Business Models for Value in Complex Infrastructure. The global C4IR(TM) event series is available to franchise via www.cir-strategy.com as C4IRx.

1. Business Models for Value
In Complex Infrastructure
3th February 2017
Professor Peter Sharratt
Presented at Consortium for the 4th Revolution | Executive Briefing Day
(#C4IR) Cambridge, UK 2-3 February 2017 | www.cir-strategy.com/events

2. Today the world’s largest 600 ci4es generate:
Top 23 Mega-ci4es with just 1/20th world’s
popula1on generate 14% global GDP.
Metro-regions are 2% of the world’s surface and
generate 80% of the world’s wealth.
20% of global GDP coming from 190 ci4es
in North America & Canada.
In 15 years’ 1me....
2 billion (1/4 world’s population)
$64 trillion
Will Generate 60% global GDP
1.5 billion (about 1/5th of the world’s population)
Generate $30 trillion
Over half of global GDP
CITY REGIONS AS DRIVERS OF THE GLOBAL ECONOMY

3. Source: McKinsey Global Ins1tute Cityscope
World’s top 10 cities in the
next 15 years:
Rank By GDP By Growth By
Population
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
New York
Tokyo
Shanghai
London
Beijing
Los Angeles
Paris
Chicago
Rhein-Ruhr
Shenzhen
Tianjin
Dallas
Washington
Houston
Sao Paolo
Shanghai
Beijing
New York
Tianjin
Chongqing
Shenzhen
Guangzhou
Nanjing
Hangzhou
Chengdu
Wuhan
London
Los Angeles
Foshan
Taipei
Tokyo
Mumbai
Shanghai
Beijing
Delhi
Kolkata
Mexico City
Dao Paulo
Mexico City
New York
Chongqing
Karachi
Kinshasa
London
Lagos
Impacts
50%
60%
33%
12%
40%
10%
Global GHG emissions
World’s energy use
Global resource consump4on
Global fresh water use
Global solid waste produc4on
Global workforce employed
Global Urbanisation

4. NEW URBAN MODELS
$23bn – of which 1/3 was infrastructure

5. Re-inventing Growth: Critical National Infrastructure
Renewable energy pumping systems on the canal
Source: Foster + Partners
Red
2
Dead

6. Cities and City Regions are the power
house of the global economy and will
continue to grow in importance. The
projected infrastructure spend to
support urban economic growth and
development is estimated to be over
$40 trillion.
Today’s Cities
Urban growth challenges are
increasingly about global security,
energy and resource constraints, re-
alignment of the global economy,
social equity and demographic issues
and the impacts of disruptive change.
CITY REGIONS AS DRIVERS OF THE GLOBAL ECONOMY

7. Line enables up to 200,000 new homes and has a Housing Land
Value upliS of £15bn
Note – Na1onal Rail Abstrac1on = 13% (loss of fare box revenue
on other lines)
The indirect contribu1on is projected to be somewhere
between 160 - 212% of the costs.
Development phase 5-6 years | 10-12 year delivery phase | due
to be opera1onal 2032.
Capital Funding Sources Crossrail 2
Opera1ng Surplus
Business Rates Supplement
Mayoral CIL
Re-sale Land/Property
Council Tax
London Contribu4on
11.6%
20.3%
16.9%
6.3%
1.4%
56%
THE CHALLENGE OF PAYING FOR ECONOMIC INFRASTRUCTURE
Tax Increment Financing (TIF)
Incremental Business Rate Income
Community Infrastructure Levy Borough (CIL)
Mayoral CIL
Stamp Duty Land Tax (SDLT)

8. STATION CENTRIC DEVELOPMENT

9. WSP TFL BRIEFING:
THE ROLE OF TRANSPORT IN MEETING THE MAYORS STRATEGIC OBJECTIVES FOR LONDON
Heathrow Gateway Clapham Junc1on Earls Court
Opportunity Areas Areas for Intensifica4on
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
Bexley Riverside
Bromley
Canada Water
Charlton Riverside
City Fringe/ Tech City
Colindale/Burnt Oak
Cricklewood /Brent Cross
Croydon
Dephord Creek /Greenwich
Earls Court & West Kensington
Elephant & Castle
Euston
Greenwich Peninsular
Harrow & Wealdstone
Heathrow
Ilford
Isle of Dogs
Kensal Canal Side
Kings Cross St Pancras
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
Lewisham, Cahord & New Cross
London Bridge, Borough, Banks.
London Riverside
Lower Lee Valley
Old Kent Road
Paddington
Park Royal
Old Oak Common
Royal Docks Beckton Waterfront
Southall
Thamesmead & Abbey Wood
Tokenham Court Road
Upper Lee Valley
Vauxhall, Nine Elms, Ba`ersea
Victoria
Waterloo
Wembley
White City
Woolwich
39
40
41
42
43
44
45
Farringdon / Smithfield
Harringay Heartlands
Holborn
Kidbrooke
Mill Hill East
South Wimbledon / Colliers Wood
West Hampstead Interchange
Red = projects we are currently engaged on

