Takeover of Sports Hub projected to cost S$2.3 billion, comparable to Govt’s payments if it continued with partnership

His statement was meant to be delivered at a previous parliamentary sitting last month, but it was delayed until Monday as Mr Tong had contracted COVID-19.

A number of MPs, including Mr Seah Kian Peng (PAP – Marine Parade) and Ms Sylvia Lim (WP – Aljunied) asked how much the Government is paying in total for the early termination, and how it compares to what the Government would pay had the partnership continued until 2035.

Mr Tong explained that SHPL funded the full initial capital expenditure for the construction of the Sports Hub by taking out a loan. 

“This meant that Government did not have to contribute any upfront capital for the construction in 2010,” he said.

When the Sports Hub was up and running in 2014, the Government paid SHPL a fee of S$193.7 million every year, and would have continued to do so until 2035 if there had been no early termination.

With this fee from Government, SHPL would then be responsible for the full operating expenditure of the Sports Hub and the assets would have been returned to the Government at no cost in 2035, said Mr Tong. This works out to be about S$2.32 billion.

He added that this does not account for net present value and other financial adjustments.

“FAIR DEAL”

With the termination, the Government would have to pay SHPL for the termination according to the project agreement, and it would also have to pay for the future costs of running the Sports Hub.

Of this amount, a large portion – S$1.2 billion – can be understood as the capital expenditure that Government would have had to bear if it adopted the traditional procurement approach from the start, he said.

Another S$300 million or so is primarily made up of the fair market value of the Sports Hub which is commercially negotiated, and other costs, expenses and deductions, based on the project agreement.

Mr Tong added that the final amount will be based on the accounts in December at the handover, but the Government does not expect a “material variance” from the projected figure of S$1.5 billion. 

He also outlined the costs of running and operating the Sports Hub post-handover. 

Using the current operating assumptions and costs incurred by SHPL, the Government expects to incur about S$68 million per year as operating costs, said Mr Tong.

This includes future lifecycle replacement, maintenance and programming costs, as well as the day-to-day costs of operating the Sports Hub.

“If we were to draw a parallel comparison against the balance tenure of the project agreement … that brings us to approximately S$800 million over the balance period until 2035,” he said.

“Taking the two buckets of costs to be paid for the termination – the sum to be paid to SHPL which largely reflects the upfront capital expenditure and future operating costs – this would be a fair deal for the Government on which to take back the assets,” he added.

He highlighted that none of the components are penalties to the Government for the early termination.

“There are simply costs we would have had to incur or would have incurred going forward,” the minister said.

HIGHER OPERATING COSTS LIKELY

“Notwithstanding the financial calculations and due diligence, I should, however, make clear that the decision to terminate the Sports Hub project was not driven by financial reasons, or to save money,” said Mr Tong, adding that the Government will not operate the Sports Hub the same way as SHPL.

To make Sports Hub more accessible and open to Singaporeans, there will be more community programmes, investments to bring in more world-class events, and opening up the Sports Hub and National Stadium more often for community use.

“All of this would probably mean higher expenditures and increases in daily operating and maintenance costs,” he said. 

“As such, we should probably expect our operating expenditure on an ongoing basis, once we take over, to be higher than what we would incur if we merely continued with the status quo under the existing arrangement.”

But at the same time, the full revenue generated from the Sports Hub will now go to the Government, Mr Tong pointed out.