Source: Transurban
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  • Toll road company Transurban (TCL) signs an agreement with revised terms to proceed with the West Gate Tunnel project in Melbourne, after resolving disputes
  • The agreement involves the Victorian Government, CPB John Holland Joint Venture (the D&C subcontractor) and Transurban
  • Due to these disputes, West Gate Tunnel is now two years late and is expected to be completed by late 2025
  • The total cost of the project will also be increased by $3.4 billion, with Transurban and the State Government contributing $1.7 billion each
  • On market close for the day, Transurban is down 0.95 per cent and trading at $13.53 per share

Toll road company Transurban (TCL) has reached a revised agreement to proceed with the West Gate Tunnel project in Melbourne.

The agreement involves the Victorian Government, CPB John Holland Joint Venture (the D&C subcontractor) and Transurban, who have been working to resolve disputes.

This includes the removal of contaminated soil from the tunnel project.

Due to these disputes, West Gate Tunnel is now two years behind and is expected to be completed by late 2025.

The total cost of the project will also be increased by $3.4 billion, with Transurban and the State Government contributing $1.7 billion each. Altogether, the project is costing nearly $5 billion more than originally anticipated.

Additional costs to Transurban of about $300 million including the company’s share of site activation and insurance costs as well as it’s direct project management costs.

The company will also incur revenue impacts due to the delays up to the new completion date.

Notably, The D&C subcontractor withdrew their claims to additional construction costs which where significantly higher than the agreed contract sum adjustment and will also go without profit margin and over heads.

Transurban’s CEO Scott Charlton said the West Gate Tunnel Project is a critical infrastructure project for Melbourne which will link the movement of people and goods between the port and city.

“We recognise this situation has been disappointing, however we believe this agreement represents the best path forward to deliver the West Gate Tunnel Project in the interests of all stakeholders, particularly the millions of Victorian motorists who will benefit from a vital alternative to the West Gate Bridge and a second river crossing”, he said.

The new tunnel is expected to bring in about $11 billion in estimated economic benefits for the State of Victoria and will save about 20 minutes in travel time per trip.

Victorian Government

The Victorian Government was considering pausing the project and finding a new builder after 13 months of negotiations, however this change will lead to almost $7 billion in extra costs and adds a further two years to the construction time.

The new contract was signed last night between the parties and when asked about it Victorian Treasurer Tim Pallas was disappointed in how long these negotiations took.

“I’ve been less than happy with some of the behaviour that has been exhibited … but the issue has been resolved and we have to move forward positively together in the interests of the state,” he said.

“If they’d been a little bit more cooperative with the state in declaring what their problem was, rather than contend and try and dupe the community that this was something more than an underbid on a project then we could have moved a lot more efficiently to resolve this issue.”

The parties will now finalise binding documents which is expected to be completed in early 2022.

On market close for the day, Transurban was down 0.95 per cent and trading at $13.53 per share.

TCL by the numbers
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