10. REALIZABLE VALUE CAPTURE

11. Sta4on Pipe Line
Clapham Junc1on
Wimbledon
Chelsea Stadium
Gunnersbury
Rossmore Road
Kings Road
Royal Mint Gardens
STATION OVERBUILD + LAND BRIDGING DEVELOPMENT

12. ‘ the scale of the cuts means we need
to completely re-think the role and
structure of the city council and how we
achieve the outcomes we seek …..
This is the end of Local Government as
we know it. ‘
Sir Albert Bore, Leader of Birmingham City Council,
2014
‘Snap-Shot ‘ City Profile
• Birmingham is the largest municipal authority in Europe and is
underperforming
• Birmingham’s GVA is lowest of the core cities at £19,523
• UK’s second largest city ONS predict a population growth of 85,000
between 2011 – 2021 to
• 1,160,100 – an increase of 8%.
• Overcrowding rose 3.6% in 2001 to 12.4% in 2011
• Ethnicity is more diverse that the UK average 47% BME.
• 22% current population born outside the UK
• 44% primary and 38% secondary school children have English as second
language.
• Youngest population of any European City: 46% population under 30
years
• 11% growth in pensioners 2011 to 2021
• Population 85yrs + expected to grow 30% between 2011 – 2021.
Revenue Challenge
• 90% from central Government ( ring fenced for public service delivery)
• 10% from Council Tax.
• By 2018, cumulative Revenue Support Grant will reduce by 50%
Key Growth Challenges
• Maintaining public service commitment with a reducing funding
from central government.
• Housing shortage
• High localised deprivation
• Securing private sector Inward investment
• Having a clear vision of a City Government Reform for 2020
2015 2016 2017 2018 2019 2020
Core Grant £403m £353m £293m £256m £260m £264m
% Change -14% -21.3% -12.4% -16.9%
-12.9
%
+1.6%
% Cumulative
Change -14% -32.3% -40.7% -50.6% -57% -56.3%
City Council Business Plan
CITY CITY STRATEGIC CHALLENGES

13. Strategies for LVC:
Extend high density central core areas to city fringe
Population Dispersal to South East Region
New Settlements: Eco-towns (Land Release: Brownfield +
Green-Belt)
Suburban Intensification
Access Charges
New
Infrastructure
Land Value Capture
New Finance Models
MODELS FOR TRANSPORT ENABLED DEVELOPMENT
Focus on Supply
Side:
How projects are
brought to market.
Less on
‘Demand Side’ – how
projects are delivered +
financed
Use tax incentives to
boost affordability for
Public Sector
Develop models to release
Capital from existing surplus
Or underutilised Public assets
To invest capital in new projects.
Public Sector
Social Value Funds
SWF / Govt Bonds

14. ‘One Belt, One Road’ – China’s Silk Road Initiative will create
A connected global economic infrastructure.
Projects Completed or Planned 2015 Source: Merics – Mercator Institute
NEW INVESTORS

15. Collaboration between Govt, industry and 9
research organisations.
CIVIL
SOCIETY
NON-
ALIGNED
ORGANISATI
ONS
OPINION
FORMERS
PRIVATE
ORGANISATI
ONS
PUBLIC
SECTOR
ENTERPRISE
PUBLIC
DEBATE
GOVERNMEN
T
SUPRA-
NAT8IONAL
ENTITIES
PUBLIC PRIVATE
PARTNERSHIPS
CIT
Y
Regi
ons
UNDERSTANDING COMPLEXITY AND HOW THINGS HAPPEN ….

16. Geographic Informa1on System (GIS) applica1ons can enable organisa1ons to visually
assess the Likelihood (Vulnerability, Threat and Target Akrac1veness) of targeted,
environmental and situa1onal business risks on a single, integrated plahorm. This
empowers risk stakeholders to take key decisions based on enhanced situa1onal
awareness and visualisa1on of simultaneous data sets.
Our team work with organisa1ons to iden1fy specific data ‘layers’ from a
comprehensive à la carte selec1on falling into the five categories (listed leS)
recognising throughout this process that each business’ individual characteris1cs
oSen determine risk exposure and that internal risk appe1te defines controls.
Together, these layers provide a detailed Risk Opera1ng Picture (ROP).
sHORAS outputs are tailored to client requirements. ROPs can be included in
wriken GRA reports or delivered as stand-alone KMZ/KML files, augmented
by dashboard repor1ng (see below), for inclusion within investment risk appraisals or
as part of op1ons tes1ng for na1onal, regional , district or site
level appraisals.
Geopolitical &
Macroeconomic
Socio-economic
Physical Security
Energy Security
& CNI
Environmental
Sustainability Risk and Value Management Tools
Visualising Loca4on Intelligence for Infrastructure eco-systems
Theme
Anti-Bribery & Corruption Compliance
Overseas Investment Risk
Global
Environmental Threats
Regional
Location Intelligence
District

17. Total UK Carbon 1.215 million t
Case Study: Generic Total Cost to Serve model for Data Centres
DATA CENTRE ‘COST TO SERVE’ MODELS
INPUTS
Engineering – Tier rating, IT load per hall,
number of halls, PUE
Technology – Applications, server complexity,
rack size, IT load projected growth
Real Estate – Years to plan for, location, site
cost, inflation
OUTPUTS
Engineering – area required for plant, energy
and carbon tax costs
Technology – IT Load per rack & hall, number
of servers and racks required, costs (IT
hardware, operating, migration)
Real Estate – site size required, construction
costs, maintenance and running costs
Facility parameters defined together with
cumulative total cost of ownership and spend
profile for the life of the data centre.

