In mid 2011 the Australian government released the results of Phase 1 of a study on the economic benefits and financial viability of a high speed rail (HSR) network connecting cities along the east coast of Australia. The estimated economic benefits from HSR in Australia have increased owing to a range of environmental and emissions credentials, its ability to provide capacity relief for airports, as well as significant economic stimulus and employment opportunities. However, while earlier studies have found that HSR could be capable of being self-funding in the operating phase, this excluded the massive initial capital outlay that would be required. A full Brisbane—Melbourne HSR system is estimated to cost in excess of AU$100 billion. It is likely that a combination of public and private means would be required to make HSR a reality for Australia. However, capital is becoming hard to source for large scale infrastructure. The implications of the Global Financial Crisis include significant pressure on world capital markets from sovereign debt issues, the demise of many leveraged private capital arrangements and poor performance of infrastructure funds. On top of the undesirable characteristics of financing public infrastructure (including regulation and safety aspects), this project could expect a reluctant private equity environment, the more so given the reputational damage associated with delayed and abandoned rail developments.
The question then becomes ‘how do we select the best capital raising method that could feasibly finance a multi-billion dollar high risk project?’ The economic case for HSR is contentious and this paper tries to stay clear of the debate for and against HSR. Instead this paper focuses on developing an understanding of the concepts involved in evaluating financing alternatives, review evaluation approaches available in the literature, and contribute concepts to be considered in the development of an evaluation framework for this type of infrastructure.