The company selected to build the new Cork School of Music as part of a public-private partnership (PPP) expects a rate of return of approximately 11 per cent on its investment, a Dáil committee has heard.
Mr David Gordon, principal officer with the PPP unit of the Department of Education and Science, told the Public Accounts Committee that this depended upon Jarvis Projects meeting all of its obligations under the terms of any deal.
While profits from PPPs can be extremely difficult to calculate, this could mean a profit of approximately €23 million over the 25-year term of the deal.
However, Mr Gordon also stressed that this was only an internal estimate, and that the company was obliged to cover any risks associated with the project.
It is understood that many PPP agreements are weighted so that companies do not see significant returns until the end of the deal.
Last March, the Government announced that it was approving plans for the new school, after a five-year delay. Construction, which could begin this summer, is expected to take two years.
British-based Jarvis will receive an annual rent of some €8.2 million over the 25-year term of its lease, after which time the building will revert back to public ownership.
In return, it will meet the projected €60 million building costs of the new 13,000-metre space. On current figures, this brings the project's total cost to the Government to some €205 million.
The Comptroller and Auditor General, Mr John Purcell, earlier told the committee he had some concerns about the way in which the project had been managed.
While he appreciated it was a pilot project, the decision to select a preferred bidder before the affordability of the project had been established left the State open to claims for compensation, were it not to proceed.
Furthermore, given that affordability was a key issue for the new school, it might also have been better to run a concurrent "shadow competition" based on the original estimates.