Investment

opportunities
in Australian
infrastructure
Contents

WHY AUSTRALIA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

A NATIONWIDE COMMITMENT TO INFRASTRUCTURE INVESTMENT. . . . . . 6

PRIVATE SECTOR PARTICIPATION WELCOME. . . . . . . . . . . . . . . . . . . . . . . . . . . 10

CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

FINANCING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

OPERATORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

INVESTMENT OPPORTUNITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

HOW AUSTRADE CAN HELP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Printed October 2015.

Disclaimer
This report has been prepared as a general overview. It is not intended to provide exhaustive coverage of the topic. The information
is made available on the understanding that the Australian Trade Commission (Austrade) and the Australian Government are not
providing professional advice.
While all care has been taken in the preparation of this report, the parties do not accept any responsibility for any losses suffered
by persons relying on information contained in this report or arising from any error or omission in the report. Any reference to
companies or investment activities is for illustrative purposes only and does not constitute an endorsement of those companies or
any investment activity.
Copyright The Australian Trade Commission (Austrade) October 2015. 13-14-562
This report is subject to copyright. All or part of it can be reproduced for bona fide research or public policy with appropriate
acknowledgement of the Australian Trade Commission. Requests and inquiries concerning reproduction should be addressed to
Austrade, GPO Box 5301, Sydney NSW 2001 or email info@austrade.gov.au.
Front cover image: Brisbane, Queensland.

| Investment opportunities in Australian infrastructure

Australia.
Stable. Resilient. Prosperous.
Australias buoyant economy, growing population and increased trade
footprint are driving the countrys need for new and sophisticated
investments in infrastructure.

As an underpinning for economic growth, infrastructure development

is a priority for the Australian Government. Infrastructure planning and
innovative financing play a prominent role in public policy. The Australian
Government has committed A$50 billion to investment in land transport
infrastructure between 201314 and 201920 onwards. This is in addition
to significant investments by state and territory governments and the
private sector.

Australia welcomes foreign investment. The countrys strong economic

credentials, transparent business environment and substantial pipeline of
projects provide the ideal conditions for companies to finance, construct,
own and operate major infrastructure assets.

Port Botany, Sydney, New South Wales.

 12
12TH LARGEST ECONOMY
IN THE WORLD
IMD World Economic Outlook, October 2015
Nominal 2015E

5
5TH LARGEST ECONOMY
IN THE ASIAN REGION
IMD World Economic Outlook, October 2015
Nominal 2015E

GDP:
US$1.3 TRILLION
IMD World Economic Outlook, October 2015
Nominal 2015E

AAA AAA
CREDIT RATING
Standard & Poors, Moodys and Fitch

POPULATION:
23.7 MILLION
(March 2015) ABS Cat. No. 3101, 24 September 2015

Workers on a building site, Sydney, New South Wales.

Why Australia
Australia offers a powerful combination of solid economic performance, a diversified economy and low-risk environment in
which to do business. These drivers of economic growth are complemented by strong demand on current infrastructure.

Strong economy Increasing,

With 24 years of uninterrupted annual economic growth and
a AAA sovereign risk profile, Australia is well positioned to
continue growing. Despite the fact that it is home to only
0.3 per cent of the worlds population, Australias GDP
accounts for 2 per cent of the worlds economy.
Australias diversified economy means that no single sector
contributes more than 11 per cent to the countrys real gross
value added. In 2014, the infrastructure sector accounted
for around 10 per cent of the economy. The construction
sector has recorded the highest average annual growth rate
since 1992, followed by professional, scientific and technical
services, and financial services.
urbanised population
Over the next 40 years to 2055, Australias population
is expected to grow at 1.3 per cent a year, resulting in a
population of 39.7 million an increase of 60 per cent.1
The composition of the population is also changing. Like
many countries, Australia has an increasing number of
citizens aged 65 and over, with the number in this bracket
expected to double by 2025. 2
Eighty-nine per cent of Australians live in cities, regional
centres and towns, mainly along the coastline. Almost half of
the countrys 23.7 million people live in Sydney, Melbourne
and Brisbane. Our four largest cities Sydney, Melbourne,
Brisbane and Perth are projected to grow from 12.8 million
citizens in 2011 to 18.6 million by 2031. 3

Urbanisation and a growing and ageing population are

placing increasing pressure on social and economic
infrastructure. For example, without the development of
additional capacity, Infrastructure Australia has estimated
that the economic cost of congestion in Australian
capital cities could be as high as A$53.3 billion by 2031. 4
These trends provide significant incentive to build more
infrastructure and use existing infrastructure more efficiently.

