 19.8 115.7

EIRR 3.8% 2.6% 7.8%

EBCR 0.9 0.7 2.5

SimilarresultsareevidentintheSydney-Brisbane tosignificantlyimprovedeconomicresultsforthecorridor,asshowninTable 6-3.Connectingthe fullcorridorcomparedtoanyoftheindividualthreesegmentssignificantlyincreasesbenefitsin segmentscalculatedonastand-alonebasis.comparisontothestand-alonesegments,leading

Table6-3 AnalysisofBrisbane-Sydneysegmentperformance(PV,$2012,$billion,4%discountrate)

Stand-alone segment performance Brisbane-Sydney (including Gold Coast)

Newcastle-Sydney

Brisbane-Gold Coast

Gold Coast-Newcastle

Passengers(in2035)(millions) 4.2 1.3 1.6 20.7

Passengerkilometres(in2035)(millions) 460 124 607 10,028

Distance(kilometres) 134 115 651 854

Totalcosts 17.2 10.2 35.2 48.5

Totalbenefits 7.4 1.9 3.7 71.5

EIRR 1.3% -0.8% -2.9% 5.5%

EBCR 0.4 0.2 0.1 1.5


Fromaneconomicperspective,thepreferredorder SydneyandBrisbane,andisthepreferredfirstwouldbetoconstructtheSydney-Melbourne stageofthenorthernroute(Line2).Constructionline(Line1)first.WithinLine1,theSydney- oftheNewcastle-SydneysegmentwouldalsoCanberrasegmentgenerateshigherbenefitsthan createnetworkbenefitsbylinkingNewcastleintotheCanberra-Melbournesegment,andalsohas theSydney-Melbourneline.Thefinalsectionsahighereconomicrateofreturn(3.8percent oftheroutetobedeliveredwouldthereforebecomparedto2.6percent).Sydney-Canberrais Brisbane-GoldCoastandGoldCoast-Newcastle.thereforepreferredasthefirststageofLine1,with GiventhesizeandnatureoftheconstructionconstructionthroughtoMelbournecommencing taskfortheGoldCoast-Newcastlesegment,assoonaspracticablethereafter. itispreferableforBrisbane-GoldCoasttobe

constructedbeforeGoldCoast-Newcastle.OnthenorthernroutefromBrisbanetoSydney Thepreferredsequenceofconstructionby(Line2),Newcastle-Sydneygeneratesthehighest segmentfromaneconomicperspectiveisshowneconomicreturnofthethreesegmentsbetween inTable 6-4.

Table6-4 CumulativeeconomicimpactsforeachadditionalstageofthepreferredHSRprogramstaging(PV,$2012,$billion,4%discountrate)

Sydney- Canberra (1)

Sydney-Melbourne (2)

Newcastle- Melbourne (3)

Brisbane-Gold Coast & Newcastle-Melbourne (4)

Full HSR program (5)

Totalcosts 22.2 46.5 58.6 64.3 79.3

Totalbenefits 20.4 115.7 126.7 128.2 180.6

EIRR 3.8% 7.8% 7.3% 7.1% 7.6%

EBCR 0.9 2.5 2.2 2.0 2.3

AsillustratedinTable 6-4,theSydney-MelbournecomponentofthefutureHSRprogramgeneratesthehighesteconomicinternalrateofreturn(EIRR)of7.8percent.ThefirststagefromSydney-Canberrawoulddeliveraneconomicreturnofonly3.8percent,butcompletionoftheSydney-Melbournelinewouldaddsubstantiallytothereturn.

TheadditionofNewcastle-MelbournereducestheEIRRto7.3percent.TheadditionofBrisbane-GoldCoasthasasimilarimpact,withtheEIRRreducingto7.1percent.However,completingtheSydney-BrisbanelineandfinishingconstructionoftheentirenetworkincreasestheEIRRto7.6percent,duetothewidertravelopportunitiesavailableacrossthecompleteHSRsystem.

