robert macey, department of transport, planning and local infrastructure - case study: the...
DESCRIPTION
Robert Macey, Director, Department of Transport, Planning and Local Infrastructure Victoria delivered this presentation at the Asset Privatisation Briefing Day. Informa's Asset Privatisation Briefing Day offers an essential guide to the sale of government infrastructure assets, including analysis of the motivations for recycling capital plus state-based reviews on recent asset sales and updates on future plans for privatisation. Find out more at http://www.informa.com.au/assetprivatisationbriefingTRANSCRIPT
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The Privatisation of Victoria’s Public Transport Services
Early experiences and subsequent refranchising
Robert Macey, Director, Department of Transport, Planning and Local Infrastructure
Asset Privatisation Briefing Day, Sydney, December 2013
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Overview
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Prelude to Privatisation
Appetite for further reform
(Strikes of 1997)
Subsidy of $850 million per year too
high by world standards
UK rail privatisation encouraging precedent
PTC becomes corporatised businesses
(1998)
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A Franchising Model
• Asset sale not feasible
• Financial support and Government oversight
• Re-tendering every 12 to 15 years
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Privatisation Objectives
• Improvement in services
• Increase patronage
• Minimise costs to taxpayers
• Transfer risk • Ensure highest standards of safety
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Key Features
Franchise term
Vertical integration
Competition by
comparison
Base contract payments
Variable revenue
allocation
Operational performance
regime
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Private Operation – 29 August 1999
National Express
Extensive UK experience
Tram and a train franchise - M>Tram and M>Train
Yarra Trams
Joint venture between French public transport operator Transdev and Australian Transfield Services
Second tram franchise – Yarra Trams
Connex
Consortium led by French conglomerate Vivendi
Second train franchise - Connex
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Performance (2000 - 2001)
• Early impressions 2000
• Highly visible improvements - low-profile trams and “superstops”; new services for sporting
and cultural events; new information displays
• Surveys showed punctuality of trains and trams up
2001
• Reliability generally improved; cancellations in less than 1% of services; bonus payments in a majority of quarters
• But serious issues were emerging – claims of higher than expected fare evasion – difficulties with ticketing system – revenue allocation - surveys not reflecting patronage growth achieved
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Avoiding Operational Crisis
Financial trouble
• Assessments in early 2002 showed significant losses needing parent support
• Unrealistic assumptions of revenue growth and cost reduction
• Interim Operating Agreements
National Express withdraws
•Couldn’t agree IOAs and withdrew in December 2002
•Left Yarra and Connex having signed IOAs
Retender, Renationalise or
Renegotiate?
•Decision time
•Performance improvement (P&R 35%) and industrial peace
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Foundations for 2003 Renegotiation
“One train one tram”
Metlink
Contract Length
Public Sector
Benchmark
Financial Sustainability
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Different Approach to Risk
• Farebox Revenue Risk – cost risk more manageable than revenue risk
– risk sharing mechanism gave protection if farebox fell below threshold
• Profit Sharing Mechanism – limit excessive returns from a single source negotiation
• Revenue Allocation – scrapped variable quarterly allocation to 40/40/20 across operators and State
– reduce volatility and grow total pool
• Input Based Maintenance Regime – output based (flexibility and risk to franchisee) to input based (AMPs) to reflect
State as custodian
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Next Stop: Patronage Growth
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Foundations for 2007 Refranchising
Going to Market August
2007
Capacity Constraints
and Demand
Network Investment
and Partnering
Contract Term
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A New Proposition
• Network Development Partnership – key planning forum
• Revenue Risk – 3 year reset to reduce volatility – allocation fixed at 1/3 each – New Ticketing System Guarantee
• Infrastructure Performance Regime – KPIs and reward for performance
• Customer Experience Performance Regime – security, information and cleanliness
• Project Delivery Regime – margin for project activity
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Privatisation Journey - Success or
Failure?
• Success through evolution
• Government’s understanding of “risk transfer”
• Informed client
• Realities of a privatised environment