COST ANALYSIS
Budget summary
This project will be funded and backed by a Public Private Partnership (PPP) between Transport NSW and Lendlease. The total cost of completing the project is $30,694,555.28. Following completion of the project, average annual ongoing-costs to operate this initiative is $2,476,403.84, with an average annual income of $4,922,557.87 generated from this project. The key features of the cost analysis include:
· Pay-back period: 12 years
· Internal Rate of Return (%): 1.12%
· Cash-flow at 25 years: $34,695,775.21
This breakdown of costs for this project analyses the cash-flow for a duration of 25 years, aligning with the general serviceability time for both hydro-electrical and solar power production stations.
Capital costs
Majority of the capital costs are undergone through the implementation and initiation phase of the project. As shown in Figure xx, all costs of items and materials that are required to implement this project have been accounted for. The total cost of materials and resources is $7,138,551.07. The cost of labour and on-going yearly costs within this 5-year construction timeline is $22,954,150.18. A 2% allowance has been accounted for within this project to allow for strict protocols in staying within the budget.
With the following resources, unit costs have been estimated against similar products that are currently on the market. The budget enables the project to achieve the following:
· 96kW Solar Power Production
· 15,000L Recycled Water
· 25kW Hydro-power production
· Central Tunnel sensor/CCTV motion LED lighting.
Certification fees and taxes legislated by government bodies and third-party inspections have been allowed for in the breakdown of costs. All accessories, formwork, and additional materials have also been accounted for. Constructing an appropriate command/control centre for hydro and solar generating power have been implemented within this project to facilitate the monitoring and controlling of the sustainable system.
All labour costs account for a 2% inflation per year in the hourly rate due to mandatory pay rises, etc. to be enforced by workers unions, etc. Energy production permit will have to be certified and active from the commencement date of the construction phase. This accounts for a 1.1% inflation per year and is a capital that continues to be undertaken throughout the ongoing costs post-completion. The solar panels installed are able to facilitate generation of 96kWof energy and due to its size, the government is subsidising $40,418.93 of the solar panel’s capital in par with initiating sustainability incentives.
Ongoing costs
Post-completion of the project, there will be costs involved in order to maintain, control and facilitate the Central Station Sustainability Initiative. Following completion of the project, the following will be required:
· Labour to monitor and control the project
· Taxes on power production
· Constant inspections on the Sustainability Initiative
· WHS Compliance
· Operational Costs
The major component of the ongoing costs comprises of labour in enabling full-control of the system through its control centre in Central Station. In order for this system to comply with national standards and government legislations, consistent inspections and labour in regard to safety and productivity translates into costs on delivering the project.
The following inflation rates have been implemented within these ongoing costs:
· Power Production Tax- 3% inflation
o With the increase of alternate power production, governments will be increasing the tax rates to account for the asset Central Station will have in place. As this development will increase cash-flow within Central Station’s asset management for the long-term, governments will be required to increase tax in-par of the increase of generated income.
· Labour – 2% Inflation: general allowance for pay rises, management fees, etc.
· Maintenance of Central Station – 3.2% Inflation
o With an increase in infrastructure and facilities within the precinct, there will be further resources that will be required to be maintained. In regards to the urban growth in Sydney, the inflation rate accounts for double the growth of Sydney’s population.
· Strata – 2.1% Inflation: in par with current rates of inflation within commercial strata increases.
· Green rooftop elements– 2.8% Inflation.
o This is separate to general maintenance due to the excess resources and labour required to maintain it. Due to growth of grass being rapid and consistent, this will require frequent attention to ensuring it is maintained to a particular size.
In aims to achieve this, an average yearly total of $2,476,403.84 is required for the scope of this project.
Revenue generation
The Sustainability Initiative of Central Station enables a potential generation of income in undertaking this project. On average, a yearly revenue of $4,922,557.87 can be formed by carrying out this project. The main income arising from this project include:
· Rental income from commercial spaces maintained and managed by Lendlease
· Rental electricity and strata fees
· Government subsidies and tax rebates
· Current funding from Transport NSW
· Income/Savings generated from solar and hydroelectric power
· Public-Private-Partnership funding for the Sustainability Initiative
· Improving aesthetics and increasing iconic features within Sydney’s Central Station which in turn increase economic activity of more commuters, further sales of business within the precinct, etc.
All inflation rates depicted in Figure xx are based on each inflation rate from its particular markets, i.e. strata inflation rate is equivalent to the current commercial strata rate. Previous funding of Central Station- a 1.7% inflation rate is based on the growth rate of Sydney’s population requiring further funding in order to maintain the station for a growing population (ABS, 2017).
The aspect of cost holds a significant in deciding whether the project shall be undertaken. This project’s initiative supersedes environmental benefits by producing clean energy throughout the Central station precinct, as well as providing recycled water to plumbing and waste that do not require local supply. The green roofing schematics also improves aesthetics and improves biodiversity within the Central Business District of this busy train station. Following the pay-back period, the cash flow in this project becomes positive and continues to increase in this manner. This increases project benefits with having more funding to better improve the project, or undertake further projects to cater for the growing requirements of Central Station in the long-term. Project benefits include:
· Lower strata fee and bills for commercial tenants with Lendlease to charge tenants a lower conjoined fee in comparison to current billing techniques from own-electricity supplier.
· Increased cash flow escalating to $34.6m in 25 years.
· Excess subsidies and funding from government due to alternate electricity generation being used
· Use of cleaner energy that generates savings/income to both tenants, Lendlease and Transport NSW
· Recycled water within plumbing of general amenities, water-supply for hydro-power plant, etc. to save water, and in turn costs.
· Enormous 100,000L tank installed for providing the green-roof with 100% water supply from a recycled source.
· Improving serviceability of the Central precinct through extended the roofs life span with the green roofing scheme