1. A
 ustralian Government Treasury, 2015 Intergenerational Report: Australia in 2055, page vii.
2. A ustralian Government Treasury, 2015 Intergenerational Report: Australia in 2055, page 1.
3. Infrastructure Australia, Australian Infrastructure Audit, May 2015, page 5.
4. Infrastructure Australia, Australian Infrastructure Audit, May 2015, page 8.

Investment opportunities in Australian infrastructure | 3

 Australian infrastructure statistics
Fiscal year 201213
60

9.6 per cent

of GDP generated by Australian
infrastructure industries

203.6 billion tonne-kilometres

of freight moved by road
60
290.6 billion tonne-kilometres
of freight moved by rail

32.4 million passengers

on international flights in Australia

57.7 million passengers

60
on domestic flights

6.7 million TEUs 60 60

exchanged at Australias five principal

container ports

60
872,849 kilometres
of roads in Australia

32,784 route-kilometres
of open railway in Australia

1,659 route-kilometres
of urban railway in Australia
60

60
747 public hospitals and
612 private hospitals
in Australia5

9.7 million hospitalisations

in public and private hospitals6
Source: Bureau of Infrastructure, Transport and Regional Economics,
Australian Infrastructure Statistics Yearbook 2014.

Port Botany, Sydney, New South Wales.

60
Robust freight growth
Australias trade performance is increasingly driven by its
proximity to Asia, with 10 of its top 12 export markets in the
region. Asias appetite for Australian minerals and energy
resources continues, and there is growing demand for
Australian agriculture, merchandise and services.
As a major exporter of bulk commodities and other
merchandise, Australia expects road freight to grow by
50 per cent and rail freight to grow by 67 per cent to 2030.7
For example, as at April 2015, Australia had A$225.8 billion
worth of committed resources and energy projects 8 , and all of
these commodities need transportation to be moved offshore.
As an island nation, the country is particularly dependent on
well-functioning seaports and airports to facilitate trade with
the world.
Welcoming
investment destination
The Austrade publication Why Australia Benchmark Report
2015 on investment in Australia shows Australia is a very
positive place to do business. It ranks 10th in the world for
ease of doing business, and fourth when compared with
economies with a similar or larger population. Australia also
has a very strong and efficient regulatory environment, it is
rated highly as an open market and its governance quality
is among the best in the world.11
The Australian Government has identified infrastructure
development as a priority and will play a leading role in
building the countrys roads, rail, seaports and airports over
the next seven years.

Large project pipeline Australia remains, in BMIs

The growth in population and freight volumes has created
a pressing need for new social and transport infrastructure.
opinion, one of our favourite
This growth also places pressure on governments to long-term markets among
maintain and improve existing infrastructure assets.
developed states, offering an
In 2011, the value-add (economy-wide spending) attributable attractive combination of vast
to infrastructure services was estimated to be 13.3 per cent
of GDP. 9 Infrastructure Australia forecasts this attributable growth potential (stemming
value-add to grow roughly in proportion to the Australian from the infrastructure
economy to 2031.10
sector) and low risks in the
To support industry engagement on major projects, the
operating environment.
Australian Government maintains a publicly accessible list of
upcoming public infrastructure works contracts. Business Monitor International,
Created in 2012, the National Infrastructure Construction Australia Infrastructure Report, February 2012
Schedule (NICS) lists all federal, state and local government
projects going to market. It also lists government asset
sales. NICS provides investors with an accurate, transparent
view of current and future opportunities to help them select
and plan for projects. Visit nics.gov.au for more information.

5. Australian institute of Health and Welfare, Hospitals at a Glance.

See: aihw.gov.au/hospitals/#haag.
6. As above.
7. Department of Infrastructure and Regional Development, Trends: Infrastructure and Transport to 2030, February 2014.
8. D epartment of Industry and Science: Office of the Chief Economist, Resources and Energy Major Projects, April 2015, pages 14-17.
See: industry.gov.au/Office-of-the-Chief-Economist/Publications/Documents/remp/REMP-April-2015.pdf.
9. Infrastructure Australia, Australian Infrastructure Audit, May 2015, page 6.
10. As above.
11. W hy Australia Benchmark Report 2015, Australian Trade Commission, January 2015, pages 52-54.

