02 April 2007
Key Points:
The RailCorp PPP Project constitutes Australia's largest PPP financing to date and one of the largest in the world in 2006.
The RailCorp Rolling Stock Public Private Partnership (PPP) reached contractual and financial close in early December 2006, concluding a complex two-and-a-half-year tender and negotiation process.
With an estimated total project cost of A$3.6 billion, it is the largest privately financed PPP project yet undertaken in Australia and the biggest rolling stock acquisition in Australian history.
Under the landmark agreement, the Reliance Rail consortium (comprising equity participants Downer EDI, AMP Capital Investors, Babcock & Brown and ABN AMRO) will finance, design, manufacture, commission and provide whole of life maintenance for 78 new 8-car double deck train sets for the Sydney rail network, as well as a new maintenance facility and training simulators. The new trains will replace approximately one-third of RailCorp’s current fleet plus provide some extra trains for growth.
Clayton Utz’ team of lawyers, led by partners Doug Jones, Sergio Capelli and Owen Hayford, and senior associates Aggie Goss and Steven Power, assisted RailCorp through the process which commenced in May 2004 through to financial close. Clayton Utzadvised RailCorp on all aspects of the procurement process, including the call for expressions of interest and shortlisting of bidders, the structure of the documentation for the two requests for detailed proposal, the contractual documentation, planning approval for the maintenance facility at Auburn and other related property issues, local industry participation requirements, evaluation, negotiation of tenders and through to contractual and financial close.
The award of the Contract was made following a public tender process. This commenced on 31 August 2004 with a request for expressions of interest ("EOI") to be submitted by 13 October.
In December 2004 RailCorp decided to invite proposals for a minimum of 208 single deck carriages to be included, rather than proposals only for double deck carriages. Those who responded to the EOI were asked for additional information to enable RailCorp to decide which of those expressing an interest should be invited to submit detailed proposals.
This innovative project further cements Clayton Utz' position as a market leader in PPPs and adviser to the NSW government.
Invitations were issued in May 2005 to four consortia for proposals for single deck trains and to two of the four also for proposals for double deck trains. These were received on 10 October 2005. After evaluation of these proposals, RailCorp concluded that double deck trains offered better value for money.
On 4 May 2006 the Premier of NSW announced that the number of carriages to be procured through the PPP would be increased to more than 600 to accommodate passenger growth on the network.
RailCorp then issued a request for final committed proposals for the provision of 72 trains each day for timetabled service (the successful tenderer would need to construct additional trains as maintenance spares).
Final committed proposals were received in October 2006 and on 10 November 2006 the NSW Premier, Mr Morris Iemma, announced the selection of Reliance Rail as the successful tenderer on the basis of better value for money and a superior train.
Final negotiations were completed shortly thereafter, culminating in contractual close on 3 December 2006 and financial close on 7 December 2006.
Under the agreement with RailCorp, Reliance Rail is required to finance, design, construct, commission and maintain:
for the purpose of making at least 72 trains available to RailCorp for timetable service until the end of the contract term. In return, RailCorp will make certain payments to Reliance Rail, the principal one being "availability payments" which are subject to performance adjustments for service availability and reliability.
The contract term will end 30 years after the delivery of the tenth-last train (ie. around 2042) and may at RailCorp’s option be extended for two further periods each of five years.
For further information, please contact Aggie Goss.
