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Have you ever been to a presentation where one slide blows you away? One slide.
On a big screen at a national infrastructure summit in Sydney on Friday, the plan of the giant Moorebank Intermodal development in Western Sydney was superimposed on the Sydney CBD. It's the same size.
From Circular Quay to Chinatown, from Darling Harbour to William Street. That's the size of this massive logistics hub which will connect by rail to the Port of Botany, with the ambitious goal of taking 3,000 trucks off the road, 40,000 tonnes of carbon a year from the air and reduce the cost of importing and exporting by 20 to 25 per cent.
At a time when Australia, from the Reserve Bank governor down, is beating itself up about lack of action on infrastructure investment and construction, here is a $1.5 billion public private partnership (PPP) that could transform Sydney and turn Botany into Australia's most efficient port.
It's also a giant property play. 240 hectares for development of industrial warehousing whose tenants will drive demand for logistics services. And because of the sheer volumes moving on rail, efficiencies should almost drive themselves.
The private side of this is driven by Qube, the Chris Corrigan-inspired logistics firm with a business model of shaking up supply chains across the country. And there's plenty of room for improvement.
Moorebank details revealedUntil last week, the whole deal had been hidden from view, tied up in confidentiality agreements with the Commonwealth Government, which owns two-thirds of the land, currently used by Defence.
The other third is owned by a consortium of 67 per cent Qube and 33 per cent Aurizon, the Sydney Intermodal Terminal Alliance or SIMTA.
It's SIMTA which will develop and operate the whole Moorebank freight precinct under a 99-year lease.
At an investor briefing on Thursday, Qube managing director Maurice James took analysts through the deal.
He took a good few minutes at the top introducing a line of management suits, responsible for the extraordinary multi-layered negotiations behind the deal.
From the Government side, Moorebank has been driven by Dr Kerry Schott.
Media player: "Space" to play, "M" to mute, "left" and "right" to seek.
If a young businesswoman ever wanted a role model, it's Schott. Now 70, her experience on both sides of PPPs is unmatched.
A former Deutsche Bank MD and head of Sydney Water, now advising NSW Premier Mike Baird on his power station privatisations and perhaps best known for the way she stood up to corrupt forces in politics on both the right and the left.
I asked her what advice she'd give any businessman or woman faced with similar pressure from corrupt forces.
"My main advice is to just tell everybody who will listen about what's going on, so people are very aware of the pressure that you're under," she responded.
Moorebank has been on various drawing boards for over a decade, but it's the last two years, with Schott in place, when environmental approvals, planning approvals, sign-offs of corporate structures and now major contracts have been inked.
Does she think the folk at Qube will be able to deliver?
"We're very confident about that, and we did look at other players in the industry before we moved to negotiate an arrangement with Qube and with their partners, Aurizon," she answered.
The deal is complicated. Essentially the Commonwealth is to fund about $370 million of the development and, importantly, the rail connection between the terminal and the Southern Sydney Freight Line.
Property development in focusSIMTA will build and operate the terminals and also has the development rights for the warehousing at an estimated cost of $1.5 billion over 10 years.
Qube's investment will be around $250 million over the first five years, which James says will be comfortably funded from Qube's balance sheet.
James adds that Qube will be, "working with alternative partners for development of the warehousing precinct, that's an $800 development in our view probably over a ten year horizon."
Importantly, in its arrangements with Aurizon, it has the first rights over all the warehousing developments.
Analysts covering Qube to date have been on the logistics side.
Now the property analysts are being wheeled in to get their heads around Qube, and it's pretty exciting out in the west with all sort of speculation amongst developers.
Consider for example, the large lump of storage property Goodman owns next door to Moorebank, which includes prime river frontage along the Georges River. Wouldn't that be useful if converted to residential while Goodman popped its storage across to Moorebank?
Rail risksSo what is the risk going forward with Moorebank? If the precinct and rail link is built, will the freight come across from road? Because right now, the reputation of rail versus road puts rail a long way behind on efficiency and reliability.
Maurice James says the key is the 240 hectare site, where the warehouse tenants will drive demand for logistics services by rail.
"Essentially it's going to come down to the efficiency of the rail network with the Australian Rail Track Corporation," he explained.
"We're comfortable in negotiations with that. We can address that. The [NSW] State Government has put targets of 28 per cent of the volume through Port Botany to be on rail.
"If ultimately they're at seven million TUs, that's two million plus by rail and Moorebank's only going to be one million so we're very confident that we can work with the stevedores to deliver that capacity requirement."
Media player: "Space" to play, "M" to mute, "left" and "right" to seek.
Also a risk is the potential for a bottleneck on the line in and out of Port Botany. The ARTC has a plan to increase passing loops in the future but, for now, there's spare capacity.
Of course if an inland rail line from Melbourne to Sydney gets up and running, that too would relieve capacity, with a lot of freight directed north to Queensland.
But that really is getting into the too hard basket that RBA governor Glenn Stevens worries about.
Kerry Schott seems pretty impressed with Qube as one of the few outfits that thinks well beyond the dreaded quarterly returns demanded by fund managers.
That's no surprise. Delve into the management team at Qube and you'll find many of the old Patrick boys, who have been salivating about Moorebank for well over a decade.
Qube is publicly talking about 12-15 per cent returns on investment and no doubt privately anticipating more than that.
There's more negotiating to do and lot has to go right, but what struck me was the options this project give James over the next decade.
As for the country, James believes that we'll see a quantum shift in how importers and exporters do business through Moorebank, with much less need for high levels of inventory.
And a port in Botany that leapfrogs the Port of Melbourne in efficiency.
This article first appeared on www.abc.net.au
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