Investment opportunities in Australian infrastructure | 5

 A nationwide
commitment to
infrastructure investment
The Australian Government has identified infrastructure
development as a priority and plays a leading role
in building the countrys roads, rail, seaports and
airports. In 2008 it established Infrastructure Australia
an independent national infrastructure advisory
body to help develop a strategic blueprint to unlock
infrastructure bottlenecks, and modernise the nations
economic and social infrastructure.
In May 2015, Infrastructure Australia delivered
Australias first top-down audit of nationally significant
infrastructure. The audit confirms existing and
emerging gaps in Australias infrastructure. It also notes
the challenges faced by governments in a fiscally
tight environment.
Webb Bridge, Melbourne, Victoria.
6 | Investment opportunities in Australian infrastructure
Infrastructure Australia is now producing the
Australian Infrastructure Plan (the Plan), which will
outline Infrastructure Australias views on Australias
infrastructure priorities. From the Plan, Infrastructure
Australia will develop an infrastructure priority list of
nationally significant proposals for consideration by all
levels of government, as well as provide opportunities
for the private sector to put forward unsolicited bids.
The Plan will be revised every five years.
In the 201516 Budget, the Australian Government
reaffirmed its commitment to land transport infrastructure.
The government has committed approximately
A$50 billion for current and future investments, of which
A$43.9 billion is in the Infrastructure Investment Programme.
KEY INFRASTRUCTURE PROJECTS
RECEIVING AUSTRALIAN
GOVERNMENT FUNDING
Bruce Highway (QLD): A significant
commitment for the Bruce Highway between
Brisbane and Cairns targeting safety, flood
mitigation and congestion

Pacific Highway (NSW): A$5.6 billion to

complete construction of a dual carriageway
between Hexam and the Queensland border

Western Sydney Infrastructure Plan (NSW):

A$2.9 billion for road upgrades and a
new motorway

WestConnex (NSW): A$1.5 billion to extend and

upgrade the M4 and M5 corridor including the
construction of a tunnel linking the motorways

Gateway Upgrade North (QLD): Up to

A$926.6 million to upgrade the motorways
northern section

North-South Corridor (SA): A$1.7 billion to

upgrade the Northern Connector, Torrens Road
to River Torrens and Darlington sections of
Adelaides North-South Corridor

Gateway WA (WA): A$676 million to improve the

safety and efficiency of one of the states most
important transport hubs

Perth Freight Link (WA): A$925 million to

extend the Roe Highway and upgrade roads

NorthLink WA (WA): A$894 million for a

new highway and grade separations at three
interchanges on the Tonkin Highway

Northern Sydney Freight Corridor (NSW):

