Fernando Fajardo, Acciona Iinfrastructure Australia - Delivering major projects – A new formula for success

March 2014

DELIVERING MAJOR PROJECTS

A NEW FORMULA FOR SUCCESS

Pioneers in development and sustainability

March 2014

1 Understanding mega project success & failures

2 Introduction – About ACCIONA

3 4 Conclusion References

March 2014

A GLOBAL FRONT-RUNNER IN RENEWABLE ENERGY, WATER AND INFRASTRUCTURE

March 2014

ACCIONA, BY THE NUMBERS

Present in more than 30 countries, on all 5 continents

+75 years of history

59% family-held + 41% free float2

worth of CAPEX

At 31 December 2012 1 - Contribution calculated prior to consolidation adjustments. 2 - Following amortization of treasury stock ( 6 June 2012)

+30,000 employees

€854 m

46%

11%

14%

€7.02bn REVENUES

20121

€1.43bn EBITDA 20122

29%

78%

March 2014

Offices and projects in more than 30 countries

ACCIONA AROUND THE WORLD

Asia & Oceania

• Australia • India • South Korea

Middle East & Africa

• UAE • Morocco • South Africa • Saudi Arabia • Algeria

Latin America

• Brazil • Chile • Colombia • Peru • Panama

North America

• Canada • USA • Mexico

• Venezuela • Dominican Rep. • Costa Rica • Ecuador • Argentina

• Hungary • Croatia • Belgium • Romania • Holland • France • Austria

Europe

• Spain • Poland • Italy • Portugal • Sweden • United

Kingdom • Greece • Germany

• Catar • Gabon • Cape Verde

March 2014

March 2014 INNOVATION

ACCIONA always has its sights set firmly on TECHNOLOGICAL LEADERSHIP in all its activities.

The Company invested €500M in R&D and Innovation in the period

2010-2015.

More than 150 PROJECTS are currently in progress in our R&D

and Innovation centers manned by 345 professionals.

WE TOP THE INVESTMENT TABLE in R&D and Innovation,

in Europe’s construction sector and utilities in percentage of revenues and EBITDA..

March 2014 October 2013 VALUE CHAIN

A “big picture” vision of the project

Alignment of interests

Optimum risk allocation

*Operation and Maintenance

R&D

FINANCING

March 2014 BUILDING A BETTER WORLD

€6.77BN BACKLOG 52% international, 79% public works.

EXTENSIVE EXPERIENCE IN BOTH THE PRIVATE AND PUBLIC SECTORS Transport, public works, hospitals, airports, maritime works, electrical facilities.

A FRONT-RUNNER IN INFRASTRUCTURE DEVELOPMENT AND MANAGEMENT Design and engineering, financing, procurement, construction and Operation & Maintenance.

March 2014

FLAGSHIP MEGA PROJECTS C I V I L W O R K S

Legacy Way Tunnel Brisbane, Australia Construction of two twin tunnels 4.3km long each. Holds world records for daily, weekly and monthly perforation rates.

Ting Kau Bridge Hong Kong, China The 14th longest cable-stay bridge in the world, with a total span of 1,558 feet. 120.000m3 of reinforced concrete was used to build it.

Alqueva Dam Portugal Europe’s biggest reservoir with a volume of 4,150 Hm3 and a surface of 250 km2. Obtained the 9th Puente de Alcántara International Award.

El Ferrol Seaport Spain Construction of Phases I and II of the seaport of El Ferrol, located in A Coruña on Spain’s northwestern coast.

ACCIONA SOLAR HQ Spain Spain’s very first zero-emissions building. Requires 52% less energy than a conventional building.

Fort St. John Hospital Canada A 55-bed hospital featuring a 123-bed care center for seniors. Built to "LEED Gold“ sustainability standards.

A-30 Expressway Canada Construction of a 42km section, and a 35-year concession. Named “North America PPP Deal of the Year” by Project Finance magazine.

Infanta Sofía Hospital Spain Design and construction and running of the non-healthcare areas for a 30-year period. Services more than 300,000 inhabitants.

C O N S T R U C T I O N

C O N C E S S I O N S

Mundaring Water Treatment Plant Design, construction, operation and maintenance of the water treatment plant which will provide water to around 33,000 rural and town services.

