It was a year of significant milestones for Inland Rail – a 1,700-kilometre infrastructure project to construct a world-class freight rail network that will connect Australia, help secure the country’s future competitiveness, and meet its long-term freight challenge.

On 13 December 2018, the Deputy Prime Minister, Hon Michael McCormack MP, turned the ceremonial first sod on the first of its 13 component projects, the Parkes to Narromine (P2N) project. We also advanced the design of its greenfield sections, held consultations with landowners, and developed the capacity of our staff – building a solid platform for delivering the project on time, to budget and to scope. A project of the scale of Inland Rail impacts on landowners and communities at different stages of its development, construction and operation. Over the last 12 months we’ve worked hard to increase our team of community engagement professionals across three states to work closely with communities and address their questions and concerns about the project. As part of this work, we’ve opened more regional offices along the alignment, so we will be more accessible to people and better understand and appreciate the communities in which we are working.

In late 2018, we received formal planning approvals for the P2N project, and appointed INLink as the construction contractor for this project. As well as officially starting construction, key steps on this project over the year included:

• Taking delivery of all rail and sleeper requirements to enable full-scale construction to begin, including a $20 million order of rail from Liberty’s Whyalla steelworks.
• Removing 27 kilometres of old rail, to be reused by the Transport for NSW Country Regional Network.
• Completing significant earthworks to remove the existing formation and build the new base for the railway.
• Receiving more than 200 expressions of interest from local industries and suppliers to provide services during the construction phase.
• Establishing site compounds at Parkes and Peak Hill.

PROGRESSING DESIGN AND PRE-CONSTRUCTION FOR THE OTHER PROJECTS

We continued to progress the design and pre-construction activities for the 12 other component projects that make up the Inland Rail program (Program), including:

• Releasing the preliminary design for the Condamine floodplain crossing after undertaking significant community consultation.
• Continuing to develop the Environmental Impact Statements (EIS) required under the Technical and Approvals Consultancy Services contracts. These documents are crucial to obtain formal planning approvals for the remaining projects.
• Negotiating to agree on timeframes and the forward approval pathway for the Gowrie to Helidon and the Helidon to Calvert projects.

We made some changes to Master Schedule during the year, to reflect revisions to our Inland Rail Program Procurement Delivery Strategy (PPDS) and later project delivery timeframes. The timeframe changes were necessary primarily to allow for additional work associated with design changes, meeting EIS requirements and government approvals.

Most significantly, the timing and approval of the investigative work on the Toowoomba Range section of the Gowrie to Helidon project resulted in an extension of the timeframe for this project. This has changed the Program Critical Path and could affect the overall completion date. However, this will depend on the results of further feasibility design work scheduled to be completed in November 2019.

We were also able to progress some design and construction work packages earlier than planned. This was achieved by breaking up individual project contract packages into multiple smaller packages with reduced size and value. This approach will also reduce risk later in the Program, when significant overlaps of major activities occur.

STARTING THE PUBLIC PRIVATE PARTNERSHIP PROCESS

The Australian Government announced the delivery of Inland Rail by ARTC, in partnership with the private sector. As part of this commitment, the Government proposed the use of a Public Private Partnership (PPP) to deliver the most complex section of Inland Rail – Gowrie to Kagaru in Queensland. This section is technically difficult, as it requires around 8.5 kilometres of major tunnelling and includes a range of engineering and construction challenges.

After laying the foundations last year, we officially started the PPP procurement process this year. This involved calling for Registrations of Interest and inviting more formal Expressions of Interest (EOI) to design, build, finance and maintain the Gowrie to Kagaru section.

We also finalised our dedicated PPP team of more than 50 talented people to drive this process. During the year, the team progressed development of:

• The Reference Design
• The Environmental Impact Statements
• The project specifications and technical requirements that will form part of the Request for Proposal that will follow on from the EOI process.

In addition, in November 2018, we commissioned Golder Associates to undertake comprehensive geotechnical studies along the Gowrie to Kagaru corridor. The geotechnical investigation project team is working closely with the Department of Transport and Main Roads in Queensland on a range of matters including land access, managing stakeholder engagement and communications, environmental management plans and the site investigation schedule.

