NZTA enters into talks with Northern Express Group to get a PPP for the Puhoi to Warkworth highway project underway

NZTA enters into talks with Northern Express Group to get a PPP for the Puhoi to Warkworth highway project underway

An 18.5km extension of the ‘Holiday Highway’ north of Auckland is a step closer to getting underway.

The New Zealand Transport Agency (NZTA) has announced it will enter into Preferred Bidder negotiations with the Northern Express Group for the Puhoi to Warkworth project - the second Public Private Partnership (PPP) for a state highway project in New Zealand.

The consortium’s principal partners include the Accident Compensation Corporation, Fletcher Building, Fletcher Construction, Higgins Contractors, HRL Morrison & Co Public Infrastructure Partners, Acciona Concesiones S.L., and Acciona Infrastructure Australia.

The group's financial and commercial adviser is Macquarie Capital, while its debt providers include Westpac, ANZ, China Construction Bank, ACC, United Overseas Bank and DZ Bank. Its equity providers include Public Infrastructure Partners II LP, ACC, Fletcher Building and Acciona Concesiones S.L.

The Northern Express Group was one of three short listed groups NZTA had invited to submit a proposal for the financing, design, construction, management and maintenance of the highway.

The other two groups were Northlink (made up of Cintra Developments Australia, InfraRed Infrastructure III General Partner, John Laing Investments, Ferrovial Agroman, Fulton Hogan) and Pacific Connect (Pacific Partnerships, VINCI Concessions S.A.S., ACS Infrastructure Australia, Aberdeen Infrastructure Investments, Leighton Contractors, HEB Construction).

From here the Group and the NZTA will enter into contract negotiations. If these are successful, NZTA expects to award the PPP contract for the project by late 2016. The contract price will be confirmed at that point.

The motorway is expected to open to traffic in 2022, after six years of building. The Northern Express Group will maintain it for the 25 years after it is completed, yet the public sector will have full ownership of the highway.

The project will form the first section of the Government’s Pūhoi to Wellsford Road of National Significance (RoNS), which aims to extend the Northern Motorway (SH1) from the Johnstone's Hill tunnels just south of Pūhoi to a point north of Wellsford.

Investigations are currently underway on the Warkworth to Wellsford section, with an indicative route expected to be released for public consultation in November.

Transport Minister Simon Bridges says the motorway will boost Northland’s economy, “providing a safer, more reliable transport link between Northland and the upper North Island freight triangle of Auckland, Waikato and Tauranga”.

He says delivering the project using a public-private partnership (PPP) model will allow the project to benefit from private sector innovation and funding sources, increasing certainty of delivery and driving better value for money.

“A PPP opens the door for private sector innovations that are not always achievable under traditional public sector procurement methods. The size and complexity of the project means it will benefit from innovative outcomes in design and construction that the private sector will bring,” Bridges says.

“The Government will continue to consider PPPs for other large-scale and complex transport infrastructure projects which could potentially benefit from the innovation and value-for-money that can be achieved through a PPP approach.”

New Zealand’s first state highway to be delivered through a PPP is the Transmission Gully motorway project in Wellington which is expected to open in 2020.

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It would be ideal if the financing element of this proposal was split from everything else. By all means build the road, and outsource the construction and even a long term maintenance contract to a qualified consortium, which on the surface this group seems to be. There can even be some risk reward incentives in such contracts that encourage cost and performance delivery. There does though seem to be some ideological spin going on when there is a suggestion that including a financing element will somehow bring innovation that would not otherwise be available, and that doing so would increase certainty of delivery. It is not at all obvious how. Meanwhile the Transmission Gulley project seems to be paying an interest element of roughly 12% per annum for its financing, where current government cost of borrowing is 2.5%. If we end up paying a similar 10% per annum premium for 25 years on say a $1 billion project, then we would be paying an extra $2.5 billion for the $1 billion project. Hopefully the financing will be transparent, but you suspect that it will not be.

The major impediment is the flawed ideology of keeping government debt down using off balance rackets such as PPP, which only get registered on the cash flow ledgers, hence friends of the party can be rewarded without a declaration of inordinate public debt . But as we all know from the UK experience, the payment flows to contractor friends inevitably have to be capitalised in the form of highly recognisable term taxpayer liabilities. But of course at this point the initiating government have long since retired.

Classic right-wing fiscal mismanagement and crony capitalism . Why pay $2 billion for the holiday highway when you can instead pay $6 billion and claim to be in surplus at the same time.

Bring back the old Ministry of Works.
NZ Govt should be building critical NZ infrastructure.

10 years working in china, I have seen how infrastructure projects 'can' be implemented....I suggest the NZ government contact me to find the cash, the workforce and the materials, it would be done in one third of the time for half the price. by 2022 the highway could be in the bay of islands.....time to get global.

Just don't check the steel used right ;)

Sounds bloody horrible!

..yes lets make those little gem hideaways up north more accesible. Lets pave the country with tarseal. Lets put developments along those desolete isolated beaches. Then we can sit back, relax and be satisfied that we have made NZ a better place.

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