Adelaide Desalination Plant (Port Stanvac) Reverse Osmosis Seawater Desalination plant with max capacity of 100 gigalitres per year provides 50% of Adelaide's drinking water.

March 2014

March 2014

UNDERSTANDING MEGA PROJECT FAILURES – WHAT ARE THE CONTRIBUTING FACTORS

KEY ELEMENTS IN MEGA PROJECT SUCCESS

March 2014

Caravel Group’s recent report produced for Infrastructure Australia on Project

Governance Effectiveness in Australia found that on average 48% of projects

failed to meet their baseline time, cost and quality objectives, based on a survey

of Industry and Government Senior Executives.

The government capital expenditure is in the order of $60 billion per annum and

private expenditure is in the order of $155 billion bringing the total to $215 billion

If we assume that the best case project success rate of 52% having a

corresponding failure rate of 48% with an average cost overrun of 40% (a

conservative estimate), then the potential wastage of capital is in the order of $30

billion

KPMG Global construction survey 2013 quotes “…56% respondents say that

mega project management is a major contributor to growth,” while “77% report

underperforming projects due to delays, poor estimating processes, and failed risk

management processes.”

March 2014

UNDERSTANDING MEGA PROJECT SUCCESS & FAILURES

March 2014

A survey of Industry and Government Senior Executives in Australia found that on

average 48% OF PROJECTS FAILED to meet their baseline time, cost and

quality objectives, and despite the efforts of industry and government, estimated

improvement over the last 20 years was estimated at 10%. Furthermore, the

BLAME for failure is falling on the Project Team, whilst the ACTUAL CAUSE of

failure lies with the Governance Team.

Source: A Review of Project Governance Effectiveness in Australia, 2.1 Project Success Rates, an Inconvenient

Truth by Caravel Group for Australian Government, Infrastructure Australia. March 2013

UNDERSTANDING MEGA PROJECT SUCCESS & FAILURES

March 2014

KPMG’s 2010 report on ‘Success and Failure in Urban Transport Infrastructure

Projects’ describes a successful project as being able to maintain its policy delivery

in the long-term, and uses sustainably project development methods that could be

transferred to other projects.

March 2014

UNDERSTANDING MEGA PROJECT SUCCESS & FAILURES

Other definitions incorporate the view success or failure of an infrastructure project

as being the community’s user-ship of the asset, the fees generated as returns to the

investor, and the productivity gains for increased efficiency returns to the local and

greater community.

March 2014

Lynda Bourne of the Project Management Institute discusses the EFFECTIVENESS

of a PROJECT SPONSOR significantly contributes probability of the project’s

success, stating that the role with respect to the project should:

March 2014

ENGINEERING

CONSTRUCTION

Gain commitment for the project by being a key advocate for the project

Ensure the projects optimisation by arranging sufficient resources at delivery

Build durability by ensuring the people and process are in place to maintain it

once the project completes its hand over

Support the project manager

Facilitate problem solving

Create alignment between all stakeholders

UNDERSTANDING MEGA PROJECT SUCCESS & FAILURES

March 2014

Commercial

Mission of Project

Client

Community and People

Value Marketing

DEFINING SUCCESS – ACCIONA

March 2014

STRATEGY Local Requirement, Client, Procurement Model, Partners, Planning Resources, Right Governance Team, Functionality, Value for Money

Commercial

Mission of the Project

ANSWERING TO SHAREHOLDERS Commercial Frame, Risk Allocation, Cash Flow, Profitability, Time and Cost

MARKETING Project Importance, Iconic, Awards

DEFINING SUCCESS – ACCIONA

March 2014 DEFINING SUCCESS – ACCIONA

Client

DELIVERY Meeting and Exceeding Expectations Problem solving approach, Win-Win strategy

MARKETING Future Work, Client References

March 2014

POST CONSTRUCTION Functionality of Infrastructure

Demonstrate Value for money

DEFINING SUCCESS – ACCIONA

Community and People

Value Marketing

DURING CONSTRUCTION Construction team work Environment, Culture and Safety

Active positive engagement with community

March 2014 DELIVERING SUCCESS – LEGACY WAY

Commercial

Mission of the Project

Transcity Joint Venture is the consortium responsible for the design, construction and 10 year operation of Brisbane’s newest road tunnel Legacy Way. The $1.5 billion project, consists of twin two-lane tunnels, approximately 4.6km in length. Construction began in early 2011 and the tunnel is set for completion in early 2015.

