A confidential finance industry publication had claimed the cost of the Royal Adelaide Hospital project had blown out to $3 billion.
“After Opposition Leader Isobel Redmond yesterday indicated the cost of the $1.7 billion RAH project had blown out by “hundreds of millions of dollars”, finance industry sources provided the Liberal Party with a document indicating a much bigger and more embarrassing blowout,” Shadow Minister for Finance Rob Lucas said today.
“The attached confidential industry briefing note provided to the Liberal Party is authored by Project Finance International and dated 3 June 2010.” It reads:
“The decision by the South Australian government to build the new Royal Adelaide Hospital as a PPP project is in for a rough ride, as the publicly stated capital cost of A$1.7bn has now blown out to almost A$3bn. The reason for the extra cost remains unclear and there is a reluctance to publicly acknowledge the new figure, which came to light following the lodging of bids by the two consortia on May 20.
Bids from the Torrens Health Partnership and SA Health Partnership consortia and their banks show that about A$500m of equity and A$2.5bn of debt will be needed to fund the hospital. The margins proposed by the consortia are about 290bp during construction and 260bp post-construction. The tenors are five and seven years…”
“Finance industry sources have indicated that PFI is one of the leading sources of information and intelligence about PPP deals around the world. PFI are linked with the global firm Thomson Reuters, and this briefing is provided only to subscribers of this service,” Mr Lucas said.
“This briefing note not only refers to the cost blowout, but also highly confidential information about debt/equity splits and interest rate margins proposed by the consortia of between 260 and 290 basis points.
“It is interesting to note that Treasurer Kevin Foley went into hiding yesterday and refused to deny claims that the cost of the project had blown out by hundreds of millions of dollars.
“The attached finance industry leak makes it clear now why Mr Foley is refusing to comment even though he has always said he is the Minister responsible for the RAH PPP.
“Whilst Mr Foley happily admits he is “not the sharpest tool in the kit,” taxpayers have the right to expect some level of financial competence in managing a $1.7 billion project. The extent of leaks about a supposedly confidential bidding process should be of great concern not only to Mr Foley, but also to South Australian taxpayers.
“Mr Foley must today come out of hiding and answer this simple question: is he still guaranteeing the RAH project cost will be $1.7 billion or has there been a massive blowout of “hundreds of millions of dollars”?