Western Sydney Airport update

On 20 December 2016, Sydney Airport received the Commonwealth Government’s Notice of Intention (NOI) setting out the material terms for Sydney Airport to develop and operate Western Sydney Airport (WSA). It is proposed to be operational in 2026 and serve the aviation needs of Western Sydney.

Sydney Airport has participated diligently in the Commonwealth’s consultation process since September 2014 and provided the Commonwealth with its views on a range of requested matters including airport design, long-term passenger forecasts and the economic viability of a new airport operating on a standalone basis. The work undertaken during the process also continues to inform planning and development for Sydney Airport over the next two decades and beyond.

However, the risks facing the development of a greenfield airport cannot be underestimated, and Sydney Airport continues to review these as part of its consideration of the NOI. Project risks include procurement and construction risks over the approximately 10-year period before the airport opens, and operational, traffic, financing, interest rate and political risks, which are at their peak in the initial years of the airport lease.

Given the significant challenges the project will face, Sydney Airport has consistently expressed its opinion that the Western Sydney Airport project would require material support from the Commonwealth to make it commercially viable. However, the Commonwealth delivered a NOI that does not feature any material support including previously contemplated procurement protections or Commonwealth funding which makes WSA a challenging investment proposition.

Given the uncertainty at reporting date as to whether Sydney Airport will develop and operate WSA, the carrying value of the project costs of $21 million has been expensed under accounting standard requirements. This accounting treatment does not impact cashflow or distributions. This is reflected in our Financial Report that follows.

Confidential and detailed market soundings are in progress with the contractor market to further inform our view of the construction costs. Any ongoing costs involved in this analysis will likely be expensed during the relevant reporting period as they are incurred.

The Commonwealth has advised that Sydney Airport’s response to the NOI is due on 8 May 2017, a four-month consideration period. We remain of the view that Sydney Airport is entitled to a nine-month consideration period but will be endeavouring to meet the Commonwealth’s timetable. As soon as we have adequate information to make an informed decision, we will do so.