Cost of S$2.3 billion to take over Sports Hub comparable to government payments under partnership

“Having no upfront costs for Government turned out to be useful, for instance, when the global financial crisis in 2008 hit unexpectedly,” said Mr Tong. 

“As the Government’s fiscal resources were not tied up, we were able to use those resources to meet other pressing economic and other needs.”

The PPP structure also allowed Government to mitigate unexpected risks, such as when the project encountered construction delays, for which SHPL underwrote the costs. SHPL also bore the costs of addressing the defects such as the roof leaks, inadequate pitch quality and poor sound quality for concerts, he said.

“The PPP structure also ensured that there would be inherent financial discipline in the project … This was a ground-breaking, novel project, and we had not undertaken a project of this scale before. It was therefore important for the Government to ensure that the costs would not run away,” said Mr Tong.

“This was achieved by ensuring that the consortium would have to bear any costs above their expectations and also return the assets back to the Government at zero cost at the end of the project period in 2035.”

FUTURE PPPS

Despite the initial advantages of this approach, the Government also envisaged that there would come a time when Singapore would be ready to operate the project, said Mr Tong.

This is why the structure of the PPP provides for a unilateral right on the part of the Government, but not SHPL, to terminate the project, and to take over ownership and management at any time before the expiry of the project, with no penalty.

Mr Tong said: “This reserves to Government the right to assess, at any time, if its interests might be better served by stepping in, to run the Sports Hub directly … If so, there is an agreed mechanism upfront (to do this).”

Responding to questions from MPs, Mr Tong also spoke about how this early termination would affect future PPPs. He said that each venture has to be “considered on its own merits”.

“As I have outlined above, we had good reasons to terminate the PPP … but having reached this decision, it does not necessarily mean that all other PPPs will not be considered or that the Government should no longer be open to other PPP projects in future,” the minister added.

He added that regardless of how projects are financed, there is a “sound evaluation process” to review and assess infrastructure projects. For PPPs, a framework is in place to assess their suitability and this is “continuously refined”.

“We will therefore continue to be open to leveraging PPPs as a model, where suitable,” he said.

IS PAYMENT TO SHPL FAIR?

MPs asked several supplementary questions on the ministerial statement, with Non-Constituency MP Leong Mun Wai (PSP) being the most persistent.

Mr Leong repeatedly asked Mr Tong about the projected payment of S$1.5 billion to SHPL, saying that his questions on that have not been answered.

He questioned the decision to build and operate the Sports Hub as a PPP, and asked why the decision was made in the first place.

He also said: “Throughout the discussion we had today, no one asked the question is the S$1.5 billion compensation or termination costs given to the private consortium fair, or not?

“Of course, then we have to go into a lot of details of financial calculations and all that, but we still need to debate about that. But so far, no question has been raised.”

Throughout, Deputy Speaker of Parliament Christopher de Souza urged Mr Leong to ask his questions and make them succinct so that other MPs would have a chance to speak.

In response to Mr Leong, Mr Tong reiterated that the Government chose the PPP model because it wanted its partners to have “skin in the game” and bear the risk of the project, that there would be financial and market discipline in the way the project was structured.

On whether the terms of the termination are fair, Mr Tong said that it is based on a formula that was in the PPP agreement.

“The majority of this cost is the CapEx (capital expenditure) as I explained, and this is a CapEx that we would have had to bear had we undertaken the procurement model anyway,” Mr Tong said, repeating explanations that he had made earlier.

He reiterated that the annual sum of S$193.7 million paid to SHPL goes towards servicing of loan obligations as well as operational and maintenance expenses.

“I’ve set out the premise of the payment, the formula by which this is done, and why I believe this is a fair assumption.”

Following Mr Tong’s reply, the deputy speaker called on Ms He Ting Ru (WP – Sengkang) to ask a question, but Mr Leong interjected, saying that Mr Tong had not answered his question.

Mr De Souza told Mr Leong that they have to give MPs in the House a chance to ask their questions, after which Ms He and Mr Sharael Taha (PAP – Pasir Ris-Punggol) both asked for clarifications on points in the speech.

Mr Leong was then given a chance to ask another question, which was: “Can I know why the Government is so generous to pay S$193.7 million a year to the private consortium, when you just mentioned that the operating costs after we take over will be about S$68 million (a year).”

Mr Tong replied: “One, it’s not about being generous, this is what the contract says … And secondly, Mr Leong may not have heard me, but the S$193 million is not just (for) the operation and maintenance, it is for debt service as well.”

He added that “from memory”, the single largest portion of the sum goes towards debt service. Upon further questioning by Mr Leong, he added that it was about 65 per cent of the total.

Mr De Souza then called Leader of the Opposition Pritam Singh to ask a question next, but Mr Leong again interrupted, saying: “We haven’t got to the bottom of the thing.

“What is the point of having the debate without getting to the bottom of the thing? … We must get to the bottom of the issue.”

Leader of the House Indranee Rajah interjected at this point to comment on Mr Leong’s conduct saying: “What the Standing Orders require is for the Minister to answer a question that is put. In this case, Mr Leong had put a couple of questions.

“Mr Edwin Tong had answered the questions. I think the fact that Mr Leong doesn’t understand the answer doesn’t mean that the question has not been answered.”

Mr Leong protested this, and asked to respond to Ms Indranee as she was accusing him of not understanding “certain things”.

Mr De Souza did not accede to his request and said: “The Chair has been very fair, I think you’ve spoken on this issue three or four times in this debate alone, and I asked you to give way to the member who I’ve just called, Mr Pritam Singh.”

Mr Singh proceeded to ask a question on how much liquidated damages the Government has collected from SHPL since 2014 due to non-performance or when venues are not available for use. Mr Tong estimated this to be about S$44 million, but said this figure is “subject to checking”.