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Planning for Performance; Building for the Future Denise McMillan Chairman, HVCCLT BITRE Colloquium: June 2008, Canberra.

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Presentation on theme: "Planning for Performance; Building for the Future Denise McMillan Chairman, HVCCLT BITRE Colloquium: June 2008, Canberra."— Presentation transcript:

1 Planning for Performance; Building for the Future Denise McMillan Chairman, HVCCLT BITRE Colloquium: June 2008, Canberra

2 BITRE June 2008 1 Coal Outlook Despite the debate about Climate Change, coal will continue to be in strong demand into the medium term – although “costs” are likely to increase with carbon taxes or equivalent: “There will be a 55% growth in coal power generation (2.1m MW) by 2020 “ By 2020 China will have twice the coal fired power generation capacity of the US; - But only half the capacity per capita “ Coal remains the most cost effective option for power generation”…. ….…. McLLvaine Report: Coal Fired Boilers; World Analysis and Forecast 2007

3 BITRE June 2008 2 Coal Price Movement

4 BITRE June 2008 3 Demand

5 BITRE June 2008 4 Hunter Valley Coal Chain: The Worlds Largest Coal Export Operation 40 Coal Mines 17 Producers 30 Load Points > 80 Different Brands of Coal 2 Above Rail Operators 29 Trains/15,000 trips per year 2 Track Owner/Operators Haulage distances up to 350km 2 Coal Loading Terminals – KCT & CCT 5 Dump Stations 1.5Mt of Working Stockyard 5 Ship Berths and Loaders, “4 Queues” Approx. 1000 vessels per year Average vessel size is 84kt Avg 2 Cargoes per Vessel Multiple Components per Cargo Tidal constrained river port 10% Domestic Consumption 90% Export – mostly Thermal coal 70% to Japanese Power Stations Q: How to maximise system throughput and drive efficient asset utilisation? Turn of Arrival loading port JIT cargo assembly process 16 independent organisations required to move each tonne of coal No control over demand – only two weeks visibility and highly variable volumes Avg 5 days clean coal on stock at the mines

6 BITRE June 2008 5 HVCCLT: A Cooperative Planning and Operating Model Provides centralised planning services on behalf of its members: 1.Short term objective – focus on maximising daily capacity and throughput 2.Long term objective – realise cohesive investment planning Established under an MoU in July 2005 – operates on a premise of cooperation between the member organisations Membership includes all transport asset owners in the Hunter Valley – and the newest operator, NCIG, have expressed intent to participate in the model 30 Employees seconded from member organisations $5 million investment in state-of-the-art constraint based planning technology and models Joint Venture between the organisations that own the train, track, terminal and port infrastructure The movement of every tonne of domestic and export coal is planned via the HVCCLT HVCCLT provides a ‘system wide’ forum for pursuing operational improvements and making efficient decisions about future investment in infrastructure

7 BITRE June 2008 6 Declared Capacity 2008 Minimum Throughput Estimate : Base Coal Chain Capacity118Mt Less Planned ARTC & PWCS Asset Unavailability 11Mt Less Risk Adjustment (Demand profile, Reliability, Other) 2Mt Less 10% Unplanned Capacity Losses 10Mt Minimum Throughput Estimate (Mtpa) ~95Mt

8 BITRE June 2008 7 HVCC Performance – YtD Performance to 8 June 2008

9 BITRE June 2008 8 Vessel Queue Offshore Vessel Queue Newcastle End of Month Vessel Queue Actual & Forecast (Updated 1 June 2008) CBS Commenced by PWCS Pre-CBS Vessel Queue CBS Effectively Concluded Vessel Queue with CBS Avg Approx 18, but with big fluctuations Effect of June 8 th Storms CBS Reinstated

10 BITRE June 2008 9 HVCCLT: Planning for performance Track Infrastructure: –ARTC / RIC Port Coal Handling Services: –PWCS –NCIG Train Operators: –Pacific National –QRN Is it as simple as “building more infrastructure” ?

