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House of Assembly - Fifty-Fourth Parliament, First Session (54-1)
2018-10-16 Daily Xml
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Livesey Report into Generator Acquisition

The Hon. D.C. VAN HOLST PELLEKAAN (Stuart—Minister for Energy and Mining) (14:12): I seek leave to make a ministerial statement.

Leave granted.

The Hon. D.C. VAN HOLST PELLEKAAN: Today, the report by Mark Livesey QC into the purchase of the diesel generators was tabled in parliament by the Attorney-General. It is a sobering read and a damning indictment of the previous Labor government's decision-making, highlighting serious concerns with its procurement process. It exposes how, seemingly without any expert advice, Labor rushed into owning permanent generators at huge expense without any evidence of their being needed in the long term.

The previous Labor government decided to slug South Australian taxpayers on the basis of politics alone for generators that will likely lie dormant. Mr Livesey QC outlines that the likely total cost of the generators will be a staggering $609.5 million or more—

Members interjecting:

The SPEAKER: Order!

The Hon. D.C. VAN HOLST PELLEKAAN: —over their 25-year lifetime. Even if they were to be used in the future, there is no guarantee that they will be anymore cost effective than alternatives.

I would like to place on the record my acknowledgement of Mr Livesey QC’s words about my department and its remarkable efforts to establish the temporary generators in such a short time under the previous government's direction and my appreciation for its ongoing work. But I will leave to the words of Mr Livesey QC’s report—

Members interjecting:

The SPEAKER: Order!

The Hon. D.C. VAN HOLST PELLEKAAN: —an explanation of the process overseen by the former energy minister Koutsantonis which led to the procurement and ultimate exercise of the option to purchase the generators, and I quote:

I have seen no comprehensive or contemporaneous independent financial analysis of the long-term implications of exercising the option when it was announced in August 2017 or when it was exercised in November 2017.

That is from paragraph 4. The report continues:

It is difficult to determine the concrete advantage associated with exercising the option early (paragraph 7.2.2).

(N)either the obtaining nor exercising of the option was made the subject of any specific procurement approval from the State Procurement Board (paragraph 7.4).

State Procurement Board approval was probably required—

Members interjecting:

The SPEAKER: Order!

The Hon. D.C. VAN HOLST PELLEKAAN: I continue—

before the option was obtained and, on any view, before it was exercised and the State was thereby committed to its acquisition. That was not done (paragraph 7.5).

I quote:

The likely overall cost—

Members interjecting:

The SPEAKER: Order! The minister has leave. The minister has the call.

The Hon. D.C. VAN HOLST PELLEKAAN: Thank you, Mr Speaker—

will be at least $494.5 million, in addition to the initial lease and associated costs for the first 13 months of around $115 million, a total of $609.5 million (paragraph 7.9).

In my view it is significant that there does not appear to be any independent—

Members interjecting:

The SPEAKER: Order!

The Hon. D.C. VAN HOLST PELLEKAAN: I continue—

expert report or other evidence provided to or considered by the Joint Steering Committee addressing the prospect of energy security risk beyond the proposed lease periods (paragraph 85).

It is significant, in my view, that at the time decision-making was announced concerning the 'State relocation option' for the acquisition of the 9GE TM2500 gas turbines from APR Energy, no further or contemporaneous consideration appears to have been given to the necessity for a State owned permanent emergency electricity generator. Rather, the necessity for this permanent facility appears to have been assumed (paragraph 105).

(T)he opportunity was lost to take the time to reflect on whether the large purchase, relocation and operation and maintenance costs could be avoided, together with reflection on the period of time for which this additional capacity may actually be required (paragraph 194).

In short, apart from the logistical issues to which I have referred, there does not appear to have been any overall advantage associated with the early exercise of the option to purchase (paragraph 198).

In these circumstances, it is my opinion that the applicable—

The Hon. A. Koutsantonis interjecting:

The SPEAKER: Order!

The Hon. D.C. VAN HOLST PELLEKAAN: Continuing—

procurement policies and guidelines were not followed—

Members interjecting:

The SPEAKER: Order! Would the Premier and the member for West Torrens please cease their discussions. The minister has the call.

The Hon. D.C. VAN HOLST PELLEKAAN: I will start that again, as it was a quote:

In these circumstances, it is my opinion that the applicable procurement policies and guidelines were not followed in connection with the obtaining or the exercise of the purchase option (paragraph 216).

Finally, the last quote:

(T)he evidence in favour of the case for a permanent emergency electrical generation facility is sparse indeed. None of the procurement materials or expert reports made available to me cite expert advice on the need for a permanent plant (paragraph 231).

I thank Mr Livesey QC for his time and effort in preparing this important report and all who assisted him in this task.

Members interjecting:

The SPEAKER: Before I call the minister again, I call the following members to order: the Premier, the Minister for Infrastructure, the member for Hammond and the member for West Torrens. The Minister for Energy has the call.

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