31/08/2012
South Australian companies will look for innovative ways to deliver infrastructure projects as market uncertainty prevails, a CEDA forum in Adelaide has heard.
The forum heard that Flinders Ports and ElectraNet continuing to expand their respective investments in ports and electricity networks to cater for demand from smaller mining companies - but would need to be flexible in adapting to rapidly changing economic conditions.
Key leaders in SA's infrastructure sector identified the need for:
- Interim port solutions with low initial capital investment to cater for smaller mining companies;
- A new electricity network to serve the Eyre Peninsula;
- Smart electricity grids and the use of electric cars as power storage devices to even out demand for electricity and to reduce prices;
- A re-think of user-pays/beneficiary pays models of funding infrastructure to free up finance for new projects; and
- Governments to look at capital contributions for public private partnerships in social infrastructure projects to deflect the additional cost of debt.
SA Department of Planning and Infrastructure, CEO, Rod Hook said that while South Australia had started the 21st century with a capital investment program of $150 million a year, spending from state and federal governments would dry up over the next couple of years.
"I know it is a sobering thought for industry but we do have an Australian Government with a fixation on getting to a balanced budget as they head to a federal election, and you can see the almost insignificant allocation from the Commonwealth Government to South Australian projects over the next couple of years," Mr Hook said.
In this context, the State Government was looking to the private sector to move into the infrastructure investment space, he said.
Flinders Ports, CEO, Vincent Tremaine said the company continued to expand with the mining boom despite publicised fears about the impact of falling iron ore prices.
"The really exciting area for us is the mining sector - and forget about Olympic Dam, there's plenty of other mining activity about to keep us busy and to keep the State developing," he said.
He said the challenge was to develop infrastructure for junior miners - particularly catering for iron ore producers with large volume, low value parcels that require deep water ports.
"Our view is that we need to get the mines up and running - the best way to do that is to give them an interim solution. They need some way of moving ahead with their project, generating some cash flow, getting the volumes up and then we can provide them with a better solution at some stage in the future," he said.
Flinders Ports has developed an innovative system to transport ore by rail containers to Outer Harbour in Adelaide, emptying the containers into the ship hold with a water spray to minimise dust.
This containerised transport system, which avoids the need to build storage sheds at the port and has a fairly low operating cost, has attracted interest from around the world, he said.
ElectraNet CEO Ian Stirling said the company's shareholders expected to invest between $600 million to $1 billion to increase the capacity of the circuit line to the Eyre Peninsula six-fold by 2020 - depending on securing deals with potential customers.
"Over the next five years we will spend at least another $1.3 billion expanding our network and potentially, depending on what happens with a number of these mining developments, it could be double that," he said.
Ernst and Young, Project Finance Advisory Partner, Darrin Grimsey said governments should re-examine the user-pays concept to assist with funding infrastructure at a time of financial constraint.
"I think we do need to re-visit the user-pays model particularly for large scale infrastructure and risk allocation, and not just throw the baby out with the bath water because some projects went wrong," he said.