Precinct Acceleration Protocol Funding. Draft guidelines for application of commercial principles

Transcription

1 Precinct Acceleration Protocol Funding Draft guidelines for application of commercial principles

2 Table of Contents 1 Sydney Water Board endorsed principles Introduction General principle for PAPs 3 2 Application of new principles Infrastructure costs Infrastructure delivery Interim infrastructure Other infrastructure costs incurred by Sydney Water Upsizing infrastructure Agreement Area 4 3 Infrastructure repayment Repayment Mechanism Repayment for Future Assets When Risk to Sydney Water is Minimised Payment Timeframe 5 4 Non-PAP Proponent(s) within the PAP Area 5 5 Definitions 5 Sydney Water - Commercial in Confidence Draft for discussion

3 1 Sydney Water Board endorsed principles 1.1 Introduction Sydney Water provides valued water solutions. We invest in infrastructure for growth to ensure that the water and wastewater needs of a growing city are met. Services need to be delivered to our customers in a timely and cost effective manner. Timeliness means that delivery of water services does not constrain overall growth. It also means that there is realistic demand for newly delivered assets with a minimal lag between investment and revenue. Sydney Water wants to ensure the financial feasibility of Precinct Acceleration Protocol ( PAP ) developments but it must also ensure that any risk to Sydney Water regarding return on investment is minimised. Sydney Water commits to funding and delivery when demonstrated demand is shown. This places some of the development timing risk onto the developer, and ensures Sydney Water receives a return on investment when it funds the works. This enables Sydney Water to deliver value to all customers and reduces the risk that IPART will determine that the investment is imprudent and not include the assets in the Regulatory Asset Base. By applying to have a precinct accelerated under the PAP, the PAP Proponent ( the Proponent ) has formed the commercial view that there is sufficient demand to develop a precinct ahead of the Government s release program. As such, it is appropriate that the Proponent accept some of the demand risk on the take-up rate of the infrastructure necessary to support the precinct. 1.2 General principle for PAPs The Proponent constructs and/or funds the infrastructure necessary to service the PAP Area. Capital payments made by Sydney Water to the Proponent are based on actual housing occupation rates. After an agreed threshold of development is reached, Sydney Water will pay the balance of the infrastructure costs incurred by the Proponent. Sydney Water s Board has provided in principle endorsement of the following principles for the funding of PAP developments: the Proponent will fund and construct the required infrastructure to service the PAP Area the Proponent will then receive progressive payments until 50 per cent of lots are connected to Sydney Water s system a balloon payment will then be made for the remaining balance of infrastructure costs. 2 Application of new principles 2.1 Infrastructure costs The infrastructure that will be constructed and/or funded by the Proponent encompasses that deemed necessary to service the development. The infrastructure may include: 1. All water and wastewater infrastructure within the PAP Area; 2. Water and wastewater infrastructure to connect the PAP Area to Major Infrastructure (this may include the construction of Major Infrastructure); 3. Any Interim Infrastructure; and/or 4. Any other marginal costs for the construction of Major Infrastructure incurred by Sydney Water deemed by Sydney Water s Board to be directly attributable to the PAP Area. Sydney Water - Commercial in Confidence (Draft for Discussion) Page 3

4 The Proponent will not be required to fund the cost of Upsizing infrastructure beyond that necessary to serve the PAP Area. It will be required to fund the cost of minimum reticulation to service the precinct and hand those works to Sydney Water free of charge. 2.2 Infrastructure delivery The Proponent is responsible for planning and delivering the necessary water and wastewater infrastructure within the PAP Area. Sydney Water and the Proponent will agree on the extent of planning and delivery required for infrastructure outside the PAP Area. The servicing of the PAP Area may involve the staging of the delivery of infrastructure to defer capital expenditure and better align the infrastructure to the anticipated growth in demand. This is termed Infrastructure Staging. Sydney Water must approve any staging of infrastructure including: the area serviced by each asset or group of assets within the Infrastructure Stage the number of lots served by individual assets or groups of assets within the Infrastructure Stage. 2.3 Interim infrastructure The Proponent may nominate to construct Interim or Temporary Infrastructure to service the PAP Area. The approval of Interim or Temporary Infrastructure will be made in line with Sydney Water s Developer Interim Infrastructure Procedure. Any approved funding of Interim or Temporary Infrastructure will be made in accordance with the repayment principles outlined in Section Other infrastructure costs incurred by Sydney Water Development in the PAP Area may bring forward capital expenditure by Sydney Water such as upgrading the capacity of treatments plants and pumping stations, or reservoirs. This expenditure is no different to that incurred by the Proponent in its PAP Area. Sydney Water s Board will determine those costs that are to be directly attributable to the PAP Area, which may include the marginal costs directly attributable to the PAP Area that are associated with the necessary capacity upgrades. The marginal costs are determined with reference to the difference in the present value of costs incurred in bringing forward the servicing of the PAP Area compared to Sydney Water s original timeframe for serving the Area. 2.5 Upsizing infrastructure Sydney Water may require the Proponent to construct assets larger than required for the PAP Area, to serve other urban areas in the future (Upsizing). Sydney Water will fund, on commissioning, the difference between the cost of the infrastructure required to service the PAP Area and those required by Sydney Water. 2.6 Agreement Area Sydney Water will set a minimum area for these principles to apply. 3 Infrastructure repayment 3.1 Repayment Mechanism Sydney Water will refund each Infrastructure Stage s costs as dwellings are connected to Sydney Water s network as defined by Sydney Water s Customer Contract ( Connected Lots ). Once 50 per cent of the entire Infrastructure Stage s dwellings are Connected Lots, Sydney Water will pay the Proponent the balance of remaining costs. Sydney Water - Commercial in Confidence (Draft for Discussion) Page 4