6.3 Financial implicationsFromafinancialperspective,allincrementalsegmentsshowanegativepresentvalueafterincorporatingallcostsandrevenues,althoughafutureHSRprogramwoulddeliverpositiveoperatingcashflowsoncethelinewascompletedthroughtoMelbourne.Table 6-5showsconstructionandoperatingcostsforeachsegment(inthetoptworows)(undiscounted),aswellastheincrementalfinancialimpactsforeachstageoftheprogram(inthebottomtworows).


Table6-5 IncrementalfinancialimpactsforeachadditionalstageofthefutureHSRprogram($2012,$billion)

Sydney- Sydney- Newcastle- Brisbane- Full HSR Canberra Melbourne Melbourne Gold Coast & program (1) (2) (3) Newcastle- (5)

Melbourne

Totalcapitalcosts

Totaloperatingcashflows

FNPV1

FIRR2

23.0

-1.7

-21.5

N/A3

49.9

38.8

-26.5

1.0%

68.8

43.2

-35.2

0.9%

(4)

79.8

41.5

-41.3

0.4%

114.0

64.8

-47.0

0.8%

Notes:1.FNPVhasbeendiscountedatfourpercent.2.Realpost-tax.3.N/AdenotesanFIRRsignificantlylessthanzerothatcannotbemathematicallycalculated.

6.4 Preferred staging of a future HSR programItisclearthatthemarket,economicandfinancialperformanceofHSRissignificantlygreaterforlinescompletedbetweenstatecapitalsthanfortheshorterroutesections.Additionally,Sydney-MelbournedemonstratessuperioreconomicperformancewhencomparedtoBrisbane-Sydney.ThefirstpriorityfortheHSRsystemshouldthereforebetoconnectSydneyandMelbourne.ThislinewouldhavehigherdemandandgreatereconomicreturnandfinancialviabilitythanthelinebetweenSydneyandBrisbane,andcouldalsobeprovidedatlowercost.

Thesetwolinescouldbeprocured,constructedandoperatedindependentlyand,forthepurposesofstaging,aredenotedasfollows:• Line1-Sydney-Melbourne.• Line2-Brisbane-Sydney.

Thesetwolineswouldinthemselvesneedtobedeliveredinstages:Line 1 Sydney-Melbourne• Stage1–Sydney-Canberra,including

Canberraspur.• Stage2–Canberra-Melbourne.

Line 2 Brisbane-Sydney• Stage1–Newcastle-Sydney.• Stage2–Brisbane-GoldCoast,includingGold

Coastspur.• Stage3–GoldCoast-Newcastle.

ThebreakdownofthelinesandstagescanbeseendiagrammaticallyinFigure 6-1.


Figure 6-1 Preferred staging

QLD

NSW

VIC

ACT

SYDNEY

Taree

Line 2

Line 1

Newcastle

Central Coast

Southern Highlands

Canberra spur

BRISBANE

Gold Coast

Casino

Gold Coast spur

Grafton

Coffs Harbour

Port Macquarie

Wagga Wagga

Shepparton

CANBERRA

Albury-Wodonga

MELBOURNE

KEY Station locationState border

Line 1 - Stage 1 Sydney to Canberra Line 2 - Stage 1 Sydney to NewcastleLine 1 - Stage 2 Canberra spur to Melbourne Line 2 - Stage 2 Brisbane to Gold Coast

Line 2 - Stage 3 Gold Coast spur to Newcastle

Line 1 - Sydney to Melbourne Line 2 - Sydney to Brisbane

Not to scale


ThesequencingofdeliveryofHSRontheeast analysismakesitclearthatthefirststageshouldcoastisbasedonthepreferredstagingshown onlybetheinitialsteptoestablishingthelineinFigure 6-1.Theprogramforthefirstand betweenSydneyandMelbourne.subsequentstagesisdescribedinmoredetailinthe

HSRdemandwouldbeheavilyinfluencedbytheImplementationPlan,providedinChapter 12.completionofthelinesbetweenthecapitalcities.

