On a different track

Category: Australia and New Zealand transport

Winner: Queensland New Generation Rollingstock

Nominated by: Macquarie Capital (financial adviser to Bombardier NGR consortium)

Other participants included:
Bombardier NGR consortium (Bombardier Transportation, John Laing, ITOCHU Corporation, Uberior); Allens (legal adviser to Bombardier NGR consortium); State of Queensland (Department of Transport and Main Roads); Projects Queensland; PWC (financial adviser to Projects Queensland); Ashurst (legal adviser to Projects Queensland)

Date of transaction: 20th December 2013

Size of transaction: A$4.4bn (€3.0 billion; $4.1 billion – total contract value over 32-year concession)

One obvious standout from the Queensland New Generation Rollingstock (NGR) transaction is its sheer size. At A$4.4 billion (€3.0 billion; $4.1 billion), this was the single largest investment in rail in the state of Queensland. However, there was far more to the deal than a headline number.

For one thing, bank funding (provided by 11 banks) was oversubscribed by more than two times and featured a “highly competitive” margin during construction that stepped down during the five-year construction phase to mirror the de-risking over the course of the project – delivering interest cost savings.

Furthermore, the bank group eschewed the traditional Debt Service Reserve Account (DSRA) in favour of a Debt Service Reserve Facility (DSRF) which provided “substantial” savings to the concession without adding any material risks. Macquarie Capital believes the use of DSRF will likely become the new market standard, having freed up around $A30 million of cash in this case that would have otherwise been trapped in reserves.

Other innovative aspects of the deal highlighted by Macquarie Capital in its submission included:

– Structuring which made optimal use of Government Contributions, which are milestone-based during the delivery phase, bringing increased value for money while ensuring delivery risk remained with the project company;

– Structuring and modelling that enabled optimal utilisation of the milestone-based contributions and construction-phase operational revenue (from the progressive delivery of trains) to fund construction costs and minimise the private financing required;

– The state was provided with the option of purchasing additional trains through milestone payments with the additional trains subsumed into the PPP contract and subject to the same performance requirements at pre-agreed pricing;

– The structuring included maintenance “windows” for a proportion of the fleet during the day, allowing the project company to plan maintenance activities during off-peak periods, bringing value for money benefits.

The project involved the Bombardier NGR consortium entering an availability-based public-private partnership with the state of Queensland for the delivery of 75 new six-car passenger trains for the Queensland government and a new purpose-built maintenance centre in Wulkuraka, Ipswich. Procurement was led by Projects Queensland in partnership with the Department of Transport and Main Roads.

The judging panel were impressed by the effort involved in pulling such a complex deal together, and also by the market-leading innovations which should ensure that the track has now been cleared for other smoother journeys towards financial close in the future.

What the judges said:

“An extraordinary amount of effort clearly went into achieving this transaction.”

“It bears some close similarities to the Thameslink deal in the UK. Both were landmark deals in 2013.”

Honourable mentions in this category:

Queensland New Generation Rollingstock was seen to be the clear winner in this category.