In the coming 12 to 18 months, our focus will be on completing the Request for Proposal process.

PROGRESSING GOVERNMENT AND OTHER AGREEMENTS

We continued working with State Governments and landholders to reach the agreements required to facilitate the construction of Inland Rail.

While the Commonwealth signed bilateral agreements with the Victorian and NSW governments in the first half of 2018, an agreement with the Queensland Government is yet to be finalised.

Nevertheless, we continued to develop a commercial agreement structure for Inland Rail in Queensland. Significantly, we agreed on terms of access to state-owned and third-party land. This allowed us to conduct early investigation activities, ahead of the bilateral agreement, with the State Government. We also progressed a land acquisition agreement and a terms sheet for a Queensland development agreement. These documents will provide an essential framework for other project agreements, including future construction and operating leases. We will need to agree on commercial terms before we can initiate the Request for Proposal process for the Gowrie to Kagaru PPP.

We also secured a land acquisition protocol with Transport for NSW to facilitate future land acquisitions for Inland Rail in NSW.

As at 30 June, 1,191 land access agreements with landholders were identified as required, with 963 in place.

INLAND RAIL FINANCIAL IMPACT AND BACKGROUND

In 2015, in association with PwC, we prepared the Inland Rail 2015 Program Business Case for the Australian Government.

The business case found that an investment in Inland Rail would have positive net economic benefits, recognising the long-term horizon for program delivery and inter-generational benefits realised over the life of the asset.

It estimated that the program would:

• Increase gross domestic product (GDP) by $16 billion over the 10-year delivery period and first 50 years of operation;
• Deliver 16,000 additional jobs at the peak of construction, and an average of 700 additional jobs per annum over the entire construction period, and
• Have an economic benefit-cost ratio of 2.62 at a four percent discount rate.

The business case was subsequently evaluated by Infrastructure Australia (IA). In May 2016, IA published its positive assessment of the program, which concluded that as proposed it would provide net positive benefits to the Australian economy. Following this endorsement, Inland Rail was listed as a Priority Project by the Infrastructure Australia Board.

In late 2016, the Australian Government commissioned a market testing process to consider funding and procurement options for the delivery of Inland Rail. In May 2017, it announced that ARTC would be commissioned to deliver the project in partnership with the private sector and that the Australian Government would provide up to $9.3 billion in equity and grant funding support towards construction. The Australian Government has issued a public Statement of Expectations of ARTC outlining the framework for our delivery of Inland Rail.

FINANCING AND OVERSEEING THE PROGRAM

The Australian Government is providing $9.3 billion in grants and equity contributions to ARTC towards the delivery of Inland Rail. Grant funding is received in advance if we reach certain milestones and timing, as agreed with the Department of Infrastructure, Regional Development and Cities. Equity financing is provided on a monthly basis based on a three-month forecast (subject to the terms of the Inland Rail Equity Financing Agreement).

As at 30 June, we had spent $657.17 million to date developing the Inland Rail Program and we have received $252.67 million in advance Australian Government grant funding payments and $278.14 million in shareholder equity finance to meet this expenditure. Additionally, this year we have contributed $200 million from our own resources towards the development of Inland Rail.

We awarded six major tenders in the year, valued at approximately $398 million. The largest was the construction contract awarded to INLink for the Parkes to Narromine project.

Throughout the year, oversight and governance of the Program was provided by:

• The ARTC Board, through the Inland Rail Committee
• The Australian Government, through the Inland Rail Sponsors Group and assisted by the Inland Rail Project Monitoring Group.

At the state level, the Inland Rail Project Coordination Groups in Queensland, Victoria and New South Wales kept governments informed of our progress and resolved key policy related matters.

INCREASING OUR FOCUS ON PROCUREMENT ACTIVITIES

In 2017 the Australian National Audit Office (ANAO) audited our management of the pre-construction phase of the Inland Rail program. It made three recommendations to strengthen our ability to manage the program effectively and deliver value for money. We have made solid progress in implementing these recommendations. In the past year, we:

• Continued to implement a new enterprise-wide risk management system
• Established an enhanced Inland Rail document records management system
• Continued to implement our Procurement Transformation Project. To further strengthen our contract and procurement processes, we enhanced ARTC’s financial, records management and procurement systems, and related policies and procedures.

