Page 4129 - Week 13 - Wednesday, 26 November 2014
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We are refining our analysis and approach, providing more and more information as the project proceeds. The agency has applied industry standards to the business case, ensuring a conservative approach to the benefits and being careful to accurately calculate the costs, including risk.
The opposition is also keen to assert, as Mr Coe does in his motion, that the cost of financing is not reflected in the business case. He is just wrong. Financing costs are embodied within the public-private partnership proxy figure, which is in table 45 on page 134 of the business case. To give Mr Coe some further guidance, the references to the PPP proxy contained in financing costs are also contained in sections 9.1.1, 9.1.4 and 9.3. I quote from the business case on page 132:
The PPP proxy model therefore incorporates the following key elements:
Capital and operational expenditures;
Bid cost and financing costs (including capitalised interest during construction, and debt interest during operations); and
Equity distributions.
Mr Coe is wrong to assert that financing costs are not included in the business case. I doubt, though, that we will get any apology from Mr Coe.
It is exceptionally unusual for governments to release details of the net present cost outcome of their PPP proxy model. Given PPP proxy models are not usually in the public domain, it is perhaps understandable that one might not appreciate that it includes a finance component, even though, as I have just demonstrated, it is explicitly stated in the business case. Let me be very clear: the PPP proxy provides the present value of payments and it includes the cost of finance.
The government has released a great deal of information: capital delivery estimates, operating cost estimates and the net present costs of availability payments. The government does not intend, as I have stated previously, to make available any financing assumptions or possible availability payments on an annual basis during the procurement process. Such information is highly confidential. We do not wish to pre-condition the market or compromise the capacity through a competitive process for taxpayers to get value for money.
Mr Coe expresses concern that the government will pay for the relocation of utilities and roadworks. Of course there is a cost for the relocation of pipes and wires, just as there is a cost for tracks, depot and light rail vehicles. Relocating and protecting utility services is part of any major construction project, and allowance for this has been made in the project’s cost estimate. In addition, a great deal of work is presently underway to understand and articulate the risks associated with utilities and where risks associated with those utilities best lie. Some risks will be transferred to the private sector; some will be borne by the territory. The apportionment of those risks will guide the timing and form of payments to be made by the territory.
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