Increased private sector involvement in infrastructure development is one option for the state government as it seeks to manage rising costs and rising demand for new infrastructure.
Increased private sector involvement in infrastructure development is one option for the state government as it seeks to manage rising costs and rising demand for new infrastructure.
Announcing the release of a state infrastructure strategy discussion paper last week, Treasurer Eric Ripper said public and private infrastructure investment was tipped to reach $650 billion over the next 20 years.
He also said the state was reviewing its current plans in light of rising costs.
The challenge for the government is to provide economic infrastructure such as ports and railways to sustain the state’s growth while also meeting the demand for social infrastructure, hospitals, schools, sporting stadiums and the like
To date, the state government has been wary of partnering with the private sector for infrastructure projects. Its only major public private partnership was formed for the District Court project currently under construction in the city.
Another significant PPP has recently been negotiated in WA, but with the local government sector.
Mindarie Regional Council, which handles waste management for City of Perth and six suburban councils, has negotiated a PPP for its new waste recycling facility.
The BioVision 2020 consortium, led by WorleyParsons and Macquarie Bank, has been selected to build the $80 million facility.
The private sector has played a big role in infrastructure provision in two specific sectors.
Most notably, the forerunners of BHP Billiton and Rio Tinto established most of the economic and social infrastructure that underpinned the Pilbara iron ore industry.
Most of the money they are currently investing in expansion projects is devoted to lifting the capacity of their port and rail operations rather than the actual mines.
Similarly, the $3.7 billion cost of Fortescue Metals Group’s Pilbara iron ore project mostly relates to the port and rail facilities it is installing.
In the Mid-West region, two private sector consortiums have proposed the development of a new port at Oakajee, north of Geraldton, and rail lines linking to proposed iron ore mines in the hinterland.
Murchison Metals has signed an agreement with Toll Holdings, South Korea’s POSCO Engineering and Japan’s Mitsubishi to develop the infrastructure, at an estimated cost of $1.8 billion.
A competing proposal was put forward earlier this month by unlisted Perth company Yilgarn Infrastructure, which is aiming to arrange Chinese backing for its $2 billion proposal.
Both proposals await a state government decision as to the best way forward.
Power generation is another sector where private money is providing infrastructure.
New entrants such as Alinta and Griffin Group are developing their own projects, while NewGen Power is building a new base-load power station after winning a tender run by the former Western Power.
One of the biggest infrastructure projects facing the state is the development of a new harbour in Cockburn Sound, to cope with expected growth in container traffic after Fremantle Harbour reaches its capacity.
The Fremantle Port Authority has put forward its preferred option, which involves construction of an island port linked to the mainland by a bridge.
The first stage of that project will cost an estimated $1.3 billion.
James Point Pty Ltd, which is part-owned by Len Buckeridge’s BGC Group, is aiming to develop a competing land-backed wharf nearby, at what it believes will be less than one third of the cost.
Two major road projects are expected to proceed late this year.
The state government has selected Macmahon Contractors as preferred contractor for a four-kilometre, $171 million extension of the Mitchell Freeway.
It has also selected the southern gateway consortium, comprising Leighton Contractors, WA Limestone and GHD Consulting, as preferred contractor for the $500 million Perth Mandurah Highway.
