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NZTA welcomes PPP decision for Transmission Gully

NZTA welcomes public-private partnership decision for Transmission Gully

The NZ Transport Agency is welcoming the Government’s decision to allow the agency to undertake a Public-Private Partnership (PPP) to finance, build and operate the Transmission Gully portion of the Wellington Northern Corridor.

Transmission Gully, which links MacKays Crossing in the north with Linden in the south, is one leg of the 110-km Wellington Northern Corridor Road of National Significance, which is being developed as a four-lane expressway from Wellington Airport to Levin to enable economic growth, improve road safety and reduce traffic congestion.

NZTA Chief Executive Geoff Dangerfield said the 27-km Transmission Gully highway is a strong candidate for a PPP.

“Given the project’s size and complexity, it lends itself well to being delivered using a PPP. A PPP opens the door for private sector innovations that are not always achievable under traditional public sector procurement methods, and today’s decision gives us the certainty we need to move ahead and deliver the important economic and safety benefits of this project.

“Under a PPP arrangement we anticipate that construction of Transmission Gully will begin by late 2014 with the road completed and open by 2020.”

Mr Dangerfield said PPPs are a proven procurement model internationally for the successful delivery of large-scale infrastructure projects where specific outcomes can be established and measured - and where risks can be identified and transferred to the private sector.

Mr Dangerfield stressed that full ownership of the highway would remain with the public sector, and the nature of the contract to be used would provide a strong incentive for the successful PPP consortium to deliver the best possible results for road users.

“While a private sector consortium will be responsible for financing, designing, building, maintaining and operating the highway for up to 25 years, Transmission Gully will remain a public asset – it is never owned by the PPP consortium.

“The procurement model to be used will allow the NZTA to establish a performance-based contract based on very specific service, quality and value-for-money outcomes. The first payments will only be made to the contractor after the project has been completed to the standards set out in the contract, and any cost increases due to delays would be paid for by the contractor – not the public.”

Although tolling will not be specifically linked to the PPP contract for Transmission Gully, Mr Dangerfield said the Minister of Transport has requested that the NZTA investigate the merits of tolling the route.
Mr Dangerfield said tolling would offset some of the annual costs required to be met by the National Land Transport Fund, meaning more projects could be progressed across New Zealand.
“We will look into the details of the tolling scheme in the new year, and once complete we would consult with affected communities and stakeholders on any proposed tolling schemes. The Minister would separately approve any tolling scheme."

The NZTA will initiate a PPP selection process before the end of the year. A short list of PPP consortia is expected to be identified by April 2013 and, subject to final borrowing approval, a PPP contract will be awarded by mid-2014. Construction would begin by late 2014, and the highway would open for traffic by 2020.

Transmission Gully – Public Private Partnership – Fast Facts

1. What is a PPP?
A PPP, or Public-Private Partnership, is a long-term contract between the public and private sectors covering the financing, construction and operation of public infrastructure or services.

2. What are the benefits of PPPs?
PPP’s allow large and complex projects to benefit from private sector innovation and funding sources, which can increase certainty of delivery. They are typically used for large-scale infrastructure projects where risks can be effectively identified and transferred to the private sector.

3. Why use a PPP for Transmission Gully?
The NZTA says financing and building Transmission Gully as a PPP will allow it to move ahead with certainty to begin construction of the project in 2014 and open the road by 2020, delivering the economic and safety benefits to New Zealanders within eight years.

Progressing Transmission Gully as a PPP will not only bring certainty to this long- awaited project, it will also bring forward many other projects around New Zealand. Because Transmission Gully would be debt-funded over its construction period, around $1 billion of funding earmarked for Transmission Gully will be available to bring forward other projects around New Zealand over the next five years. This will mean more transport projects commissioned than previously planned, releasing greater economic and safety benefits for the whole country.