We expect to have fully implemented the ANAO’s recommendations by July 2019 with the implementation of the enterprise-wide risk management system.

ENGAGING WITH OUR LOCAL COMMUNITIES

As part of our commitment to addressing local community and environmental concerns about Inland Rail while also maximising its benefits, we increased our engagement with local communities during the year. For example:

• We established six additional Community Consultation Committees (CCCs), bringing the total to 10. The new CCCs cover the Narromine to Narrabri, Illabo to Stockinbingal, North Star to Border, and Kagaru to Acacia Ridge and Bromelton projects.
• We held an intensive program of briefings and information sessions. These included 2,126 separate face-to-face consultations, 328 of which were community information and town hall meetings.
• We participated in local and regional agricultural shows and field days across Victoria, New South Wales and Queensland.
• We held meetings with local councils and Members of Parliament.

We also conducted individual briefings with landowners affected by the construction of the greenfield sections of the line, including the Narromine to Narrabri and Illabo to Stockinbingal projects in NSW. These consultations will continue into next year.

In addition, we used a wide range of channels to inform communities and businesses about Inland Rail and the opportunities it offers. Our staff delivered addresses or presentations at 57 conferences, and three business and stakeholder roundtables hosted by the Deputy Prime Minister. We sponsored 13 of these conferences and submitted 14 papers for inclusion. For example:

• In July 2018, we were Gold Sponsor of the ALC/ARA Inland Rail Conference in Parkes, attended by 400 delegates.
• In November 2018, we showcased Inland Rail to hundreds of delegates at the AusRAIL Conference hosted by the Australasian Railway Association in Canberra.

We established social media channels for Inland Rail on Twitter, LinkedIn, YouTube, Instagram and Facebook. We started several targeted social media campaigns to address misconceptions about the Program and promote specific project-related work. We also issued five project update newsletters, 13 project fact sheets and 14 technical fact sheets during the year.

Further, we demonstrated our commitment to the local communities affected by Inland Rail through a range of sponsorships and donations. In particular:

• In August 2018, we agreed to sponsor six programs developed by the NSW Police Service for its Rural Crime Awareness campaign. The programs aired between October 2018 and June 2019.
• In January 2019, we were once again the Platinum Sponsor of the Parkes Elvis Festival and signed a contract to be the sole Platinum Sponsor for the Festival in 2020 and 2021.
• In June 2019, we delivered the first grants through our Community Sponsorship and Donations Program. Community organisations were invited to apply for small grants or donations up $4,000. We awarded grants worth around $66,000 to 21 organisations.

ENSURING COMMUNITY BENEFITS

This year, we established the Inland Rail Community Sponsorships and Donations Program as part of our broader social performance approach to ensuring the construction of Inland Rail delivers social benefits to our neighbouring communities. The sponsorships program is available right along the alignment and not-for-profit community groups are encouraged to apply for funding of between $1,000 and $4,000 to support one-off events, projects and activities that contribute to community sustainability and wellbeing. The first round of funding contributed to NAIDOC week activities, upgrading facilities of sporting, men’s shed, CWA and child-focused organisations and convening small-business capacity building workshops.

We also launched the Inland Rail Indigenous Participation Plan (IRIPP) to ensure the long-term benefits of Inland Rail are shared with indigenous communities along the route. INLink, the construction contractor for the P2N project has already committed to ensuring that 50 percent of those employed on the project will be from local communities, including a minimum of ten percent from Indigenous communities.

Early evidence suggests that the project is already having a positive economic impact on the Parkes area. Figures released by contractor INLink show that this year from December 2018:

• More than 622 people worked on the project, including for INlink and its contractors
• Around 230 of these workers identified as local residents, of which around 61 identified as Indigenous
• A total of $16.6 million had been spent with more than 66 local businesses, and around $2.5 million of that amount had been spent with eight Indigenous businesses.