18. Cities & Infrastructure: Pulse Survey
How strongly do you agree/disagree with the following
statements?
Agree Neutral Disagree
The Government should con1nue to invest in major infrastructure
projects
99% 1% -
The Government should delay investment decisions un1l there is
greater certainty on Britain's rela1onship with the rest of Europe
2% 4% 94%
Ci1es should have greater fiscal / revenue control and decision
taking powers on investment priori1es
73% 18% 9%
The public don't understand the role of infrastructure in enabling
growth
80% 7% 13%
The industry should do more to engage key decision takers on the
importance of infrastructure and development
94% 5% 1%
Britain's leaving the EU will significantly weaken the UK
Government's Environmental commitments and carbon reduc1on
targets
42% 27% 31%
The quality of our ci1es and the public realm will be of increasing
importance in increasing our na1onal compe11veness should we
leave the EU
79% 15% 6%

19. A
(14%)
B
(14%)
D
(14%)
I
([PERCENTAGE]) E
([PERCENTAGE])
L
([PERCENTAGE])
E
(8%)
K
([PERCENTAGE])
J
([PERCENTAGE])
E
([PERCENTAGE])
E
([PERCENTAGE])
C
([PERCENTAGE])
TOP 5 investment priori4es to help ensure our long term compe44veness
Improved transport links between ci1es e.g.
HS2, HS3 Northern Powerhouse
Improved transport linkages within ci1es and
city regions e.g. Cross Rail 2
Increased airport capacity in the South East
Conven1onal Power Genera1on,
Transmission, Distribu1on
Increase Renewable Energy
Systems Improvement e.g. electrifica1on
Improving UK's main Trunk Roads and
Motorways
Improving Local Road Transport
Flood Defense / Climate Resilience
Ranking Priority
1st
A
B
Improved Transport between ci1es
Improved transport within ci1es
3rd C Digital & IT Infrastructure
4th D Airport Expansion in SE
5th
E
F
G
H
Trunk Road & Motorway Improvement
Increased Renewable Energy
Urban Housing
Social Infrastructure
9th
10th
11th
12th
I
J
K
L
Conven1onal Power
Flood Defence / Climate resilience
Local Road Transport
Systems Improvements, Electrifica1on
Cities & Infrastructure: Pulse Survey
Single most important areas for Government and policy makers to ensure growth and compe44veness
Na4onal Infrastructure 28%
23%
20%
Beker, integrated inter- urban transport systems
Long term na1onal infrastructure plan with cross party support
Na1onal clean power strategy + support systems
City & City Regions 22%
20%
17%
Beker public transport systems
Beker, integrated mul1-modal transport systems
Devolu1on
Rural 52%
10%
7%
Broad-Band
Community Investment
Planning policies that support economic development

20. Key Themes
Cities & Infrastructure: Pulse Survey
Housing was surprisingly not a major
issue even though the public and
poli<cians see housing as their most
important infrastructure related
issue (ignore immigra<on). If
infrastructure wants to be vocal it
should talk in the language of housing
(development) that the public
understands.
Compe44veness We have been calling for greater infrastructure investment for years, we were on this
journey anyway. Brexit doesn’t impact the desire or long term need for upgrading our
transport networks that need it to cope with a growing popula1on and economy.
Confidence Is Brexit Infrastructure’s opportunity to find it’s voice?
Not only does it provide enormous benefits to the economy, we as an
industry are significant employers of high end technical skills in our own right.
Advocacy &
Awareness
How do we do a beker job in communica1ng the complexi1es and benefits of
infrastructure and connected development ?
Do we think that by persuading the public can we persuade government?
How can we akract young bright people to the industry ?
Engagement &
Influence
How can the industry do more to engage and influence decision takers and
poli1cians ?
What do we need to do beker ?
1
2
3
4
‘ There is an exis<ng skills gap in
this country. We want young
people to see great careers ahead
of them with the promise of world
class iconic projects to work on,
otherwise they may choose other
industries. Major projects can help
the UK to inspire the next
genera<on of Brunel’s.’

21. Professor Peter Sharratt MA, DipArch, MSt. IDBE, FRSA
Director Strategic Consulting, WSP Parson Brinckerhoff
Professor of Industry & Professional Practice, University of Westminster
Peter.Sharratt@wspgroup.com
07713 - 985 833 m