11 BITRE June 2008 10 The Challenge Critical Items Required to Meet Base Case Delivery TrackCoal TerminalTrainsLoad Points“Rules” ARTC Complete current HV Corridor Strategy on time, critical projects include; –MB-Antiene duplication (Q2 2009) –3 rd Track Maitland to Whittingham (Q1 2012) AND RIC Complete current Gunnedah Strategy on time PWCS Complete Project 3Exp inbound on time (ie Q2 2009) AND NCIG Compete Stage 1 on time (Q1 2011) Train delivery schedule; Q4 2008 - 2 x Consists Q1 2009 - 4 x Consists Q1 2010 - 1 x Consist Q2 2010 - 1 x Consist Q3 2010 - 1 x Consist Q4 2010 - 1 x Consist Q4 2011 - 1 x Consist Total of 11 New Consists Current load point performance NOTE: Poor load point performance is somewhat masked in Base Case by release of additional Port capacity (NCIG) and timing of infrastructure upgrades Load point performance impacts vessel turn around and greatly diminishes full return on infrastructure upgrades Current rules Base Case unable to achieve a “target” demand of 145Mtpa of delivered capacity and results in unacceptably high vessel turn around times Target delivered capacity Full MB-A Dup & 3 Exp aligned NCIG 3 rd Track Maitland to Whittingham

12 BITRE June 2008 11 HVCCLT Model – The Opportunities Strengths Clearer definition of issues Integrated planning is now occurring Formal structure System assets utilisation is being maximised Each member still has full responsibility for assets

13 BITRE June 2008 12 HVCCLT Model – Opportunity Weaknesses Is a cooperative collaboration… - Fragile Disparate data sources can lead to non shared understanding Staff are still employed by member organisations – perceptions of independence Model currently excludes producers as members Pieces of the chain are ‘linked’ – not ‘bonded’….

14 BITRE June 2008 13 “Hardware” vs “Software”: Coal Chain Complexities & The HVCCLT Model Capacity Development: Use & Allocation Demand Profile? What ‘Toys’ ? Funding Risk Profile Risk Sharing Contractual Alignment Queue Management

15 BITRE June 2008 14 Moving Forward Common understanding and alignment between Producers, Ports, Track & Operators with respect to: –Demand Profile –Asset suite to deliver reliable capacity –Investment Triggers –Contractual & Commercial Alignment Certainty of Outcome

16 BITRE June 2008 15 HVCCC – Proposal “Greiner” Review Outcomes: –Agreement of Coal Chain Principles –Establishment of HVCCC as legal entity –Producer & Service Provider Board representation –HVCCC to employ staff directly –Industry commitment to 10 year take or pay rolling contracts –Contracts & performance to reflect capacity utilisation

17 BITRE June 2008 16 HVCCLT – Overview of planned Investment Appendix I – For information only HVCCLT members recognise that infrastructure planning must be undertaken as a holistic system plan HVCCLT members are working together to ensure all plans are complementary and will meet future system needs Note plans are constantly reviewed and future works may change subject to delivery schedules, demand expectations or better options are resolved. The following is an outline of current planned investments to future system development

18 BITRE June 2008 17 Port Waratah Coal Services Limited (PWCS) is an unlisted public company owned by the Hunter Valley Coal Industry (70%) and Japanese Coal Customers (30%) PWCS is the worlds largest coal handling facility and currently exports coal valued above $5 billion per year PWCS’ terminals are an important part of regional, state and national economies - coal exported through PWCS facilities counts as Australia’s largest commodity export PWCS owns and operates two coal handling facilities in the Port of Newcastle, Carrington Terminal at a capacity of 25 million tonnes per year and Kooragang Terminal at a capacity of 77 million tonnes per year following the completion of the Project 3D expansion in March 2007 Port Waratah Coal Services

19 BITRE June 2008 18 Expansion to 102 Mtpa (Project 3D- new pad & stacker) was completed in March 2007, nine months ahead of schedule and under budget Development Application approval to increase the throughput capacity of the Kooragang Terminal to 120 Mtpa (total PWCS approved capacity of 145 Mtpa) was received on 13 April 2007 Board considered expansion at May 2007 Board meeting Announcement of further expansion of Kooragang Terminal at a cost of $458 Million to 88 Mtpa (combined PWCS capacity of 113 Mtpa) made on 20 June 2007 Expansion beyond 113 Mtpa (fourth operating berth, western extension of stockpile pads C and D, the remainder of upgrades to the original stacking stream and the replacement of the remaining two original Kooragang Terminal stacking machines) will be considered in the future in order to meet long term Customer requirements Port Waratah Coal Services

