www.ara.net.au

ABN 64 217 302 489

OUTLOOK FOR RAIL

SUPPLIERS

Bryan Nye, CEO ARA

3 July 2013

www.ara.net.au

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

www.ara.net.au

Election Platforms for 2013

• Carbon Emissions –Rail: Solution for a low

carbon future

• Freight by Rail – keep our economy moving

• Public Transport – the future of our cities

• High Speed Rail – catching up with the world

www.ara.net.au

Transport and Rail

Freight

• 1 billion tonnes of mining product transport on rail

• The state of intermodal freight

• The uncertainty of grain freight

• 1 new train consist needed every week to handle mining growth

Moving People (intra-region)

• 770 million passenger journeys p.a.

• Over 5% growth p.a.

• 60 thousand new passenger journeys every week

• 300 new passenger cars every year

Moving People (inter-region)

• Rail needs to pick up its game in this area

• Solution: High Speed Rail

www.ara.net.au

CARBON EMISSIONS

Rail: Solution for a low carbon future

www.ara.net.au

Objective

Ensure equal pricing treatment for road and rail

www.ara.net.au

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.

www.ara.net.au

The Costs to Rail – The Dollar Value

Direct Costs

$113m

Indirect

Costs

$206-$412m

$525m

www.ara.net.au

Supporting the Coalition’s Direct Action Plan

– the Emissions Reduction Fund

1. Replacing and/or

repowering 183

Australia’s

oldest

locomotives;

2. Energy use

management

tools; and

3. Advanced

breaking

systems

Reduce carbon emissions

Deliver additional

environmental benefits

Not result in price increase to

consumers

Protect Australian jobs

Cannot proceed without

Government’s assistance

www.ara.net.au

Supporting the Coalition’s Direct Action Plan

- Transport fuels and fuel subsidies

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

www.ara.net.au

Rail is better for the environment

• 1 train takes 525 cars or 110 trucks off the roads.

• An average passenger train reduces carbon

emissions by the same amount as planting 320

hectares of trees.

• 1 freight train travelling between Melbourne and

Brisbane instead of trucks reduces carbon

emissions by the same amount as a household

going without electricity for 46 years.

www.ara.net.au

RAIL FREIGHT

Keep our economy moving

www.ara.net.au

Freight Network

Rail’s share of containerised freight

www.ara.net.au

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

www.ara.net.au

INLAND RAIL

www.ara.net.au

Inland Rail

A $4.4 billion

Melbourne – Brisbane

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

www.ara.net.au

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.

www.ara.net.au

PUBLIC TRANSPORT

The future of our cities

www.ara.net.au

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

www.ara.net.au

Congestion in context

www.ara.net.au

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)

www.ara.net.au

HIGH SPEED RAIL

Catching up with the world

www.ara.net.au

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

www.ara.net.au

Competitive travel times…

www.ara.net.au

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.

www.ara.net.au

Why high speed rail here?

• Congestion is crippling our cities and skies

• Our urbanisation is unsustainable

• We need to open up regional Australia by

connecting country and city

• We need to future proof our nation from fuel

shortages or supply shocks

www.ara.net.au

Domestic travel today

• 152 million trips on our East Coast in 2009

• 16.7 million registered motor vehicles

• 430 flights into Syd daily from high speed

locations

• Melb – Syd = 3rd busiest air corridor globally

• Annually:

- 4.4 million on 30,999 planes fly Bris – Syd

- 8.2 million on 53,633 planes fly Melb – Syd

www.ara.net.au

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.

www.ara.net.au

Without alternatives by 2065

• All airports will need additional runways

• Sydney will need a 3rd airport

• The 800km Hume Hwy will need

duplicating again

www.ara.net.au

2020: China’s 25,000km HSR Network

www.ara.net.au

Creating new living circles

What about here in

Australia?

www.ara.net.au

We have the population for HSR

Source: John Daly, GRATTAN Institute

www.ara.net.au

HIGH SPEED RAIL = A FUTURE AUSTRALIA

FOR FUTURE GENERATIONS

www.ara.net.au

Rail Suppliers

Single Rail Supplier Industry Voice Guiding

government policy and agency actions

including Austrade

ARA Board

RCG

JHG, Thiess,

Laing O’rourke,

Leighton,

Downer Works,

Abigroup,

McConnel

Dowel, Balfour

Beatty, Ansaldo

STS.

RMG

UGL Rail,

Bombardier,

Downer, Alstom`,

CAF, Bradken,

Siemens,

Invensys,

ComSteel.

ARISEG

Waranga

Engineering,

TTG Transport,

OEM Technology,

Faiveley.

