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House of Assembly - Fifty-Second Parliament, First Session (52-1)
2011-05-05 Daily Xml
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ROYAL ADELAIDE HOSPITAL

Dr McFETRIDGE (Morphett) (15:04): My question is to the Treasurer. Will the Treasurer confirm that, on top of the 12 to 15 per cent return paid to investors in the new Royal Adelaide PPP, there will be an additional margin paid to Macquarie Bank?

The SPEAKER: The Minister for Health.

Members interjecting:

The SPEAKER: Order!

The Hon. J.D. HILL (Kaurna—Minister for Health, Minister for Mental Health and Substance Abuse, Minister for the Southern Suburbs, Minister Assisting the Premier in the Arts) (15:04): Well, I would say to the member for Morphett the same as I said to the Leader of the Opposition: we have yet to conclude the contractual arrangements with the parties, so we cannot confirm anything. Of course—

Mr Williams interjecting:

The SPEAKER: Order!

The Hon. J.D. HILL: —there is a profit involved in the commercial enterprise otherwise they would not do it, and, of course, those who provide services get a fee otherwise they would not do it.

Dr McFetridge interjecting:

The SPEAKER: Order, member for Morphett!

The Hon. J.D. HILL: There is a big difference between the rate of return on the equity investment—which is, I understand, around about 10 per cent of the total sum—and the debt, and the equity investors who take the highest risk are offered a higher reward if the project is able to come in on time, on budget and so on. That is when they get that high reward. If it does not they do not get anything—in fact, they might lose money.

The debt is established in a different way and at a different rate. Of course, everyone gets paid, but the reality is—and that is the point made by Infrastructure Partnerships Australia—that, even with the profits going to these organisations through it, you get a better outcome because the planning of the project is such that you have got better life-cycle cost arrangements in place, so it is cheaper in the long term for the public to do it this way, and, of course, the risk is transferred from government to the state.

Companies that build these things are used to building complex buildings. State governments—when was the last time that we built a hospital of this size? Well, never. If we were to build a hospital of this size and this level of complexity there would be a whole range of risks that we would get wrong and the cost would blowout.

Say the price of steel went up, say there was a strike on the waterfront and we could not get materials in. Projects would run over cost and then the state would be wearing those risks. Through this arrangement all those risks are transferred to the private sector. That is why it is a good deal.

It is important that they get a profit because they are taking the risks, but we know in advance exactly how much it is going to cost and how much we have to pay and we can factor that in. If you compare it properly, like with like, it is a good deal. Sometimes, PPPs—

Mr Williams interjecting:

The Hon. J.D. HILL: No, I am not.

Mr Williams interjecting:

The SPEAKER: Order!

The Hon. J.D. HILL: Strange that you should say that. Infrastructure Partnerships Australia says exactly that. Let me quote them again:

Public private partnerships are the best method available to Australia's governments to deliver large, complex and expensive projects, achieving significant savings in both time and cost.

So, it is not only me that is saying that: that is what the industry is saying about it; that is what Infrastructure Partnerships Australia is saying. There is always a question: is a particular contract that is being offered to the state good value? Some might be, some may not be. In this case, this is a good value contract, and all of the details will be available to all the members opposite and the media and everybody else in the world to examine and to make their decision, but we do not have that available to us now because we have yet to sign the contract. I know that this is a difficult thing for the opposition to accept, but that is the reality.

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