Time to take charge

19 November 2012

Tunnels North America editor Nicole Robinson this month looks at the booming Canadian tunnelling market and the mega projects of the US. Last month’s sell out Tunnelling Association of Canada’s conference was a clear indicator of interest in the country and the numerous upcoming hydropower and transport works.

Big transport jobs and power projects have been high on the political agenda at all levels in Canada. It is a different story in the US.

For those readers tracking the US election - the details of which we will avoid as the election is due while this magazine is in the post - you may have noticed a distinct lack of infrastructure in the discussions.

According to a Standard & Poor's report last month, the failure for the US central government to develop a coordinated plan to repair the country's failing infrastructure will leave the state and local governments footing the bill. Or otherwise the projects may be deferred.

According to the report, the US has a USD 2.2tn backlog of infrastructure projects just to maintain the status quo. Infrastructure developments seem impossible to separate from the public purse.

The massive investment costs required for the more complex tunnelling projects may never be able to cover their costs in tickets and tolls but may find an economic case by measuring the benefits to the local economy or improvements in the standard of living. Therefore these projects, from metro developments to sewer lines, become politicised.

But what if the politicians turn their backs on infrastructure? With a USD 2.2tn backlog of work there must be opportunities for the industry regardless of guidance coming from politicians.

Infrastructure developments will typically take longer to come into fruition than the politician will serve in office. This can make them an unattractive investment for the politician that backs, for example, a metro line. During his four years in office he might not able to move the project beyond the drawing board.

In Chile, the proposed 52km trans Andean base tunnel is being spearheaded by a consortium of private companies. The tenacity of the proponents of the trans- Andean tunnel is a model to be followed.

Work on the original Central Trans-Andean Railroad began in 1887 as a private finance initiative well ahead of its time. Nearly 100 years later the tunnel crossing the central section of the Andes is out of use due to avalanches and a replacement road tunnel is at capacity.

In 2001 the Tecnicagua company, an oil firm based in Mendoza, presented a feasibility study showing that the reopening of the Central Trans-Andean Railroad would produce their sponsors a return of over 20 per cent. The importance of the study came from increased truck traffic on the corridor Los Andes-Mendoza and the reduced capacity of the road.

The study won the project governmental support from both countries - perhaps aided by the fact the cost and risk would be 100 per cent borne by the private sector. The only commitment needed from the public sector would be a 25 year concession for the winning bidder to reclaim its investment.

Despite the doubts of railroad experts, economists and engineers, and after delays, in September 2004 the governments of both countries assured that they would open a competitive bidding process for the reconstruction the Central Trans-Andean Railroad.

Bids were called for the project but in 2008 the process was declared void: the only bid received was that of Tecnicagua and was unsuited to the technical requirements. However, Corporación América picked up the torch and acquired the rights to Tecnicagua's project. It presented the improved project with the construction of the base tunnel: the Bioceanic Aconcagua Corridor, a bi-national project (Chile-Argentina) with regional impact (Brazil - Uruguay - Paraguay - Peru).

Corporación América introduced the respective private initiatives for the project in Chile and Argentina in 2008. Both countries quickly backed the project.

At the beginning of 2010, the project details, the financial and economic model, and the guarantee scheme that were formally presented to the governments as part of the private initiative were all presented to multilateral credit agencies and the process of assuring financial support begun.

The consortium, which includes Japan's Mitsubishi and Italy's Geodata, is in the processes of hammering out a design for the base tunnel, which is expected to take a decade to construct.

This model of spotting a problem and driving it through, hopefully, to construction could well be transferred to the USD 2.2tln backlog of infrastructure development in the US and secure a stable future workload for the industry.