ARA Operator

Groups

PTG

FTG

WDG.

www.ara.net.au

ARIC Transition into ARA

www.ara.net.au

Australian Rail Manufacturing Industry

Strategic Plan 2009 - 2014

Clear long term

demand profile

Harmonised national

product specifications,

policy & standards

Strong customer

partnerships

Innovative &

technology savvy

Internationally competitive

& strong export market

Skilled, capable &

renewed workforce

Cohesive industry

with a single voice

2014 Milestones

1. Funded rail supply task force in place and body established

2. Convincing case articulated and key stakeholders on board

3. COAG endorsed strategic development plan for the rail

supply industry

4. Harmonisation body established and a major exemplar

standard published

5. Five new major research projects funded and underway

and demonstrated industry uptake of existing research

6. Developed an effective Tier 3 supply chain development

program

7. Consistent national industry participation and procurement

policy implemented

8. Published first annual consolidated demand forecast and

wide endorsement

9. Media plan with six positive press releases on value of rail

industry

10. Skills enhancement plan for trades and scholarships

2010 Milestones

Create a

convincing &

compelling

case

Build a national

rail supply plan

Create a

collective

Gain key

stakeholder

buy-in

Drive

harmonisation

agenda

Engaged in

National

planning

Understand the

market and

focus on

innovation

Build on

strengths and

develop critical

skills

Pathways

www.ara.net.au

ARA Economic Analysis of Rollingstock Procurement: Industry Brief

Deloitte Access Economics | 37

• Continuous Improvement Pilot Program – 2010

– Launched with critical companies nominated by primes

– Today has almost 70 companies involved

• Australian Manufacturing Statistics and data card – 2011

– $4.6 billion annual turnover

– $1.6 billion contribution to GDP

– 0ver 15,000 people working in rail equipment manufacturing

• 2040 Technology Roadmap – 2012

• Numerous export missions

– delivering immediate business success and

– learning on global success factors

• Future Australian Passenger Rolling Stock Report – 2012

– First ever national fleet audit

– 300 passenger cars required each year

Partnership with Rail supplier Advocate 2010-2013

www.ara.net.au

ARA Economic Analysis of Rollingstock Procurement: Industry Brief

Deloitte Access Economics | 38

• 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.

www.ara.net.au

ARA Economic Analysis of Rollingstock Procurement: Industry Brief

Deloitte Access Economics | 39

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.

www.ara.net.au

ARA Economic Analysis of Rollingstock Procurement: Industry Brief

Deloitte Access Economics | 40

Potential Response Savings in

plan and

design cost

Benefit of

Improved

Scale

Benefit of

smoother

production

Long Term Planning

Long Term Procurement

Coordinated rolling stock

planning

Reduce number of types

Joint Procurement

Harmonised Platform

Estimated Savings $2.5b $2.3b $17b

Future Australian Passenger Rolling Stock Report Phase 2

Benefits Available

• Most benefits attributable to smoother production through better co-

ordinated planning

• Spin off benefit of lower unit cost through scale

• If savings are re-invested into reduced fares this equates to a further

$1.2billion in savings

www.ara.net.au

Targets

Increase in member activity & sales

Increased uptake of gov’t programs

Known as THE body for rail SME

Member satisfaction and growth

New partnerships established

Message effectiveness and understanding

Recognised & sought by gov’ts

Continuity of valued gov’t programs

Primes /tier 1s engaging on supply chain development

2016 Objectives

Increased commercial success and growth of Rail SMEs

Known for who we are and what we stand for

Linking with the right partners

Promoting and supporting the key messages of the rail industry

Influencing governments

Working hand in hand with the manufacturers

2014 D

eliv

era

ble

s

1. Completed Board transition

2. Held first strategic discussion with primes/tier 1s

3. Brand in place & being promoted

4. Developed communications plan & issued first media release

5. Defined & launched our initial product set

6. Influenced government programs

ARISEG STRATEGIC PLAN 2013 TO 2016

Active

& skills based

board

Primes as

strategic partners

Strong linkages

to support

programs

Effective &

valued product

set

Strategic Enablers

Copyright 2013

Focused

communications

program

A new

professional

brand

www.ara.net.au

ARISEG Agenda for 2013

• April – Small Enterprise Group Strategy Session

– Application to Austrade for Asian century Business Engagement Grant

• May RSA Briefing Sessions

• 22 May Sydney Members Forum

• 3,4 July Rail Suppliers Conference Melbourne

• Publish Reports – Rail Manufacturing Story

– Economic benefit of Passenger Rail spend

– Rail - Road Infrastructure Cost Comparison

• 29 August Brisbane Members Forum

• 26-27 November ARISEG Stream at AusRAIL Plus

www.ara.net.au

Rail Contractor Group (RCG)

Current Priorities

• Higher safety standards through safety data share trial

• Best Practice Rail Infrastructure Procurement analysis and

reporting

– In partnership with IA and state DOT’s

• Initiatives to take costs out of rail infrastructure project costs

• Initiative to clarify cost comparisons between road and rail

www.ara.net.au

RCG 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).

www.ara.net.au

Rail versus Roads - 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

www.ara.net.au

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”

www.ara.net.au

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

www.ara.net.au

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

www.ara.net.au

www.ara.net.au