www.ara.net.au

ABN 64 217 302 489

Heavy Haul Conference

Bryan Nye, CEO ARA

31 July 2013

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The ARA

• Who we are: a member-based association that represents

the interests of the rail sector

• Our purpose: to create an environment that will permit

the Australasian rail industry to prosper

• Who we represent: all rail operators, both private and

government, track owners and managers, manufacturers

of rollingstock and components, and other aspects of the

rail industry

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5 Election Platforms for 2013

• Public Transport -The future of our cities

• Freight by Rail- Keep our economy moving

• Rail Manufacturing- Skilled jobs for the future

• High Speed Rail- Catching up with the world

• Rail Technology- A smart, efficient and safe network

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PUBLIC TRANSPORT

The future of our cities

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Benefiting all Australians

Whether they travel on public transport

or not, every Australian benefits from it

• One passenger train takes 525 cars off

our roads

• Less cars on the road =

– Less road congestion

– safer roads

– reduced greenhouse gas emissions

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Congestion in context

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Rail Patronage

That means an

additional 60,000

people are travelling by

train each week!

Urban Passenger Rail 769.9 million journeys in 2010

(6.1% increase since 2008)

Non-Urban Passenger Rail 13.38 million journeys in 2010

(12% increase since 2008)

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Environmental change

*Marchetti Travel Principle

Relative change 2004 to 2008

Petrol price +31%

Population +6%

Private road vehicle use +1%

Heavy rail +23%

Light rail +10%

Bus +11%

Public transport +18%

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Innovative funding and IA

• Sustainable, reliable funding is needed

• Alternative funding options should be

explored:

– Tax mechanisms to fund rail and public transport

eg fuel tax, parking levies, 0.5% GST increase,

property tax, property development charges

– Hypothecation is crucial

• We support Infrastructure Australia (IA)

evaluation and priority listing

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FREIGHT BY RAIL

Keep our economy moving

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Rail Freight around the world

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Freight Network

Rail’s share of containerised freight

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Trends In Modal Share – Road vs Rail

Key questions:

• Is inter-city rail freight in terminal decline, or can it make a significant contribution to the national economy?

• If it can make a significant contribution, what in broad terms is required to make this happen? 20%

40%

60%

80%

100%

Road

Rail

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Coal

Ore

Sugar

Bauxite

Grain

Other Bulk

Source: Royal Bank of Scotland Transport Equities Update (2012)

Grains 3-4%

Bulk Commodities

931 million tons

Non-Bulk Commodities

20 million tons

Rail Freight

Rail Freight moves nearly 1billion tons of goods p.a. (2011)

Coal Ore Sugar Bauxite Grain Other Bulk

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Rail Freight

0

200

400

600

800

1000

1200

1400

1600

1800

Y2012 Y2020

Coal and Iron Ore

Source: Royal Bank of Scotland Transport Equities Update (2012)

818 million

tonnes

1530 million

tonnes

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Inland Rail

A $4.4 billion

Melbourne – Brisbane

41% existing, 25% upgraded, 34% new track

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Inland Rail benefits

• 7 hours faster than the coastal route- whole of supply chain

benefits.

• Would remove trucks from Pacific, Newell, Hume and New

England Highways

• Allows for 1800m double stacked trains- increased benefits of

scale.

• Freeing of rail capacity through Sydney- currently no freight rail

can enter Sydney from the north during peak hours.

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Inland Rail- delivery strategy

• 2010 ARTC Study is key

• NPV assumed 7%. Today projects such as HSR 4%

• Inland Rail is financially net beneficial when you take

into account positive externalities generated.

• So far secured $300 million in funding for planning

and acquisitions – commencing late 2014

• ARA’s view- Inland Rail needs to be completed by

2020

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Inland Rail- demand analysis

• There is demand for the railway that would result in a freeing of capacity through Sydney (removing 5 northbound M-B services from the Main North Line by 2030)

• Rail mode share increases to be greater than road’s share

Melbourne to Brisbane freight modal share without Inland Rail Melbourne to Brisbane freight modal share with Inland Rail commencing

in 2020

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Carbon Pricing- objective

Ensure equal pricing treatment for road and rail

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Message

• The current exemption for trucks fails logic.