A$840 million to improve freight-train access
between Sydney and Newcastle

Moreton Bay Rail Link (QLD): A$583 million to

build a new rail line

Western Highway (VIC): A$501.3 million to build

a duplication of a key section of the highway

Inland Railway (National): A$300 million for

pre-construction works
Asset Recycling
Initiative
The Australian Governments Infrastructure Growth Package
includes A$4.2 billion for an Asset Recycling Initiative to
encourage the sale of public infrastructure. Under the
initiative, the Australian Government will provide incentive
payments of 15 per cent of the assets sale price to state and
territory governments, on the condition that sale proceeds are
used to fund new productivity-enhancing infrastructure.
RECENT PRIVATISATIONS UNDER
THE ASSET RECYCLING INITIATIVE
New South Wales
The NSW Government is leasing 49 per cent
of the states electricity network. The proceeds
will be invested in the Rebuilding NSW plan,
which involves a range of projects such as the
Sydney Rapid Transit rail project (including a
second harbour crossing) and the Parramatta
Light Rail project.
Australian Capital Territory
The ACT Government is privatising nearly
A$400 million worth of assets including betting
agency ACTTAB, public housing and commercial
property. The proceeds will be invested in the
Capital Metro light rail project.
Infrastructure is important for
Australia because of its size,
the geographical dispersion of
its population and production
centres, and its remoteness
from other markets.
 ECD, International Futures Programme, Pension
O
funds investment in infrastructure, September 2011
12. Infrastructure Australia, Northern Australia Audit Infrastructure for a Developing North, January 2015.
8 | Investment opportunities in Australian infrastructure
Opportunities in
northern Australia
White paper on developing northern Australia
With the release of Our North, Our Future: White Paper on
Developing Northern Australia on 18 June 2015, the Australian
Government confirmed its commitment to developing
northern Australia. This includes identifying and upgrading key
roads, ports and railway to address the lack of infrastructure,
considered a key barrier to northern growth. Northern
Australia spans all of the Northern Territory and north of the
Tropic of Capricorn in Queensland and Western Australia.
The white paper included a Northern Australia Transport Package
to build and make better use of transport and infrastructure. The
package includes A$600 million for capital investment in specific
road projects, and A$5 million for cross-jurisdictional rail freight
analyses. The white paper also announced the establishment
of a A$100 million beef roads fund.
Northern Australia Infrastructure Facility
In the 201516 Budget, the Australian Government announced
a A$5 billion loan facility to fund the productive capacity of
northern Australia. The facility provides concessional loans to
projects that would not otherwise be built.
The Northern Australia Audit report identified more than 180
infrastructure requirements across sectors including airports,
communications, energy, ports, rail, roads and water.12
For more information, visit naif.treasury.gov.au.
Working with state and
territory governments
There are three levels of government in Australia with defined
law-making powers: federal, state and territory, and local. All
three levels work together to deliver public infrastructure.
The federal government is the main revenue-raising government
in Australia. It raises money by collecting taxes on incomes and
company profits, tax on goods and services (GST) and through
other charges such as fuel excise and customs duties. State
and territory governments have much of the responsibility for
planning and building public infrastructure. As such, most major
infrastructure projects are developed in partnership and jointly
funded by federal and state governments.
 The next [infrastructure]
boom will be dominated not
by brownfield or greenfield
development, but by asset
disposal programs. The bulk of
disposals will be the privatisation
of state-owned assets.
ANZ Bank, IIB Insights, April 2014

The Ghan, Northern Territory. Image courtesy of Tourism NT.

Investment opportunities in Australian infrastructure | 9

 Private sector
participation welcome
The Australian Government is seeking further growth in private investment in public sector infrastructure projects to meet
increased demand for infrastructure over the next decade. Opportunities exist to invest at all stages of an assets life for
both domestic and overseas companies.
Publicprivate
partnerships
Australian governments have a 25-year history
of embracing publicprivate partnerships (PPPs),
recognising the benefits private sector participation
provides including innovation, operational efficiencies
and alleviating pressure on public finances.
Australia has extensive experience using PPPs and
the approach has developed into a mature model
of private sector engagement for Australian public
infrastructure works. Since the late 1980s, Australian
governments have used PPPs to deliver social
infrastructure projects such as hospitals and schools,
and upgrades to major economic infrastructure such
as road, rail and energy networks.
Barangaroo development, Sydney, New South Wales.
10 | Investment opportunities in Australian infrastructure
Innovative approaches
to PPP financing
The Australian Government uses a range of funding and
financing mechanisms to encourage additional private
sector investment and ensure the Australian taxpayer dollar
is efficiently used.
The Australian Government is providing a concessional
bridging loan of A$2 billion to accelerate the construction
of the WestConnex M5 by up to 18 months. The loan will be
classified as a subordinated loan.
The Toowoomba Second Range Crossing is the
Queensland Governments largest single infrastructure
project. Under this PPP arrangement, the Australian
Governments commitment will be paid in full during the
construction phase of the project. The consortium will
ultimately be responsible for the design, build, operate
and maintain phases of the project. The Queensland
Government will be responsible for setting toll prices and
a procurement process is underway to identify a suitable
contractor to establish toll collection services for all vehicles.
EXAMPLES OF RECENT PUBLICPRIVATE PARTNERSHIPS

Project Terms Procuring Industry Value Consortium

state (A$m) members included
government

Victorian Comprehensive
Cancer Centre 25 years: design, Plenary Group, Grocon,
construct, finance Victoria Health 1,000 PCL, Honeywell, UniSuper,
Specialist cancer treatment hospital, and maintain Partners Group
oncology R&D, education and training

