Infrastructure SA yesterday released its 2021 Capital Intentions Statement, spruiked by Premier Steven Marshall for including his recently unveiled Adelaide Arena project in its shortlist of “projects recommended for investment decision”.
However, while the document anticipates “that an updated arena would generate a sharp increase in event demand in its opening year, followed by a steady increase over time”, its rhetoric is otherwise cautionary.
“While this project is aligned with the Government’s Growth State agenda, further analysis is required to determine the project timing in light of the significant capital commitment required and current State budget priorities,” it states.
It also reveals Infrastructure SA [ISA] undertook a review of the initial business case, as well as “supplementary information which responded to ISA’s review recommendations”.
“A well-developed business case has been documented; however, further work is required to refine the costs in order to proceed to a final investment decision,” it states.
ISA chief Jeremy Conway told InDaily the panel raised questions about the Government’s original submission – which included a retractable soccer pitch as part of a grander overall design with almost double the current seating capacity of 15,000.
“Part of it was a rescoping,” he said.
“The original proposal included the soccer pitch as well as a greater amount of surrounding development… we also asked them to do some work to firm up the demand and need for it.”
Asked if that meant the original proposal did not meet an economic threshold for approval, he said: “I would categorise it to say we wanted some more evidence to prove it.”
“It’s not that it didn’t show any need for it [but] the original business case with the soccer pitch was a much larger scale project, with much larger risk – we asked them to reconsider the scope,” he said.
“I think they’ve made a more compelling case this time.”
He said the Government “worked up the rescoped option” during the last year – despite having officially declared its city stadium off the agenda after the economy was hit by the COVID pandemic.
Conway said the soccer stadium proposal “brought with it a significant amount of additional capital cost to incorporate it within the facility” and also “meant the facility had to be bigger” – without a corresponding financial uplift given “there’s only a limited number of games per year”.
However, he added that the impact of bringing soccer to the city on Adelaide Oval’s round-ball and rugby events “wasn’t really a significant consideration”.
“The reality is if you were going to play a game that was going to have more than 25,000 spectators, it would need to go to Adelaide Oval anyway,” he said, adding that a Socceroos-style marquee event would “probably still be capacity constrained” at the rejected city arena option.
Conway says ISA has now “done a couple of reviews” of the arena project and “we think the team have done a good job in substantiating the need for it” – which is primarily predicated on large-scale conferences and conventions.
“We think it will be beneficial to the state – a lot of the public commentary is around sports, but the reality is the majority of the benefits lie within an expanded convention space,” he said.
“I think there’s evidence that a newer, more flexible and larger facility would make a positive contribution in terms of attracting more live entertainment but also very importantly larger and more economically-beneficial conventions and exhibitions…
“I think there’s a strong case for that.”
He says while “the rhetoric may be a little bit more conservative” in ISA’s capital intentions document, “that was more around having an understanding of escalation and contingency… which is as much a function of when the project will commence”.
“It’s clearly a fairly significant capital cost – the Government came out and said they were allocating $700 million or so for it… they need to look at what their priorities are and prioritise what they fit in within the budget.”
The convention sales pitch may be a harder sell given a recent extension of the Convention Centre, while Conway concedes it’s not simply a case of ‘build it and they will come’.
“Clearly you need to bid to win these conventions… the reality is that it’s a competitive international market [but] the feedback we’ve received is these conventions are getting larger and for us to continue to be able to bid for conventions of that sort and size and scale, there’s a need for additional convention and exhibition space.”
Interestingly, the capital statement includes in a list of “projects recommended for Business Case development” plans for a “Hydrogen export facility” – which Conway confirms was included after representations from the Liberal Government.
“It’s something we’ve had some conversations with the Department for Energy on,” he said.
Labor this week unveiled a “fully costed” plan for a $590 million hydrogen plant, which Opposition Leader Peter Malinauskas emphasised would “help set us up to export hydrogen”.
But the ISA document suggests “a critical piece of infrastructure required to enable this outcome is a suitable port that hosts the necessary infrastructure to enable hydrogen exports”.
“There is significant potential for the growth of the local industry, provided appropriate hydrogen port infrastructure is in place,” it said, recommending “further analysis be undertaken to determine the required infrastructure solution”.
Conway said there were currently “a range of options” for such a port, with the likely cost “very much depending on scale and production”.
But he added: “Once you get to export scale, [the cost] would be hundreds of millions of dollars.”
That means Labor would need to spend, or facilitate, an equivalent outlay to be able to capitalise on the export capabilities of its hydrogen plan – effectively leaving a major black hole in its costings.
Labor’s policy document says its plan includes the formation of a new corporation, Hydrogen Power SA, “charged with developing a strategy for the export of this renewable energy” – but with no commitment to funding it.
“By definition, an export facility will need to be constructed [to export hydrogen], whether it’s government or private is yet to be determined,” Conway said of the proposal reviewed by ISA.
He said “if there’s a market for Hydrogen… potentially a government could create a Port Corporation” to manage the project.
“I haven’t reviewed the Labor proposal, but from what I understand their costings are around production of hydrogen [so] that would be needed in addition, yes,” he said.
He said the hydrogen export facility considered by ISA was “more on an assumption that the market will produce the hydrogen” but that a facility was required “to get it to Korea or Japan or whatever the end market is”.
“We don’t currently have a facility in the state that’s designed to export Hydrogen at scale – that’s going to require some investment,” he said.
“We think there’s a lot of potential in the Hydrogen market and that a business case should be done.”
He said the Marshall Government already had “a clear strategy to build an export industry themselves… but to create the hydrogen export industry, we need to be able to export via a port – and we don’t have one at the moment.”
He said there had already been “high level assessments as to where it might be”, with options including Port Adelaide, Port Bonython and the Eyre Peninsula, with both Cape Hardy and Port Spencer under consideration.
Conway said that all the options on ISA’s priority list “involved conversations with government agencies” and “we are conscious of government priorities”, but insisted: “The determination of whether [something] makes the list or not is an independent view formed by the ISA board.”
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