PM-OP-TE-0015

Local requirements, Partners and Governance

Constructors Joint Venture

Acciona 40%

Ghella 30%

BMD 30% RCR O’Donnell Griffin

Design Alliance Participants

March 2014 DELIVERING SUCCESS – LEGACY WAY

Commercial

Mission of the Project

Completed tunnelling FOUR MONTHS AHEAD OF SCHEDULE

Achieved a WORLD RECORD excavating 48m in one day, 239.9m in one week, and 818.89m in one month (30 day)

March 2014

Date: 4/06/2013

42+000.00

42+500.00

43+000.00

43+500.00

44+000.00

44+500.00

45+000.00

45+500.00

46+000.00

46+500.00

47+000.00

3/09/2012

17/09/2012

1/10/2012

15/10/2012

29/10/2012

12/11/2012

26/11/2012

10/12/2012

24/12/2012

7/01/2013

21/01/2013

4/02/2013

18/02/2013

4/03/2013

18/03/2013

1/04/2013

15/04/2013

29/04/2013

13/05/2013

27/05/2013

10/06/2013

24/06/2013

8/07/2013

22/07/2013

5/08/2013

19/08/2013

Chai

nage

TBM 1 & 2 Tunnel Programs

Predicted production

TBM1

Actual production

TBM1

Predicted production

TBM2

Actual production

TBM2

Date

March 2014

Understanding of the contract requirements

DELIVERING SUCCESS – LEGACY WAY

Client

Understanding client drivers

Committed to working together and problem solving

March 2014

WINNER of the prestigious LORD MAYORS 2012 AWARD FOR "BUSINESS INNOVATION” for Legacy Way

WINNER of the MAJOR TUNNELLING PROJECT OF THE YEAR award for Legacy Way at the 2013 International Tunnelling Awards

DELIVERING SUCCESS – LEGACY WAY

Client

"ACCIONA's drive to constantly find new and better ways to operate is evident in its design and construction of the Legacy Way road tunnel.” Brisbane Lord Mayor Graham Quirk

March 2014 DELIVERING SUCCESS – LEGACY WAY

Community and People

Value Marketing

Dedicated Community and Stakeholder Relations team works closely with local RESIDENTS, BUSINESSES and COMMUNITY GROUPS to ensure projects progress is effectively communicated via a range of channels including:

Face-to-face meetings Door knocking Flyers Website information

Public displays 24/7 hotline Visitors’ Centre Community Liaison Groups

March 2014

1. MISSION OF THE PROJECT

Functionality

Best Procurement Model

Commercial Frame

Risk Allocation

2. UNDERSTANDING THE PROJECT SPONSOR ROLE

CONCLUSION

Right people and processes in place

Identify an alignment of stakeholders

Clear long term rules and drivers

Problem solving approach on a “win-win” basis, support of the Project Manager

March 2014

3. GOVERNANCE TEAM

Skills and Capabilities Understanding of Risk and Responsibilities Looking for Innovation Ability to foresee and plan for resources required Support of the delivery team, performance measures of governance team

Gain internal commitment during delivery Gain external commitment with long term view

4. VALUE MARKETING

CONCLUSION

March 2014

REFERENCES

• Project Governance Effectiveness, report by Caravel Group—March

2013 http://www.infrastructureaustralia.gov.au

• Lynda Bourne, DPM, PMP, Project Management Institute, April 5,

2012

http://blogs.pmi.org/blog/voices_on_project_management/2012/04/wh

at-does-a-project-sponsor-re.html

• Success and Failure in Urban Transport Infrastructure Projects,

report by KPMG United Kingdom, 2010

http://www.kpmg.com/CN/en/IssuesAndInsights/ArticlesPublications/

Documents/Urban-transport-infrastructure-projects-O-201003.pdf

• KPMG Global construction survey 2013

KPMG International Cooperative (“KPMG International”)

March 2014

March 2014

Fernando Fajardo Managing Director, ACCIONA Infrastructure & Agua

(Australia & South East Asia)

Project Director, Transcity Joint Venture, Legacy Way Project