1. 21 October 2009 ARTC Melbourne-Brisbane Inland Rail Alignment Study Presentation to Parkes symposium 22 June 2012

2. Agenda 1. Scope of the Inland Rail Alignment Study 2. Study process 3. Performance specification 4. Demand analysis and outcomes 5. Technical analysis outcomes 6. Financial and economic outcomes 7. Summary of outcomes

3. 1. Scope of the Inland Rail Alignment Study The objectives of the study were to determine: optimum alignment of the inland railway (considering user requirements, economic, engineering, statutory planning and environmental constraints) so it can be quickly taken through the statutory planning and approval process and into detailed engineering design and construction, should a decision be taken to proceed The likely order of construction costs +/- 20% (replaced by P50 / P90 approach) The likely order of below rail (infrastructure) operating and maintenance costs Above rail operational benefits The level and degree of certainty of market take up of the alignment A project development and delivery timetable A basis for evaluating the level of private sector support for the project. The study’s outputs included: -Final report -15 appendices -Additional information maps -Frequently Asked Questions All this material is available on ARTC’s website. Slide 3

4. 2. Study Process The study was undertaken between 2008 and 2010. Followed the North-South Rail Corridor Study, completed in 2006. The study was focused on the ‘far west’ corridor through Parkes, as identified in the 2006 study, rather than routes further east such as through New England. The financial analysis was carried out from the perspective of a track owner; it was not assumed that ARTC would be the owner of Inland Rail. ARTC commissioned consultants to carry out the study – financial/economic and technical. Determination of the optimum route and alignment brought together financial, economic and technical work. The study was carried out in three stages, with a review of progress and direction at the end of each stage. An open, transparent approach was adopted: working papers were published at the end of stages 1 and 2, with invitations to comment; meetings were held with interest groups along the corridor.. Slide 4

5. Slide 5 To be viable an inland rail corridor must, as a baseline, provide a superior service for Melbourne – Brisbane freight to that offered by the coastal route, noting that sections of track will be common for both routes. This includes: -journey time below threshold demanded by customers, and not at any disadvantage when compared to the coastal route -equivalent or better reliability of journey time -equivalent or lower operational costs (fuel and crew) -equivalent or lower access charges. 3. Performance Specification

6. Slide 6 The demand analysis was broad and detailed, drawing on information and data from a wide variety of sources. It analysed the competitiveness of the inland railway against the coastal route and against road transport, considering: -price for freight customers -reliability -transit time -availability 4. Demand analysis

7. 4. Demand analysis outcomes M-B modal share without inland route (inter-capital freight) M-B modal share with an inland route notionally commencing operations in 2020 (inter-capital freight) Slide 7 Key findings There is demand for the railway that would result in a freeing of rail capacity through Sydney. Inland Rail’s share of Melbourne-Brisbane intercapital freight would be greater than road and other rail. Coastal railway capacity analysis (assuming only committed/planned capex): -Practical rail freight capacity is reached on the coastal route in 2052, on the analysis of the study. Changes in demand would change this date. Note that the coastal route would be used for Melbourne-Sydney and Sydney-Brisbane freight, and the inland route for Melbourne-Brisbane freight. Inland Rail would not provide an efficient route for Sydney- Brisbane traffic.

8. Slide 8 5. Technical analysis - route options Melbourne to Parkes: via Albury using existing track (inexpensive) via Shepparton and Narrandera using upgraded corridors and new track (slightly faster but very expensive) Parkes to Moree: via Werris Creek using existing track (inexpensive but very slow) via Gwabegar using predominately new track (most cost effective way to significantly reduce journey time) via Binnaway using predominately existing track with some greenfield construction between Binnaway and Narrabri (only small journey time reduction) Moree to Brisbane: via Toowoomba using existing corridors with some new track (less expensive and caters for existing traffic) via Warwick using some existing corridors and substantial new track (slightly faster but much more expensive). Inland railway route options

9. Slide 9 5. Technical analysis - optimum route The route presented as ‘optimum route’ in the Final Report: Corridor: existing corridor from Melbourne to Narromine (with new route from Illabo to Stockinbingal), new route to Narrabri, upgraded track to North Star, new track and upgrading existing narrow gauge track to Kagaru and the existing corridor to Acacia Ridge 41% existing, 25% upgraded, 34% new track Route distance: 1,731 km Transit time: 20.5 hours (terminal-terminal) Optimum inland railway route

10. Slide 10 5. Technical analysis – capex 44% of total capex is between Gowrie and Kagaru It is assumed that the ARTC line from Melbourne to Illabo will be duplicated in due course and will be able to accommodate double-stack trains from a Melbourne terminal. These works will not be a cost to Inland Rail.

11. Slide 11 The financial analysis prepared from the point of view of a track owner indicates Inland Rail does not appear viable on a standalone commercial basis. It will need some form of government or external financial support. It has positive operational cash flows if capital costs are excluded. 6. Financial analysis

12. Slide 12 6. Economic outcomes Sensitivity of economic results to changes in key assumptions The test that affects the economic results most positively is a reduction in the discount rate to 4%. It is also greatly affected and becomes economically viable commencing in 2020 if capital costs are reduced by 30%. Furthermore, it becomes economically viable commencing in 2020 if demand is estimated using more optimistic assumptions. Inland Rail becomes economically viable if commencing notionally in 2020 if tonnage demanding it increases by 30%. Note that this table refers to the economic analysis of Inland Rail, reflecting its benefits and costs to the community. It does not indicate the railway’s commercial results.

13. Slide 13 7. Summary of outcomes The alignment will provide Melbourne - Brisbane freight with a rail option 7 hours faster and 170 km shorter than the current coastal route, with improved reliability and availability, and is expected to be more competitive with road via the Newell Highway. The financial assessment prepared from the point of view of a track owner indicates Inland Rail does not appear viable on a standalone commercial basis. Economic analysis suggests Inland Rail will achieve a positive economic net present value at a 7% real discount rate when operations commence between 2030 and 2035, or when total tonnage demanding the railway is 25-26 million tonnes per annum. If demand volumes are stronger than the study forecasts, viability could be reached sooner. Consequently, it would be appropriate to re-examine the project again: -Project re-examined: between 2015 and 2020, or when tonnage approaches the level identified; -Ongoing ‘network’ monitoring: given Inland Rail will be approaching economic viability in the medium term, it should be re-considered as new details become available of the costs of coastal railway upgrade proposals, the capacity and reliability improvements they provide, and demand achieved. With the prospect that Inland Rail will in time be economically viable, consideration should be given in the meantime to whether steps need to be taken by governments to reserve and protect the alignment so that it is available if the railway is eventually built.

14. The report of the Inland Rail Alignment Study and related information is on ARTC’s website: go to www.artc.com.au, then to the section headed Investment Strategies. Printed copies of the report are available from ARTC; contact details are on the website. Slide 14