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Finance and
Performance Committee
12 December
2017
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Update on
the purchase of additional trains for Metro Rail
File No.: CP2017/26574
Purpose
1. To
approve increasing the number of Electric Multiple Units (EMUs) to be purchased
from 15 to 17 at a cost of $18 million and converting the 17 EMUs to
Independently Powered Electric Multiple Units (IPEMUs) at a cost of up to $20
million.
Executive
summary
Previous decisions
2. In
July 2017, this committee approved the purchase of 17 Independently Powered
Electric Multiple Units (IPEMUs) at a total estimated capital cost of $207
million, with $101 million of the cost for Auckland Council at an assumed 51
per cent funding contribution from the NZ Transport Agency (NZTA). Subsequent
to the approval, Auckland Transport (AT) managed to reduce the total capital
cost to $198 million through further negotiations.
3. In
October 2017, this committee rescinded this earlier decision and approved the
purchase of 15 EMUs at a capital cost of $133 million with a confirmed 51 per
cent contribution from NZTA, as NZTA had deferred the 17-IPEMU decision subject
to further decisions on electrification from Papakura to Pukekohe. AT has until
15 December 2017 to amend the EMU order placed with the supplier CAF to either
17 EMUs or 17 IPEMUs.
Pukekohe electrification
4. Since
then, a business case for Pukekohe electrification was prepared by KiwiRail and
AT, and was submitted to the Ministry of Transport (MoT). The outcome of the
funding is likely to be known by the second quarter of 2018. Nonetheless,
KiwiRail has determined the electrification project will take a minimum of five
years to complete after funding approval, resulting in operational delivery by
mid-2023.
Additional requirement
5. The
15-EMU order only provides for additional capacity on the core network required
as a result of rail patronage growth. Two additional EMUs are required to
operate a full service pattern of through-running between Britomart and
Pukekohe, whether electrification progresses or services are operated under
battery power between Papakura and Pukekohe.
6. Battery
powered EMUs offer greater resilience and disruption recovery in the event of
overhead powerline failure on the network. They could be used to potentially
operate during power isolations during the City Rail Link (CRL) construction.
Emerging battery technology
7. Furthermore,
new battery technology now under consideration by AT and CAF since October 2017
opens the possibility for the battery systems to be installed without
structural modification to the existing EMU design and at a significantly lower
cost due mainly to:
i) new
battery technology that has moved on from Lithium, leading to more power and
smaller mass; and
ii) the
batteries are sized for a design life to match the electrification timeframe to
post 2023, instead of the original excess life of 12 years.
8. The
estimated cost for installing the potential battery system to the 17 EMUs is
targeted at $1 million per unit, subject to further technical and commercial
discussions with CAF and the potential battery supplier Kokam of Korea.
Cost and funding
9. AT
re-assessed the benefit of IPEMUs with the updated timing assumption for
Pukekohe electrification and the cost of new battery technology, and compared
the IPEMU option against the EMU option. AT board recommended the IPEMU
solution going forward and an increase in the number of EMUs to be purchased
from 15 to 17 at a cost of $18 million, with an intention to retrofit the 17
EMUs with battery systems at an estimated target cost of up to $20 million.
10. The total
cost in addition to what the council has approved is $38 million (without a
confirmed contribution from NZTA), bringing the overall cost for the package of
17 IPEMUs to $171 million. This represents a cost reduction of $36 million
compared to the original position in July 2017, and $27 million compared to AT
negotiated position in August 2017. Cost movements are summarised in the table
below.
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($m)
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Event
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Purchase
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Total cost
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AC
(49%)
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NZTA
(51%)
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Note
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1)
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July AC approval
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IPEMU x 17
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$207
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$101
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$106
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assumed NZTA 51%
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2)
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August NZTA
submission
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IPEMU x 17
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$198
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$97
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$101
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AT negotiated
position
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3)
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October AC
approval
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EMU x 15
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$133
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$65
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$68
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confirmed NZTA
51%
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4)
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December AT
request
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Converted EMU
x 17
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$171
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$84
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$87
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including
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EMU x 15
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$133
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$65
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$68
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confirmed NZTA
51%
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EMU x 2 (additional)
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$18
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$9
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$9
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assumed NZTA 51%
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IP conversion
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$20
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$10
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$10
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assumed NZTA 51%
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Total cost
reduction from original IPEMU position
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$36
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$18
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$18
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1) less 4)
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Total cost
reduction from negotiated IPEMU position
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$27
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$13
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$14
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2) less 4)
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11. NZTA and
Auckland Council is each funding the existing $133 million for the 15 EMUs base
order at 51 per cent and 49 per cent respectively ($68 million for NZTA and $65
million for the council). The cost of $38 million for two additional EMUs and
conversion of 17 EMUs to battery-powered does not include any confirmed NZTA
subsidy at this point. AT will approach NZTA for further subsidy support for
the additional cost.
12. Assuming
NZTA provides 51 per cent subsidy to the additional cost, the council’s shared
of the total cost would be $84 million. In the worst case scenario where NZTA
does not provide any subsidy towards the additional cost, the total cost to the
council for this package would be $103 million (i.e. $65 million plus $38
million), $2 million above the original commitment of the council in July 2017.
13. To ensure the
CAF contractual deadline of 15 December 2017 is not missed, council approval is
sought for up to an additional $38 million, comprising $18 million for two EMUs
and up to $20 million for battery power conversion of the 17
EMUs.
