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House of Assembly - Fifty-First Parliament, Third Session (51-3)
2009-09-10 Daily Xml
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PUBLIC-PRIVATE PARTNERSHIPS

Mr GRIFFITHS (Goyder—Deputy Leader of the Opposition) (14:53): My question is to the Treasurer. What amount of compensation or other payments has been paid to consortia involved with the government's cancelled prisons PPP projects? If payments have not been made, when will this issue be resolved?

The June state budget cancelled the $500 million prisons PPP projects, with the government acknowledging the need to compensate the affected consortia. The Treasurer is yet to disclose the amount of compensation but has said that it will cost millions of dollars.

The Hon. K.O. FOLEY (Port Adelaide—Deputy Premier, Treasurer, Minister for Industry and Trade, Minister for Federal/State Relations) (14:53): The government did cancel the PPPs for the prisons. I think that the member for MacKillop said yesterday that the only reason we have improved our budget position is because we stopped doing things. That is what you have to do when times gets difficult.

Mr Williams interjecting:

The Hon. K.O. FOLEY: To save the AAA rating, yes, and we stopped doing things; guilty.

Members interjecting:

The SPEAKER: Order!

The Hon. K.O. FOLEY: We did that and, by doing that, we were able to deleverage the balance sheet going forward.

An honourable member interjecting:

The Hon. K.O. FOLEY: Borrow less, have fewer borrowings. In putting the government's balance sheet into a better position, given the current financial crisis, we maintained our AAA credit rating. The payment stream we would have had to pay for those facilities has been captured by the government, in terms of savings.

What I have said is that under the contracts—under the request for proposal processes—it was very clear that the government reserved its right to cancel the project at any time: no compensation. I took a decision, having decided to cancel these projects at a later stage than one would normally cancel such a project, that I thought (and I think) there is an obligation on me as Treasurer to provide some form of compensation to the bidders. We are now negotiating what the size of that compensation shall be. It is not surprising that the three consortia would put a large number to government and that I would start off at a small number, and we will meet somewhere along that road.

Mr Griffiths interjecting:

The Hon. K.O. FOLEY: Soon, maybe. A couple of weeks, a month; I don't know—however long it takes to sort out this stuff. It will come to the tune of some millions of dollars, but I am not going to speculate on how much per consortium. It is a good faith decision by government. It is an acknowledgment that the government is a serious player when it comes to being active in the PPP marketplace and that, when decisions are taken that are effectively beyond our control, such as a global financial crisis, we will at least acknowledge in some part that we are a good faith government to deal with.

I have made that decision and the cabinet supported it. No-one likes to give away X millions if one does not have to. However, the decision to cancel the project will save the budget in any one year tens of millions of dollars. So, the payback period: whatever we choose to pay to the consortia will be paid back in a very quick space of time.

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