4. How much will it cost?
That depends on the outcome of the competitive tender process. The current design and construction cost estimate is roughly $1 billion (in 2020 dollars). Under the debt-funding arrangements of a PPP the cost when the road is completed will likely be around $1.3 billion, including accumulated interest during the construction phase.

Under a PPP, the private consortium finances the construction of the project. In return, the NZTA would commit to making service payments to the consortium for 25 years, with the first payment made after the road is available for use in 2019/20. The annual payments are likely to be in the order of $120 to $130 million per year.

Just like borrowing to buy a home, borrowing the funds to build Transmission Gully and spreading the repayments over 25 years means that the final cost will always be more than paying the full cost in cash up front. But it also means that the road (and many other projects) can be built now, and it allows the costs of Transmission Gully to be shared more evenly by those who will benefit from the project in the future.

5. Who will own the road?
Full ownership of the highway will remain with the public sector. While a private sector consortium will be responsible for financing, designing, building, maintaining and operating the road for up to 25 years, Transmission Gully will remain a public asset – it is never owned by the PPP consortium.

6. Will it be tolled?
Maybe. Tolling won’t be part of the PPP contract, but the NZTA is investigating the merits of tolling the route and will report back to the Minister next year.

7. When will Transmission Gully be finished?
The NZTA will initiate a PPP selection process before the end of this year. A short list of PPP consortia is expected to be identified by April 2013 and, subject to final borrowing approval, a PPP contract will be awarded in mid-2014. Construction would begin in late 2014, and the highway would open for traffic in 2019/20.

8. Why do we need Transmission Gully?
Transmission Gully, which links MacKays Crossing in the north with Linden in the south, is a 27km section of the 110-km Wellington Northern Corridor Road of National Signficance, which is being developed as a four-lane expressway from Wellington Airport to Levin to enable economic growth, improve road safety and reduce traffic congestion.

Transmission Gully – the story so far

1919 - First known mention of alternative route for State Highway 1 (SH1) through Transmission Gully (Evening Post 5 June 1919).

1996 - Designation consent sought to include the proposed route through Transmission Gully in local district plans.

2003 - Designation consent for proposed route through Transmission Gully confirmed.

2005 - Transit NZ and the Greater Wellington Regional Council (GWRC) consulted with the public on the Western Corridor Plan which included plans for the building of the Transmission Gully route.

2006 - GWRC included Transmission Gully project in 2007-2016 Regional Land Transport Strategy.

2007 - Transit NZ establishes Transmission Gully project team to undertake investigations and preliminary design.

2008 – Under Phase 1 of the Transmission Gully Project, the NZ Transport Agency undertakes public consultation on the preferred route through Transmission Gully. The consultation resulted in 88.6% of respondents supporting the preferred route.

2009 – Government announces Roads of National Significance (RoNS) programme, with Transmission Gully identified as a possible component of the Wellington Northern Corridor RoNS. Government signals that some RoNS projects will may be delivered with PPPs, including Transmission Gully.

2010 – NZTA carries out Phase 2 of Transmission Gully Project - engagement on design and environmental matters undertaken with iwi, community groups, statutory agencies and territorial/local authority stakeholders in preparation for the lodgement of Notice of Requirement (NoR) and resource consent applications with the Environmental Protection Authority (EPA).

August 2011 – NZTA, Porirua City Council and Transpower lodge concent applications with the EPA, which recommends to the Minister for the Environment that regulatory consent applications be directed to a Board of Inquiry as a proposal of national significance.

September 2011 - Minister for the Environment directs that the applications be referred to a Board of Inquiry.
February – March 2012 - Board of Inquiry hearing on the Transmission Gully applications.

May 2012 - Board of Inquiry’s draft decision released, approving consent applications lodged by NZTA, Porirua City Council and Transpower.

June 2012 - Board of Inquiry final decision released, approving consent applications.

21 November 2012 – Government announces Transmission Gully to be progressed as a Public-Private Partnership.

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