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Recommendation/s
That the Finance and
Performance Committee:
a) approve
increasing the number of Electric Multiple Units (EMUs) to be purchased from
15 to 17 at a cost of $18 million and converting the 17 EMUs to Independently
Powered Electric Multiple Units (IPEMUs) at a cost of up to $20 million,
noting that:
i) a
new, more energy dense battery system has been sourced that offers the
potential for an IPEMU solution that does not require structural modification
to the existing EMU design.
ii) the
technical assessment is to be confirmed with the EMU supplier and the
potential battery system supplier.
iii) the
total capital cost for 17 IPEMUs is $171 million, compared to $207 million
originally.
iv) Auckland
Transport will seek 51 per cent funding contribution from the NZ Transport
Agency towards the additional cost of up to $38 million.
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Comments
Previous decisions
14. In July 2017,
Auckland Transport was given the approval to purchase 17 IPEMUs at a capital
cost of $207 million to address the rapid growth in patronage and the resulting
capacity issue forecast from late 2019. This approval was subject to NZTA
funding.
15. Subsequent to
the council’s decision and just prior to the intended confirmation to
proceed by the NZTA board, the election promises suggested an intention to fund
electrification from Papakura to Pukekohe. The NZTA board therefore considered
that it could not approve the 17 IPEMUs purchase if early electrification would
provide a similar service level with the lower cost EMUs. The NZTA board
approved the option to purchase 15 EMUs.
16. In October
2017, this committee rescinded the early decision to purchase 17 IPEMUs and
approved the purchase of 15 EMUs at a capital cost of $133 million with a
confirmed NZTA contribution of 51 per cent. It was noted that the acquisition
would be subject to further decisions on electrification of the North Island
Main Trunk from Papakura to Pukekohe. AT has until 15 December 2017 to amend
the EMU order placed with CAF.
Pukekohe electrification
17. Since then, a
business case for Pukekohe electrification was prepared by KiwiRail and AT, and
was submitted to the Ministry of Transport (MoT). AT consider the business case
has a strong merit and there was abundant political support apparent during the
election campaign.
18. The initial
outcome of the submission is expected prior to the Christmas break, in terms of
which submissions continue through the MoT’s Budget 2018 process and which
revert to consideration within the NZTA National Land Transport Fund (NLTF).
MoT Budget 2018 funding decisions would be expected in the second quarter of
2018, while the NLTF process and timeframes have yet to be defined but are
assumed to be end of the second quarter of 2018 also.
19. KiwiRail has
determined the electrification project will take a minimum of five years to
complete after funding approval, therefore would be operational by mid-2023
assuming funding is confirmed.
Emerging battery technology
20. The IPEMU
business case highlighted that newer technology battery systems were emerging
that could enable a reduction in the IPEMU cost premium over standard EMUs. A
viable alternative has been identified from Korean supplier Kokam with higher
energy density, opening the possibility for the battery systems to be installed
without structural modification to the existing EMU design and therefore at a
significantly lower cost estimated to be $1 million per unit.
21. The new
battery system would be underframe mounted and enable the IPEMUs to fit within
the Waitakere tunnel gauge. However, passenger evacuation would still need to
be resolved.
22. It is also
envisaged that the battery system would be engineered to enable retrofitting to
the existing fleet of 57 EMUs to further enhance passenger safety and service.
A smaller battery system with the same modular components is under
consideration, which has an estimated target cost of $0.5 million per unit.
This is not included in the request at this time.
IPEMU
benefit revisited
23. AT
considers the health and safety and operational benefits that IPEMUs provide
have been understated in the previous business case. The key Health and Safety
risk is that of passengers stranded on stationary trains due to power outages.
Operational benefits include the ability to continue operating passenger
services through planned work sites with power isolations. The CRL Mt Eden site
is an example, where construction activity over three years will require
considerable mitigation to maintain a safe work site without disrupting
passenger services.
24. Overall,
AT preferred the IPEMU option over the EMU option, after re-assessing the
benefit and the cost for both, with updated assumption around electrification
timing and the cost of new battery technology.
Cost and impact
25. AT board
recommended the IPEMU solution going forward and an increase in the number of
EMUs to be purchased from 15 to 17 at a cost of $18 million, and a conversion
of the 17 EMUs with battery systems at an estimated target cost of $1 million
per unit.
26. AT is seeking
the approval to purchase two additional EMUs at a cost of $18 million plus up
to $20 million for the conversion of 17 EMUs to IPEMUs. This is the full
purchase price and does not include any confirmed NZTA subsidy at this point.
27. AT will seek
51 per cent funding contribution from NZTA towards the additional cost of $38
million. The remaining balance would be funded by the council from borrowing,
which will have an impact on the council’s prudential debt ratios.
However, it is expected that AT will detail its capital programme through the
2018-2028 Long-term Plan process, to ensure the capital programme including EMU
purchase and conversion can be delivered within the agreed funding envelope. Without
any further NZTA contribution, the overall funding requirement from the council
would be $103 million, $2 million higher than the original committee approval
in July 2017.
28. To ensure the
CAF contractual deadline of 15 December 2017 is not missed, council approval is
sought for up to an additional $38 million, comprising $18 million for two EMUs
and up to $20 million for battery power conversion of 17 EMUs. Missing this
deadline would potentially affect the operational delivery date for the new trains.
Consideration
Local
board views and implications
29. Local board
views on the purchase of additional trains have not been sought.
Māori
impact statement
30. The purchase
of two additional EMUs has no specific impact on Māori.
Implementation
31. AT will
commence technical discussion with the EMU supplier CAF, the potential battery
supplier Kokam of Korea in early December to determine whether IPEMUs can be
technically and economically viable. AT will commence the initial design review
with CAF in Spain in order to meet expected in-services dates of late 2019.
Attachments
There are no attachments for
this report.
Signatories
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Author
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Mark Lambert – Chief Transport Services Officer,
Auckland Transport
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Authoriser
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Matthew Walker - Acting Group Chief Financial Officer
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