5 3.2 Repayment for Future Assets When Risk to Sydney Water is Minimised Once 50 per cent of the entire precinct s dwellings are connected, Sydney Water will assess whether the demand within the precinct indicates that the risk to Sydney Water on its return on investment is now minimised. In the event that this risk is minimised to an acceptable level, future Infrastructure Stages to be delivered beyond that point to service the PAP Area may be placed onto Sydney Water s capital investment program and delivered under normal Sydney Water policies. This will be subject to Sydney Water Board approval. 3.3 Payment Timeframe To ensure there is no impact on Sydney Water s next price path, no repayments will be made to PAP (and non-pap Proponents, see Section 4 below) prior to June Non-PAP Proponent(s) within the PAP Area A non-pap Proponent may seek to develop their land within the PAP Area earlier than the timing proposed by the Proponent. Sydney Water intends to apply the same overarching cost and repayment principles to the non- PAP Proponent. This means the non-pap Proponent will continue to accept appropriate risk over the take-up rate of the infrastructure necessary to support the development area. Sydney Water will determine the number of lots to which the repayment principles will apply. This will be based on the area of land to be serviced that is within the ownership of the non-pap Proponent, rather than the catchment of the Infrastructure Stage. 5 Definitions Table 1 Definitions Term Connected lot Interim Infrastructure Infrastructure Stages/ Infrastructure Staging Definition A property deemed covered by Sydney Water s Customer Contract as defined under clause 2 of the Contract. Clause 2 outlines, amongst other things, that a customer is covered by relevant clauses of the Customer Contract if: they are the owner of property within our area of operations that is connected to a water main or wastewater system owned by us and that connection has been authorised or approved by us they receive water and/or wastewater services from us. Water and wastewater infrastructure that will only be used in the short to medium term, until a developer or Sydney Water constructs permanent infrastructure Sydney Water may approve the staged roll out of infrastructure to service a PAP Area. Sydney Water will only approve staging if it: defers capital expenditure is the lowest life cycle cost forms part of the ultimate servicing strategy. Any staged infrastructure that does not meet these criteria will be dealt with as Interim Infrastructure. Sydney Water will need to approve the area serviced by each asset or group of assets to be constructed and/or funded by the Proponent. It will also determine the number of lots that each infrastructure stage is to service. Sydney Water - Commercial in Confidence (Draft for Discussion) Page 5

6 Term Major Infrastructure Non PAP Proponent Precinct Acceleration Protocol (PAP) PAP Area PAP Proponent/Proponent Temporary Infrastructure Upsizing Definition Works associated with the construction of permanent storage reservoirs, treatment plants, pumping stations and trunk mains Another developer(s) or landowner(s) whose land is located within the PAP Area that is to be serviced by the major infrastructure provided by the PAP Proponent. Allows precinct releases within the growth centres to be accelerated. The key condition for acceleration is that there will be no cost to Government The area of a precinct rezoned by the Minister for Infrastructure and Planning as part of the PAP Process in the North West and South West Growth Centres. The developer(s) or landowner(s) who make an application under the PAP Process to bring forward the release of land. This can include part or all of a precinct within the North West and South West Growth Centre. The proponent is required to commit to finance and deliver the infrastructure for the Precinct and any connecting infrastructure linking the Precinct to existing urban areas Water and wastewater infrastructure that will provide services to customers, while a developer or Sydney Water is constructing the interim or permanent infrastructure, for example temporary pump outs The difference between the cost of the infrastructure required to service the PAP Area and those required by Sydney Water Sydney Water - Commercial in Confidence (Draft for Discussion) Page 6