Good faith agreement will see the state government cover $339 million of the infrastructure building consortium’s upfront costs
The Victorian Government has confirmed it will not go ahead with the East West Link project.
After several months of negotiations, it has revealed the cancelled contract would be put to rest with $339 million worth of sunk costs covered by the state.
“Today’s agreement is the best possible result we could have achieved,” premier Daniel Andrews says.
The “good faith” agreement will see the government purchase the project-specific consortium Project Co for a single dollar.
“All assets owned by Project Co will transfer to the state,” the premier says.
Those “assets” are in fact a collection of liabilities.
These debts are associated with the consortium’s bid for the project and early works that took place before the 2014 state election.
By taking on ownership of Project Co, the government is able to negotiate the rates, fees, swaps, and obligations directly with the financiers involved.
In addition to the $339 million worth of debts, the government will take responsibility for a further $81 million – which represents the fees involved with Project Co establishing a $3 billion credit facility for the project.
The government says it will still “receive value” for those fees, as it renegotiates with the banks involved to have the credit available for different infrastructure projects, in particular the Melbourne Metro Rail project.
Andrews is adamant the deal does not involve “compensation” for the consortium.
“[The deal] puts the interests of Victorians first – no ten billion dollar tunnel, no compensation and far more funding available for the Melbourne Metro Rail project,” he says.