The state government of Victoria in Australia will pay the East West Connect consortium US$258 million to cancel construction of Melbourne’s East West Link road tunnel.
The payoff is to cover the consortium's bidding, design and pre-construction costs and draw a line under the deal that has been mired in financial controversy for years.
The federal government slammed Victoria’s decision to bail out of the project as “an obscenity’’ that will cost 7000 jobs, according to a report in The Australian newspaper. Another $81 million in fees spent by the state government to set up a credit facility to borrow the project costs.
3260 World Highways has been following developments since October 2013 when the Victoria state government announced plans to build the East West Link, costed at the time between $5.64 and $7.53 billion.
Four consortia were shortlisted for the18km tolled motorway project: Momentum Infrastructure, consisting of Leighton,4755 John Holland, Iridium and 4761 Dragados; Sicuro, made up of 2643 Egis, 236 Hyundai, 3149 Impregilo, Salini, Aquasia and InfraLinx Capital. The third consortium was Inner Link Group comprising 1304 Transfield Services, 930 Cintra, Samsung, 2717 Ferrovial, Ghella, 2378 Macquarie and REST. East West Connect, the eventual preferred bidder, is made up of Capella Capital, 976 Acciona, 979 Bouygues and Lend Lease.
But last month East West Connect said, after months of wrangling with the state government, that it definitely wanted out.
The government was wanting East West to payback around $153 million which the consortium allegedly received when the toll road contract was signed, reported the Herald Sun newspaper at the time.
The contract ran into trouble after a Victoria state election in November that saw a change in government. The incoming Labour Party administration of now premier Daniel Andrews brushed the deal aside, claiming the benefit to the state was only 45 cents for $1 spent to build the link.
World Highways reported last October that the consortium signed a contract with the Victoria government to deliver the US$7 billion, but only after the High Court rejected an application for an injunction to defer the controversial deal.
The project's winning design incorporates two 4.4km three-lane tunnels between CityLink and Hoddle Street. The consortium reportedly had spent nearly $35 million on the project up to the signing of the deal. The contract also included a $436.69 million kill fee to protect the consortium from sovereign risk.
Also in October, World Highways reported that Hyder and2693 Parsons Brinckerhoff had been appointed as the design team for East West Link. The two engineering and management consultancies created a 50/50 joint venture to provide detailed design and construction support services for the 6.6km Stage 1 work, which is the eastern section, of the project.
Stage 1 was to be a three-lane road connecting the Eastern Freeway and CityLink, the majority of which will be underground in twin tunnels. The project's winning design incorporated two 4.4km three-lane tunnels between CityLink and Hoddle Street. However, the eastern section required extensive tunnelling to avoid disruption to suburbs, making it very expensive for what it would have delivered, especially given relatively low traffic volumes.
Andrews also said no preference would be given to the developers comprising the consortium regarding future projects. “Bids for future projects will be assessed appropriately and fairly under well-known principles and with a level of transparency that we just haven’t seen with this project,” he said.
The payoff is to cover the consortium's bidding, design and pre-construction costs and draw a line under the deal that has been mired in financial controversy for years.
The federal government slammed Victoria’s decision to bail out of the project as “an obscenity’’ that will cost 7000 jobs, according to a report in The Australian newspaper. Another $81 million in fees spent by the state government to set up a credit facility to borrow the project costs.
Four consortia were shortlisted for the18km tolled motorway project: Momentum Infrastructure, consisting of Leighton,
But last month East West Connect said, after months of wrangling with the state government, that it definitely wanted out.
The government was wanting East West to payback around $153 million which the consortium allegedly received when the toll road contract was signed, reported the Herald Sun newspaper at the time.
The contract ran into trouble after a Victoria state election in November that saw a change in government. The incoming Labour Party administration of now premier Daniel Andrews brushed the deal aside, claiming the benefit to the state was only 45 cents for $1 spent to build the link.
World Highways reported last October that the consortium signed a contract with the Victoria government to deliver the US$7 billion, but only after the High Court rejected an application for an injunction to defer the controversial deal.
The project's winning design incorporates two 4.4km three-lane tunnels between CityLink and Hoddle Street. The consortium reportedly had spent nearly $35 million on the project up to the signing of the deal. The contract also included a $436.69 million kill fee to protect the consortium from sovereign risk.
Also in October, World Highways reported that Hyder and
Stage 1 was to be a three-lane road connecting the Eastern Freeway and CityLink, the majority of which will be underground in twin tunnels. The project's winning design incorporated two 4.4km three-lane tunnels between CityLink and Hoddle Street. However, the eastern section required extensive tunnelling to avoid disruption to suburbs, making it very expensive for what it would have delivered, especially given relatively low traffic volumes.
Andrews also said no preference would be given to the developers comprising the consortium regarding future projects. “Bids for future projects will be assessed appropriately and fairly under well-known principles and with a level of transparency that we just haven’t seen with this project,” he said.
