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West Gate Tunnel project a year off track, Transurban tells ASX

Road toll operator Transurban has told investors it expects the West Gate Tunnel project in Melbourne to be delayed by a year.

Transurban says it expects the West Gate Tunnel to be completed by 2023. (ABC News: Graeme Powell)

Key points:

The $6.7 billion West Gate Tunnel project was due to start in July last year and finish by 2022, but was delayed after Transurban, its builders and the State Government could not agree on how to treat and dump contaminated soil.

In an announcement to its investors, Transurban today said it was “committed to working with the State and the D&C subcontractor to resolve the tunnelling issues”.

Victorian Minister for Transport Infrastructure Jacinta Allan said at a press conference on Monday that the 2022 deadline was written into the contract Transurban had with the Government.

“We’ve made it clear we intend to hold Transurban to that contract and what’s contained in that contract is that for every day that this project is not completed beyond 2022, Transurban lose millions of dollars,” Ms Allan said.

She said Transurban would also suffer a loss in revenue in toll charges, and revenues written into the contract with the Government.

A view looking down into a concrete shaft with water and an excavator at the bottom.
Minister for Transport Infrastructure Jacinta Allan said the Government would hold Transurban to its contract, which included a 2022 deadline.(Supplied: West Gate Tunnel Project)

“It is a fixed-price contract and the Government will be holding Transurban to the letter of that contract,” she said.

“The Government’s message to Transurban is really clear; you’ve got to get on, resolve the dispute with the builders, resolve the disposal of the soil from the tunnel boring activities, get those tunnel boring machines going as quickly as possible and honour the commitment and the contract that Transurban has signed.”

She said she was notified last week that Transurban would likely be advising its investors of the delay.

Transurban also told investors it was working through the requirements to “gain necessary planning and environmental approvals” for proposed disposal sites for the contaminated soil.

Opposition transport spokesman David Davis said the Premier and Ms Allan “must be the only people in Victoria who didn’t know the project was in trouble”.

“Daniel Andrews and his incompetent Transport Infrastructure Minister either knew about the time blowout and covered up, or they should have known,” he said.

Sam Hibbins, the Greens’s spokesman on transport issues, said the delay was further proof that it was a bad idea from the start, calling it a “self-serving project designed to benefit Transurban at the expense of Victorian drivers”.

“Given the generous increase and extension of tolling revenue from the State Government, I doubt any costs associated with delaying the project by a year will be of much consequence to Transurban,” he said.

An artist impression of a tunnel to be built at Footscray for the West Gate Tunnel project.
An artist impression of the northern tunnel portal at Footscray, for the West Gate Tunnel Project in Melbourne.(Victorian Government)

In January, the builders of the road project, CPB and John Holland, told Transurban they wanted to terminate their contract to build the West Gate Tunnel, due to the contaminated soil.

CPB and John Holland said at the time that the discovery of contaminated soil constituted a “Force Majeure Termination Event” — a common clause in contracts that frees both parties from liability in the event of an extraordinary circumstance beyond the control of both parties, preventing one of both of them from fulfilling their obligations under the contract.

The CPB and John Holland alliance and Transurban have been at odds as to how to resolve the issue of the contaminated soil, but the State Government says it expects the parties to resolve the matter themselves.

Ms Allan acknowledged the coronavirus pandemic had affected the construction industry around the world and said there had “been some challenges around the removal of soil” but said “the financial cost very clearly sits with Transurban”.

She would not say whether the Government would pursue legal action over the delay.


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