Theperformanceofeachofthetwosegments Thisisreflectedinthebuild-upofdemandshownbetweenSydney-CanberraandCanberra- inTable 6-6.TheincrementalcostsanddemandMelbourneissubstantiallyinferiortothewholeof representtheimpactsofeachindividualstage;theLine1.Sydney-Canberraispreferredasthefirst cumulativetotalsrepresenttherunningtotalofthestageofLine1,buttheeconomicandfinancial costsanddemandateachpoint.

Table6-6 CostanddemandbuildupbetweenBrisbaneandMelbournewithpreferredstagingto2065

Route sector

Cost PV ($2012 billions)(1) Demand (millions of passengers per year)

Incremental (2) Cumulative Incremental(2) Cumulative

8.4Sydney-Canberra 22.2 22.2 8.4

Canberra-Melbourne 24.3 46.5 31.5 39.9

Newcastle-Sydney 12.0 58.6 6.9 46.8

Brisbane-Gold Coast via Gold Coast spur 5.7 64.3 2.3 49.1

Gold Coast-Newcastle 15.0 79.3 34.5 83.6

Note:1.CostsaredifferentfromthoseinTable 6-2andTable 6-3astheyreflectthetimingforthestagedprogram.2.IncrementaldemandforthesesectionsisheavilyinfluencedbythetravelbetweenthestatecapitalsfacilitatedthroughthecompletionofLine1andLine2.

6.4.1 Timing ThetimingestimatesdescribedinthischapterhavebeendevelopedusingestablishedAustralianmethodologiesandcapabilities,blendedwithinternationalprecedentsofHSR.

ThepreferredstagingofafutureHSRprogram,asshowninFigure 6-2,setsouttheorderofconstructionwithregardtotheeconomicandfinancialperformanceofindividualsegments.

TheSydney-CanberrastageofLine1(Line1stage1)wouldbethefirststagetobeconstructed.ThesecondstageofCanberra-Melbourne(Line1stage2)wouldfollowassoonaspracticable

thereafter.Constructiontimingwouldbesubjecttoeconomicandbudgetaryconsiderations,butifeachstageweretofollowsoonafterthepreviousstage,thetotalprogramwouldstilltakearound30 yearstofullyconstruct.Althoughtheconstructioncouldbeaccelerated,therearepracticalissuestoconsider,includingthecapacityofindustrytoefficientlyconstructaprojectofthis size.


Figure6-2 IndicativetimingofthepreferredstagingofafutureHSRprogram

Preliminary requirements

Line 1: Sydney – Melbourne

Line 1 stage 1: Sydney – Canberra

Line 1 stage 2: Canberra – Melbourne

Line 2: Brisbane – Sydney

Line 2 stage 1: Newcastle – Sydney

Line 2 stage 2: Brisbane – Gold Coast

Line 2 stage 3: Gold Coast – Newcastle

2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070

Preliminary requirements, and outline design

Detailed design, project management and procurement

Construction and commissioning

Operations commence

Forevaluationpurposes,thecommercialand • Deferredroll-out–consistsofpushingtheeconomicappraisalsthatfollowinChapter 7and constructiontimelinebackbyfiveyears.AChapter 8arebasedontheindicativeprogram 50 yearappraisaltimeframehasbeenappliedillustratedinFigure 6-2,withtheopeningof withanenddateof2090.thefirststageoftheHSRprogramin2035and

Theimpactsontheeconomicandfinancialresultscompletionoftheentirenetworkin2058.ThisfortheacceleratedrolloutaresummarisedindoesnotnecessarilyrepresenttheeconomicallyTable 6-7andTable 6-8 respectively,withtheoptimalcommencementdate.Twootheroptionsresultsforthedeferredrolloutsummarisedinweretested:Table 6-9andTable 6-10.Theincremental

• Acceleratedroll-out–consistsofbringing impactscolumnineachofthetablesshowstheforwardbyfiveyearstheconstructiontimeline. incremental(i.e.additional)costsandbenefitsofA50 yearappraisaltimeframehasbeen theacceleratedanddeferredrolloutincomparisonappliedfromthedateofcommencementof tothereferencecase.construction,withanenddateof2080.