McDonnell Dowell
Constructors, Bombardier
Transportation, KDR Gold
Gold Coast Rapid 15 years: design,
Coast Pty Ltd (Keolis
Transit Phase 1 build, finance,
Queensland Transport 1,296 and Downer EDI), Aveng,
operate and
13 km light rail public transport system Marubeni Group, Palisade
maintain
Investment Partners,
International Public
Partnerships, Plenary Group

Education Works 30 years: design, Capella Capital, Hansen

build, operate, South Australia Education 178 Yuncken, Commonwealth
Six new schools in Adelaide finance and maintain Bank, Spotless Group

New Royal Adelaide Hospital Hansen Yuncken, Leighton,

35 years: design,
Macquarie Capital, InfraRed,
Public teaching hospital with 800 beds build, operate and South Australia Health 1,850
Spotless Group, John Laing
and 40 operating theatres finance
Investments, Lloyds Bank

Mundaring Water Treatment Plant 35 years: design, Brookfield Multiplex,

Western
build, operate and Water 360 Acciona Agua, United
165ML per day water treatment facility Australia
finance Utilities Australia

Investment opportunities in Australian infrastructure | 11

Construction of the Legacy Way tunnel, Brisbane, Queensland.

12 | Investment opportunities in Australian infrastructure

Construction
Australias construction sector is valued at approximately A$124.7 billion per year.13 In the next five years to 2020, the Australian
Government is bringing significant public sector funded projects to market. These projects predominantly involve transport
infrastructure in large cities and telecommunications infrastructure.14

To complete these projects, the Australian Government is engaging domestic and international companies with experience in
complex engineering and construction projects.

International Bouygues Construction

France-based Bouygues Construction has partnered with

construction companies Lend Lease on the A$3 billion NorthConnex road tunnel
project in Sydney, which spans nine kilometres in length.
active in Australian
infrastructure Proposed construction
Samsung C&T project pipeline
Samsung C&T, one of the largest conglomerates in South Korea,
Sydney Metro City & Southwest
was part of the winning consortium selected in September 2015
to design and construct Sydneys new M5 Motorway, which is The NSW Government is planning Stage 2 of its Sydney
part of Australias largest road project WestConnex. To bid for Metro project, the Sydney Metro City & Southwest rail line.
the project, Samsung C&T formed a joint venture with Australias Due to open in 2024, the 30-kilometre rail line will include
Leighton Contractors and Spanish company, Dragados. approximately 12.5 kilometres of twin rail tunnels, as well as
an underground Sydney Harbour crossing and CBD rapid
The new M5 Motorway win follows Samsung C&Ts successful
transit line.
tender for the A$2.7 billion M4 East stage of the WestConnex
project in June 2015. This success represented the first Western Harbour Tunnel
contract for a Korean construction company on a major public
The NSW Government has announced plans for a second
sector infrastructure project in Australia. The consortium
northsouth road tunnel for Sydney Harbour. The Western
is a joint venture with Leighton Contractors and John Holland
Harbour Tunnel will give road users a new route from the
(which is owned by the Chinese Communications
inner west to employment hubs in the north and northwest
Construction Company).
of Sydney.
Samsung C&T is also undertaking contracts for the Roy Hill
Canberra University Hospital
Project in Western Australias Pilbara region. These contracts
include constructing a 347-kilometre rail line, as well as a port The ACT Government plans to build a 140-bed sub-acute
and iron ore processing facilities. hospital on the campus of the University of Canberra. The
facility will provide a range of rehabilitation services, treat
Acciona
various mental health conditions and provide targeted care
As a member of the Nexus consortium, Spanish conglomerate for ageing Canberra residents.
Acciona was awarded the A$1.6 billion contract to design,
Melbourne Metro Rail
construct, finance and operate the Toowoomba Second Range
Crossing project a 41-kilometre highway in Queensland. The Victorian Government announced plans to build the
Melbourne Metro Rail project, which will include two nine-
Acciona has been active in the Australian market for many years.
kilometre rail tunnels and underground stations across
It was part of the Transcity consortium (which included Ghella
Melbournes CBD.
of Italy and BMD of Australia) that completed the 4.6-kilometre
Legacy Way tunnel in Brisbane, valued at A$1.5 billion.