• This exemption is effectively promoting more

carbon emissions by moving freight off rail.

• In any future carbon pricing scheme, road and rail

should be treated equally.

• Government incentives for carbon abatement

initiatives and alternative fuels are encouraged.

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Supporting funding for emissions reduction

1. Supports changes

to fuel standards that

are implementable 2. Introduction of

alternative fuels e.g.

Gaseous fuels or

Biodiesel

3. Greater use of

more-fuel efficient

locomotives and

vehicles

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Heavy Haul- Project example Roy Hill

• Roy Hill will build, own and

operate a 342 kilometre single

line, heavy haul railway to

transport processed iron ore to

the south of Port Hedland

• Five ore trains will operate per

day, with a total payload of

31,450 tonnes of ore

• An advanced communications

based signalling system will

provide improved safety and

operational efficiency, while also

making the rail system ready for

future autonomous operations

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Port Project Overview

• Roy Hill has been

allocated 55Mtpa of export

capacity through the Port

Hedland inner harbour

Port design includes:

• Stockyard with the

capacity to store over five

million tonnes of ore.

• Two berth wharf, 800m

long, caters for 2 vessels

with a combined capacity

up to 420, 000 tonnes

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Project Overview Remote Operations Centre

Mining Processing Rail Ports

Remote Operations Centre

Rapid problem identification

& rectification

Better decisions, faster.

Better people, cheaper.

1. Standardised KPI’S

2. Improved communication

across roles

3. Integrated production visibility

Mine planning Mine scheduling Asset management

Integrated

planning

Integrated

planning

Commercial in Confidence1

• Roy Hill’s Remote

Operations Centre

(ROC) will introduce a

significant new

dimension and standard

to the mining industry

• The end-to-end, state-

of the-art automation will

deliver a higher level of

safety, reliability and

operational efficiency to

Roy Hill’s operations

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Locomotives

Locomotives • 21 x GE EVO – ES44 ACI

Locomotives

• 15 by July 2014 with 6 to follow

in 2015 and 2016

• Locomotive Superintendent

• Maintenance Planner

• Ramping up to 20 Locomotive

Maintainers in 2016/17

• 30 Day Minor Services

• 184 Day Maintenance cycle for

Major Services

• Capability for minor to major

maintenance (Engine and Bogie

changes on site)

• Major component repairs off site

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Rolling Stock Wagons

• D & C Contract - CSR

• 1196 x Ore Cars – Standard Pilbara Design

– Tandem Pairs

– 40TAL

– ECP Brakes

– Auto Park Brakes

– Amsted bogies

• 12 x Rail Tank Cars

• 5 x Flat Tops

• 3 x Ballast Wagons

• Maintenance Superintendent

• 15 Ore Car Maintainers

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Lessons learned

• Pit to port

• Total supply solution

• Safety, Safety, Safety

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RAIL MANUFACTURING

Skilled jobs for the future

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Impacts of increased demand

• Every additional

1 million tonne means

1 new train set

• More tracks

• More skilled employees

- Skill shortage

• Increased cost for all

projects

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ARA Economic Analysis of Rollingstock Procurement: Industry Brief

Deloitte Access Economics | 32

• Time gaps between orders creates significant

resourcing issues for the industry. For instance,

Future Australian Passenger Rolling Stock Report Phase 2 Sporadic Ordering

• Repeated re-tooling and

disassembly of production lines

increases costs.

• Investments in R&D or equipment

may also need to be recouped over

a shorter timeframe.

• Ongoing uncertainty regarding the

timing and size of orders impact on

how industry is able to invest.

• Over 1,200 rail cars are aged 30

years or over

• Over the next 20 years national

fleet will grow from 4,000 to

11,000 cars.