Table6-7 Impactofanacceleratedconstructiontimeframeontheeconomicresults(PV,$2012,$billion,4%discountrate)

Measure

Totalcosts

Reference case Accelerated roll-out

Accelerated roll-out incremental impacts

15.279.3 94.5

Totalbenefits 180.6 193.1 12.5

EIRR 7.6% 6.8% <4%

ENPV 101.3 98.6 -2.7

EBCR 2.3 2.0 0.8

Note:ConsistentwiththeATCNationalGuidelines,theacceleratedanddeferredtimeframeappliesthesamebaseyear(2028)andappraisaltimeframe(i.e.50years)asthereferencecaseanalysis.TheincrementalEIRRcannotbeaccuratelycalculatedduetodifferentenddatesfortheappraisalperiodandnegativeyearlycashflows.AstheEBCRislessthan1.0(applyingafourpercentdiscountrate)itcanbeinferredthattheEIRRislessthanfour percent.

Table6-8 Impactofanacceleratedconstructiontimeframeonthefinancialresults(PV,$2012,$billion,4%discountrate)

Totalcapitalcosts

Reference case Accelerated roll-out

72.0 86.4

Totaloperatingcashflows 15.5 17.1

FNPV -47.0 -58.7

FIRR (real, post tax) 0.8% 0.5%

BringingtheconstructionofthefutureHSRprogramforwardbyaperiodoffiveyearsincreasesboththeprojectscostsandbenefits.Theincrementaleconomicbenefitsoftheacceleratedtimeframe(incomparisontothereferencecase)are,however,lessthantheincrementaleconomiccosts.ThisgeneratesareductionintheENPVofaround$2.7billioninpresentvalueterms($2012)althoughtheEBCRremainspositiveat2.0.Thefinancialperformanceundertheacceleratedroll-outisalsoinferiortothereferencecasewithadecreaseinFIRRof0.3percent.


Table6-9 Impactofandeferredconstructiontimeframeontheeconomicresults(PV,$2012,$billion,4%discountrate)

Measure Reference case Deferred roll-out Deferred roll-out incremental impacts

Totalcosts 79.3 66.3 -13.0

Totalbenefits 180.6 168.7 -11.9

EIRR 7.6% 7.7% <4%

ENPV 101.3 102.3 1.0

EBCR 2.3 2.5% 0.9

Note:ConsistentwiththeATCNationalGuidelines,theacceleratedanddeferredtimeframeappliesthesamebaseyear(2028)andappraisaltimeframe(i.e.50years)asthereferencecaseanalysis.TheincrementalEIRRcannotbeaccuratelycalculatedduetodifferentenddatesfortheappraisalperiodandnegativeyearlycashflows.AstheEBCRislessthan1.0(applyingafourpercentdiscountrate)itcanbeinferredthattheEIRRislessthanfourpercent.

Table6-10 Impactofandeferredconstructiontimeframeonthefinancialresults(PV,$2012,$billion,4%discountrate)

Reference case Deferred roll-out

Totalcapitalcosts 72.0 60.0

Totaloperatingcashflows 15.5 13.9

FNPV -47.0 -37.3

FIRR (real, post tax) 0.8% 1.1%

DeferringtheconstructionbyfiveyearsincreasestheENPVbyaround$1.0billioninpresentvalueterms($2012).Whilethisappearstosuggesttheremaybesomeeconomicgainfromdeferringtheproject,anadditionalbenefitofaround$1.0billionitisrelativelysmallwhencomparedtothetotalreferencecaseENPVof$101.3billion.Itdoes,however,improvethefinancialperformancecomparedtothereferencecasewithanincreaseinFIRRof0.3percent.

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