20 BITRE June 2008 19  NCIG established August 2004  Objective : To increase total export capacity for Port of Newcastle via construction of a third coal terminal  Members (shareholding):  BHP Billiton – through Hunter Valley Energy Coal (35.46%)  Centennial Coal (8.78%)  Donaldson Coal (11.60%)  Peabody Energy (17.68%)  Felix Resources (15.4%)  Whitehaven Coal (11.06%) Newcastle Coal Infrastructure Group- NCIG

21 BITRE June 2008 20  Project Approval granted 13 April 2007  Quarter 4 2007 : Commence construction of the project and dredging  Quarter 2 2009 : Complete dredging  Quarter 1 2010 : Commence operations (first ship loaded)  End 2010 : Commence full operations – 30 Mtpa NCIG Status & Timetable

22 BITRE June 2008 21 PWCS – Kooragang : 88 Mtpa – mid 2009 PWCS – Carrington : 25 Mtpa NCIG – Kooragang : 30 Mtpa – 2010 TOTAL : 143 Mtpa2010 Port of Newcastle – Future Capacity

23 BITRE June 2008 22 ARTC Investment Project2007-2012 Strategy2007-2012 TimingStrategy Cost Order of Magnitude Newcastle-Muswellbrook Sandgate Grade SeparationCompleted 80 km/h approaching Minimbah BankCompleted Muswellbrook Loop & JunctionCompleted 80 km/h approaching Nundah BankCompleted Antiene to Grasstree duplicationQ1 2009$ 29,891,000 Bidirectional signalling Maitland to BranxtonQ3 2009$ 22,500,000 Bidirectional signalling Grasstree – St HeliersQ3 2009 St Heliers – Muswellbrook duplicationQ3 2009$ 27,000,000 Minimbah Bank 3 rd roadQ4 2009$ 100,000,000 Newdell JunctionQ1 2010$ 7,200,000 Drayton Junction upgrade2011$ 6,000,000 Minimbah – Maitland 3 rd road2012$270,000,000 Muswellbrook – Ulan Ulan line CTCCompleted Mangoola (304km) loopQ4 2008$ 9,030,000 Rylestone Rd (381 km) loopQ4 2008$ 9,000,000 Wollar (410 km) loopQ4 2008$ 10,726,000 Aerosol Valley (370 km) loop2010$ 9,000,000 Worondi (348 km) loop2010$ 9,000,000 Radio Hut (319 km) loop2012$ 9,000,000 Muswellbrook – Bengalla duplication2012$ 30,000,000

24 BITRE June 2008 23 ARTC Investment Project2007-2012 Strategy2007-2012 TimingStrategy Cost Order of Magnitude Muswellbrook – Narrabri Togar loop extensionCompleted Murulla loop extensionCompleted Gunnedah loop (RIC)Completed Willow Tree loop extensionCompleted Werris Creek loop extensionCompleted Ardglen loop extensionQ2 2008$ 9,782,000 Breeza loop extension (RIC)Q3 2008$ 3,500,000 Curlewis loop extension (RIC)Q3 2008$ 3,500,000 Werris Creek to Gunnedah CTC (RIC)Q3 2008$ 10,000,000 Gunnedah – Narrabri CTC (RIC)2010$ 10,000,000 Emerald Hill loop extension (RIC)2010$ 3,500,000 Boggabri loop extension (RIC)2010$ 3,500,000 Braefield passing loop2010$ 9,000,000 Murrundi loop extension2011$ 6,500,000 Werris Creek Bypass2011$ 17,200,000 Parkville loop extension2011$ 6,500,000 Scone reconfiguration2011$ 1,700,000 Watermark passing loop (RIC)2011$ 9,000,000 Muswellbrook – Koolbury duplication2011$ 35,000,000 Quipolly passing loop2011$ 9,000,000 Wingen passing loop2012$ 9,000,000 South Gunnedah passing loop (RIC)2012$ 9,000,000 New Liverpool Range alignment2012$290,000,000 Burilda loop extension2012$ 9,000,000 TOTAL PROGRAMME COST> $1 Billion

25 BITRE June 2008 24 Conclusion Together, the members of the NSW HVCCLT are committed to delivering the most efficient ‘Pit to Port’ shipment of coal for customers. –The current structure ensures current system assets are being used to deliver the maximum amount of coal throughput. –Short term, HVCCLT focuses on planning & performance of current assets –Medium term, investment in complementary infrastructure and operating systems is already underway to ensure we can meet known demand. –Long term, HVCCLT members will engage in rolling review of whole of system investment strategies to create a holistic plan ensuring demand and capacity are always in alignment going forward.


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