13. BIS Shrapnel, Engineering Construction in Australia 201415 to 202829.

14. As above.

Investment opportunities in Australian infrastructure | 13

Financing
Australias infrastructure market comprises more than just its construction pipeline. Australia has a strong track record of opening
up public assets for privatisation. Since the 1990s, Australian governments have selectively sold infrastructure assets to recycle
capital for new infrastructure projects.

Major investment opportunities for the private sector direct and indirect continue to grow in Australia, especially as state
governments seek to take advantage of the Asset Recycling Initiative. Infrastructure Australia has identified up to A$219 billion
in publicly owned assets with privatisation potential.

Upcoming proposed WestConnex

privatisations
NSW Electricity Network Assets Lease
New South Wales has a reliable, world-class electricity system
that includes generation, transmission and distribution through
to retail business. The NSW Government intends to proceed
with a 99-year lease of 49 per cent of the network businesses.
This includes leasing 100 per cent of TransGrid, 50.4 per cent
of Ausgrid and 50.4 per cent of Endeavour Energy.
Port of Melbourne
Australias largest container port is currently owned by the
Victorian Government. In 201314, the port processed more
than 2.53 million twenty-foot equivalent units (TEUs), with
growth expected to double over the next 20 years. In FY
201314, the port generated A$102.3 million in operating
profit before income tax, and A$205 million in earnings before
interest, tax, depreciation and amortisation.
M5 financing
WestConnex M5 is a Sydney tollway development. Sydney
Motorway Corporation, the NSW Governments investment
vehicle for WestConnex, recently completed a process to
raise the required debt for the project, and is close to finalising
the terms and conditions of the A$2 billion Commonwealth
concessional loan. The NSW Government expects investment
opportunities to arise once WestConnex is operational and
traffic patronage is proven. If and when that occurs, the NSW
Government will seek to sell down its equity holdings in the
WestConnex project.

Port of Fremantle

With port facilities at Fremantle and Kwinana, the Port of

Fremantle is Australias fourth-largest container port and
is due for privatisation in 2016. In 201314, total port trade
was 33.36 million mass tonnes with a value of more than
A$28.4 billion.

The Kwinana Bulk Terminal imports and exports bulk products

and handles a variety of commodities including coal, iron ore,
liquefied petroleum gas, cement clinker, gypsum, nut coke,
slag and grain. In 201314, Kwinana Bulk Terminal had a total
throughput of 5.2 million tonnes and generated revenue of
A$61.6 million, with expenditure of A$36 million.

14 | Investment opportunities in Australian infrastructure

 EXAMPLES OF INTERNATIONAL
COMPANIES ACTIVE IN AUSTRALIAN
INFRASTRUCTURE FINANCING
Abu Dhabi Investment Authority

The Abu Dhabi Investment Authority was a member

of the consortia awarded the 99-year lease of the
state-owned Port Botany and Port Kembla in NSW.
The Abu Dhabi Investment Authority also holds
shares in the Port of Brisbane.

Canada Pension Plan Investment Board

Canada Pension Plan Investment Board

has Australian investments including the
A$3.4 billion acquisition of toll road operator
Intoll and a A$525 million (25 per cent) stake
in Sydneys NorthConnex Motorway.

China Merchants Group

China Merchants Group committed to investing

A$1.45 billion jointly with Australia-based Hastings
Funds Management to secure a 98-year lease of
the Port of Newcastle.

Deutsche Asset Management

Deutsche Asset Management has invested in

Australian infrastructure over many years and holds
assets in airports, seaports and gas distribution.

Ontario Teachers Pension Plan

Canadian pension fund Ontario Teachers Pension

Plan, in consortia with Australia-based Hastings
Funds Management, successfully bid for the
50-year lease of the Sydney Desalination Plant.

Port of Melbourne, Victoria.

Investment opportunities in Australian infrastructure | 15

Sydney Harbour, New South Wales.

16 | Investment opportunities in Australian infrastructure

Operators
State governments are turning to the private sector for assistance in operating and managing state-owned assets, particularly water
utilities. There is now an opportunity for investment in these assets to ensure their ongoing productivity.