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ARA Economic Analysis of Rollingstock Procurement: Industry Brief

Deloitte Access Economics | 33

Australian rolling stock orders over the past 10 years suggests

that economies of scale is reached when the order size is

around 200 rail cars.

Future Australian Passenger Rolling Stock Report Phase 2

Order Size

Small orders tend to lead

to higher costs per car as:-

• many of the ‘fixed’

costs of building a

train, such as

• research and

development and

• production line

mobilisation,

can only be spread over

fewer units.

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HIGH SPEED RAIL

Catching up with the world

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The preferred route

• 1,748 km

• 4 city stations

• 4 city-peripheral

stations

• 12 regional stations

• 144km tunnels

(8% of the line) or

29% of costs

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Competitive travel times…

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Study proposed stages

• Stage one: Sydney, Southern Highlands,

Canberra, Wagga Wagga, Albury Wodonga,

Shepparton, Melbourne.

– Sydney, Southern Highlands, Canberra = $23 billion

– Canberra, Wagga Wagga, Albury Wodonga, Shepparton,

Melbourne = $26.9 billion

• Stage two: Sydney, Central Coast, Newcastle,

Taree, Port Macquarie, Coffs Harbour, Grafton,

Casino, Gold Coast, Brisbane.

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Forecast travel demands

• 355 million East Coast trips forecast

by 2065 without high speed rail

• Our cities, highways and airports are

congested today.

• In 2065, without alternatives our East

Coast will be gridlocked.

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Without alternatives by 2065

• All airports will need additional runways

• Sydney will need a 3rd airport

• The 800km Hume Hwy will need

duplicating again

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2020: China’s 25,000km HSR Network

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Creating new living circles

What about here in

Australia?

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We have the population for HSR

Source: John Daly, GRATTAN Institute

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RAIL TECHNOLOGY

A smart, efficient and safe network

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ARA analysing cost of Rail v Road

Drivers of cost under the current paradigm

• Higher safety standards/more sophisticated infrastructure than roads

• Operators won’t wear disruption and limit construction access

(build with teaspoons)

• Operators’ conservatism driven by high public profile of disruptions

and fear of backlash

• Commercial drivers put on Rail Operators

• Unique regulatory burden placed on rail projects (red tape)

• Unnecessary gold plating of specifications. (Projects more than 5 years

old would not meet current specifications).

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Rail v Road - Cost Benefits

Bridge Construction nominal 100m long bridge:

Two lane road bridge ( D&C sell price)

• Structure, 100m x 8m wide @$9k / sqm = $7.2M

• Road Furniture = $1.0M

Total $8.2M

Single track bridge ( D&C sell price)

• Structure, 100m x 4m wide @10k/sqm = $4.0M

• Rail systems, Track, OHL, Sigs 100m@$5k/m = $0.5M

• Stations allowance, $12m station every 3km, 100m @$4k/m = $0.4M

Total $4.9M

Key Take-Away Points

• Comparing two lanes of road against single track is conservative

• Rail infrastructure is more cost effective

• If planned properly, rail will deliver step-change results

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Design Benchmarking – Rail v Road

Benchmarked a number of projects across the east coast,

results as follows:

• For large rail projects, design is generally in the order of 4 to 9% of D&C

sell price (including construction phase services and development).

Greenfields were at the lower end, brownfields at the higher end.

• For road projects, design is generally in the order of 5 to 8% of D&C sell

price (including construction phase services and TOC development)

• In both rail and road, the costs of design during bid was high

“As a % of construction cost, it is no more expensive to design

rail against road projects on the east coast of Australia”

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Road v Rail – The New Paradigm

• Gold Coast rail corridor is 1/3rd the width of the

Pacific Motorway

Smaller footprint results in a lower environmental impact

Much more viable solution for every day commuters

Catalyst for growth – build it and they will come

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Rail… it’s always better

• Travelling to work

• Sending freight

• Getting there safely

• The impact on the environment

• Costing less

• Rail… it’s always better

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