The South Australian government has reached an agreement to cancel the privatisation of train and tram services. 

The deal, signed on Sunday with train operator Keolis Downer Adelaide (KDA) and tram operator Torrens Connect, will see operations returned to public hands by 2025. 

This fulfils an election promise by the Labor government to reverse the privatisation of tram and train services by the former Liberal government. 

The initial contracts were for eight years, with an option to extend, but the government says it will not pay early termination fees of up to $94 million.

However, the government will put up around $36 million over the next two years to cover what Transport Minister Tom Koutsantonis described as “mobilisation costs, not compensation costs”. 

He explained that these were costs that the government would have paid at the end of the contract anyway to bring the services back into public hands.

Koutsantonis said that instead of delivering $118 million in savings, the controversial privatisation would have cost taxpayers up to $120 million over the contract's potential 12-year life span. 

The extra cost was mainly due to 134 rail staff who did not transition to the private sector when the deal was struck and currently “remain unassigned” but on the public payroll. 

“We have public servants who are being paid not to work,” Koutsantonis said.

The contract analysis revealed a termination clause that could expose taxpayers to “as much as $94 million in termination and disengagement fees”. 

However, Koutsantonis said that would not deter the government from scrapping the deal. 

He said he had met with senior Keolis Downer staff and believed it would act as “a good corporate citizen” and not pursue legal action. Keolis Downer has not made public comment.

Opposition transport spokesperson Vincent Tarzia rejected suggestions the government could break the contract without incurring costs. 

“For the government to come out and say that the taxpayers of South Australia aren't going to be exposed to some termination clause is just rubbish,” he said.

The government said a further announcement regarding its intention to scrap the privatisation was “imminent” but did not elaborate on how soon that might be.