Examples of operators Some Australian superannuation funds have reached

critical mass in funds under management, enabling them to

foreign investment invest in infrastructure assets in their own right, while smaller
funds will generally use a specialist infrastructure manager
to gain exposure.
Keolis

French transport conglomerate Keolis is a 51 per cent

shareholder in KDR Victoria, the private company responsible
for operating Melbournes tram network under the trading name
Yarra Trams. KDR Victoria won the eight-year operating contract
in 2009, which has an optional extension period of seven years.
Keolis is also a member of the GoldLinQ consortium, which
in 2011 won a 15-year PPP contract from the Queensland
Government to design, build, finance, operate and maintain the
Gold Coast Light Rail system.
Veolia Environnement
French transnational company Veolia Environnement owns a
40 per cent stake in Transdev Australasia a joint partner
in Harbour City Ferries. In July 2012, the NSW Government
awarded Harbour City Ferries a seven-year franchise contract
to operate the services of Sydney Ferries.
Infrastructure financing
expertise
Australian infrastructure investment managers have significant
expertise in financing infrastructure.
Small investment managers or those without experience
in infrastructure investments can use the skills of local fund
managers to participate in the Australian infrastructure market.
Larger funds with established skills and dedicated infrastructure
investment teams can partner with Australian superannuation
funds or investment managers in consortia.
Australian fund managers are also active in offshore infrastructure
deals. This creates opportunities for Australian and international
firms to form strategic investment partnerships in Australia, their
home jurisdiction, and third markets of mutual interest.

Investment asset class

Australias US$1,788 trillion pool of funds under management is Secondary trade market
the third largest in the world and the largest in Asia.15 Australian
Participants in the Australian infrastructure market are not
superannuation funds (pension funds) have been active investors
limited to primary asset sales or greenfield builds. The countrys
in infrastructure for almost 20 years and have developed strong
stock of privately owned infrastructure assets provides a strong
expertise and knowledge of the sector. Many of these funds
secondary market for buyers and sellers. Examples of secondary
are attracted to the long-term and stable cash flows inherent in
market activity in 2013 include the following:
infrastructure assets through their inelastic demand properties.

The Industry Super Network, an industry association representing

Australian superannuation funds with around A$150 billion in
assets, has recorded 12.2 per cent annual returns over the past
15 years from its unlisted infrastructure investments the highest
return of all asset classes.16 The standard deviation of returns was
also one of the lowest at 6.5 per cent.
Global Infrastructure Partners sold its unlisted equity in the
Port of Brisbane to Caisse de dpt et placement du Qubec
after three years of ownership.
UK pension fund Universities Superannuation Scheme
purchased Airtrain Holdings, which held the concession for
the Brisbane Airport rail link.

Many superannuation funds with long-term investment horizons

State Grid Corporation of China purchased
19.9 per cent equity from Singapore Power in
now classify and measure infrastructure as a separate asset
the listed energy infrastructure assets of SP AusNet.
class, appreciating the unique qualities and diversification it
15. Investment Company Institute, Worldwide Mutual Fund Assets and Flows Data,
provides in the asset-allocation decision. December 2013.
16. Industry Super Network, Building Australia: Super investment initiative,
June 2013.

