House of Assembly Fifty-First Parliament, Third Session (51-3) 51 3 Parliament of South Australia House of Assembly published Question Time Super Schools SUPER SCHOOLS Mr PICCOLO House of Assembly Light SUPER SCHOOLS Mr PICCOLO (Light) (14:40): Can the Treasurer advise the house of recent progress in the public-private partnership process for the six new super schools? The Hon. K.O. FOLEY House of Assembly Port Adelaide Deputy Premier Minister for Industry and Trade Minister for Federal/State Relations SUPER SCHOOLS The Hon. K.O. FOLEY (Port Adelaide—Deputy Premier, Treasurer, Minister for Industry and Trade, Minister for Federal/State Relations) (14:40): I thank the member for his very important question. From the outset, can I say that I have my father with me today. It is his 84^th birthday and he believes, quite rightly, that he has raised a well-mannered, well-behaved, intelligent son, and I would appreciate if you would treat me with the respect I deserve and show nothing that would make my father think he has probably raised someone less well-behaved than he may like. Sorry, Dad. Don't interject; just make me feel important today, please. Dad will like it. Ms Chapman House of Assembly Ms Chapman: It's an easy question on your side. All you've got to do is answer it. The Hon. K.O. FOLEY House of Assembly The Hon. K.O. FOLEY: It's my dad's birthday. Come on, Vic. Come on, don't be harsh. Ms Chapman House of Assembly Ms Chapman: Happy birthday. The Hon. K.O. FOLEY House of Assembly The Hon. K.O. FOLEY: Yes, he's over there. Happy birthday from the deputy leader, Dad. In the 2006-07 state budget, the government announced it was building six new super schools to be procured under the public-private partnership model. These schools are to be located at Taperoo—within my electorate, in case anybody wants to make anything of that—Blair Athol, Gepps Cross, Woodville Gardens, Smithfield Plains and Munno Para West. To manage the procurement, a unit within the Department of Treasury and Finance, called Partnerships SA, was established. An executive steering committee within government, with membership of the chief executive officers of Treasury and Finance, department of education and Department for Transport, Energy and Infrastructure, was formed to oversee the process. The expressions of interest were released to the market in December 2007. Market sounding events and consultation forums were held over the following months; responses were received and bidders shortlisted in April 2008. A request for proposal was released in May 2008. Final bids were received on 13 February 2009. Since the government received these bids, the executive steering committee has worked through each of these proposals. Significant time and effort has been spent with each of the bidding consortia to determine which of the bids best suited the requirements of the project. The government has now considered these bids and, on advice from the executive steering committee, the cabinet has endorsed the recommendation that the selected preferred bidder to continue negotiations with the government is Pinnacle Education Consortium. The consortium includes Commonwealth Bank Investments Ltd, Hansen Yuncken Pty Ltd and HJB Investments Pty Ltd, and I think the Allied Irish Bank but I will need to confirm that. Pinnacle Education will partner with Spotless Pty Ltd for the delivery of facilities management services—the FM contract. It should be noted that Babcock & Brown Investments were originally the major equity financier of this consortium but, as members may be aware, Babcock & Brown no longer exists. An honourable member House of Assembly An honourable member: They haven't had a good year. The Hon. K.O. FOLEY House of Assembly The Hon. K.O. FOLEY: They haven't had a good year. I am advised that this role of financing has been assumed by Commonwealth Bank Investments Ltd, along with Hansen Yuncken and HJB Investments Pty Ltd. The other two shortlisted bidders were deemed not to meet the project requirements as closely as Pinnacle Education. The government will now work through various technical and financial issues with the consortium so that the government can determine that the project meets the public sector comparator test and delivers, importantly, value for money to the public. Ms Chapman interjecting: The Hon. K.O. FOLEY House of Assembly The Hon. K.O. FOLEY: Sorry? Ms Chapman House of Assembly Ms Chapman: For three years. The Hon. K.O. FOLEY House of Assembly The Hon. K.O. FOLEY: Public-private partnerships are a longer process than direct builds for obvious reasons. If these negotiations are successful, the government expects to reach contractual close in June this year. This will enable construction of the schools to commence around the middle of the year, and today's announcement by the government shows that there is still a market—and I will say a bit more on that at the conclusion of this piece on the schools—for projects such as the government's new schools PPP and, at this end of the market, we will continue to attract significant interest and commitment from the private sector. However, I have to say that there are clearly issues with credit market volatility, and with available capital becoming more scarce for larger projects there have been concerns that infrastructure funded by private sector debt may not be viable. My main concern, ultimately, as we have said from the outset, is that the test is best value for money for taxpayers. We are currently working through these issues and examining a range of options, as are all states around Australia, to see what will deliver best value for money for the state into the future. The government looks forward to concluding negotiations with Pinnacle Education. A report in the paper today by a lobby group, Infrastructure Partnerships Australia—I am not overly aware of the entity other than they are a lobby organisation—suggests that the new Royal Adelaide Hospital may be in some doubt. That is not correct. That report is wrong. I am not aware of them contacting us for confirmation or advice. They may have, but I am not personally aware of it, from what I can recall. We are in an incredibly capital restrained market. It is very difficult for the private market to raise capital. It is very expensive for the private market to raise capital, and I think the behaviour of, in main part, our domestic banks, as it relates to business financing, is less than satisfactory. However, in the particular issue of public-private partnerships, the ability of the private sector is acknowledged in relation to delivering a tranche of $1.7 billion of private financing for projects, such as the hospital, and the same would occur for the $1.4 billion proposal from the Liberal Party. We are now examining, with some advice from the Royal Bank of Canada, the best way to go forward with this. We are looking at a complete PPP and seeing whether or not the market can deliver $1.7 billion of private debt, bearing in mind that we want competitive tension; so that would have to be three individual organisations or consortia having to get their own $1.7 billion. It is highly unlikely that you will get that amount of available capital in the market. So, what we are looking at is whether our financing authority plays a role in the capital provision, or, probably more likely, that we as a government may consider what contribution a government makes to lessen the capital requirement needed to be raised from the market. However, there is no problem in the state government raising capital. There is little difficulty in private consortia raising capital, probably up to the half a billion plus mark, 700 million. It is obviously getting more difficult for the private sector to go much beyond that at present. We are just seeing now, and I was very heartened overnight, that work by the Obama administration has been incredibly well received by—not that they are necessarily the greatest judges in the world—Wall Street, but the Dow jumped 6 per cent. So, there appears to be a strong view in the United States' financial markets that President Obama's decision to take the toxic assets out of the banking structures in America and put them into some form of nationalised or private-public partnership model has been well received. If we can get some stability into the market and if we can start getting the banks behaving like banks it may well be a different story. It is an incredible time of disruption in the financial markets. Let's see what occurs. Importantly, there are two points I want to conclude on: the hospital will be delivered. Raising the capital of the government is not an issue. Secondly, we have got a way of PPP today that involves a significant, albeit much smaller, amount of private capital, and in this case we believe the PPP will provide value for money. To members opposite, thank you for showing respect to me in my answer, and, for that, I am appreciative.