Investment opportunities in Australian infrastructure | 17

Investment opportunities
With a fast-growing population and freight movements expected to double over the next 20 years and treble along the eastern
seaboard17, there are many opportunities for international investors, construction and engineering companies, and operators.
Australia is making significant investments in transport, utilities and social infrastructure.
Roads
Australias road network is 872,849 route-kilometres in
length as of 2013, with 144,011 kilometres of urban roads
and 728,838 kilometres of non-urban roads. In 201213,
203.6 billion tonne-kilometres of freight was carried on
roads. Domestic road passenger movements within
Australia was 413.3 billion passenger kilometres.18
Rail
Australia is investing in rail freight infrastructure to increase
the volume of freight that can be transported by trains
and to ease urban congestion. The Australian Government
is progressing planning for the estimated A$10 billion
Melbourne to Brisbane inland rail project, committing A$300
million for pre-construction work in the 2014 Budget.
Sydney Airport, New South Wales.
18 | Investment opportunities in Australian infrastructure
Seaports
Australias island status and liberalised trade policies offer
tremendous potential for future growth in port freight. The
weight of international sea freight to and from Australia
has increased by 87.8 per cent over the past 10 years,
growing by 7.3 per cent per annum.19 Infrastructure Australia
has identified up to A$11 billion of seaport assets with
privatisation potential.
Airports
Australia is the worlds 14th largest aviation market based
on passengers transported. 20 Total passenger movements
have increased by 49.6 per cent between 200405 and
201415, growing by 4.1 per cent per annum. In 201415,
total passenger movements totalled 147.4 million. 21
All of Australias capital city airports are operated by private
companies holding long-term leases from the Australian
Government. These airports prepare a Master Plan every five
years setting out their major construction and development
plans for the medium term.
In April 2014, the Australian Government announced that
Commonwealth-owned land at Badgerys Creek will be the
site of an airport for Western Sydney. Detailed planning
is underway towards the proposed airport commencing
operations in the mid-2020s. The project is expected to
create significant direct and indirect economic benefits, along
with potential opportunities for the private sector, both during
construction and ongoing operation of the proposed airport.
Opportunities exist for private financiers to invest in
Australian airports, including existing federal-leased airports
and existing private airports. As state and local governments
examine the possibility of privatising regional airports, or
seek private investment to upgrade regional airports, further
opportunities may become available.
 EXAMPLES OF MAJOR AUSTRALIAN
Energy
Australias demand for energy is expected to increase due to
INVESTORS IN INFRASTRUCTURE
economic and population growth, creating opportunities for
General partners future construction projects. There are 39 electricity generation
projects worth A$226.3 billion at the committed stage.22
AMP Capital
Capella Capital
Colonial First State Water
CP2
As the worlds driest inhabited continent, water security and
Hastings Funds Management
management is a major priority for Australia. This has led to a
IFM Investors number of major water infrastructure projects in recent years,
Macquarie Group including desalination plants in Adelaide, the Gold Coast,
Palisade Investment Partners Melbourne, Perth and Sydney. Significant capital expenditure is
required to renew ageing assets and expand the network in line
Plenary Group
with population growth.
Transurban Group
Whitehelm Capital

Limited partners
Social infrastructure
AustralianSuper Like many countries, Australias population is ageing, with
Construction and Building Industries the number of Australians aged 65 and over increasing from
Superannuation Fund 11.6 per cent of the population in 1993 to 14.4 per cent in 2013.
This rate is projected to accelerate in coming years and grow
Future Fund
at a faster rate than the broader population.
HESTA
Australias ageing population will require federal, state and
MTAA Super Fund
territory governments to spend an increasing proportion of their
QSuper
income on health and aged care facilities. Governments will be
Queensland Investment Corporation looking to the private sector to bridge funding gaps.
Retail Employees Super Trust
In addition, Australias fast-growing general population will require
UniSuper additional schools, defence, justice and other social infrastructure
Victorian Funds Management Corporation to be constructed.

PPPs are common for these types of projects due to the

availability and attractiveness of payment structures. Recent
PPP projects include the New Royal Adelaide Hospital in
South Australia, Ravenhall Prison in Victoria, the Victorian
Comprehensive Cancer Centre and the Queensland
Schools Project.

17. Minister for Infrastructure and Regional Development speech, IPA Partnerships 2013 Conference keynote address, 18 October 2013.
18. BITRE, Australian Infrastructure Statistics Yearbook 2014.
19. BITRE, Australian sea freight 201213.
20. World Bank, Infrastructure Databank.
21. BITRE, Airport traffic data 198586 to 201415.
22. Bureau of Resources and Energy Economics, Electricity Generation Major Projects, April 2015.

Investment opportunities in Australian infrastructure | 19

Sydney Harbour Bridge, New South Wales.

20 | Investment opportunities in Australian infrastructure

How Austrade
can help
The Australian Trade Commission Austrade
contributes to Australias economic prosperity
by helping Australian businesses, education
institutions, tourism operators, governments and
citizens as they:

develop international markets

win productive foreign direct investment
promote international education
strengthen Australias tourism industry
seek consular and passport services.
What we provide

Working in partnership with Australian

Commonwealth agencies, state and territory
governments, Austrade provides international
investors with the information needed to establish
or expand a business in Australia. Services for
international investors include:

initial coordination of investment enquiries

and assistance
information on the Australian business
and regulatory environment
market intelligence and investment opportunities
identifying suitable investment locations
and partners in Australia
advice on Australian government programs
and approval processes.
Accessing Austrades investment services

Austrades investment services are free of charge

and are focused on productive foreign direct
investment outcomes of strategic importance to
the Australian economy, to build capability and
enhance productivity.

austrade.gov.au/invest

info@austrade.gov.au

Investment opportunities in Australian infrastructure | 21