East-West link project raises controversy in Victoria

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East-West link project raises controversy in Victoria

The Labor party in Victoria, Australia, is threatening with canceling the PPP contract for the East West Link project if they win the elections to be held in March 2015.

And the details of the compensation clauses of the contract have raised controversy.

According to sources, the Treasury had estimated that A$1.1 billion would be the cost of breaking the project contract by March 2015.

The bill would cover costs already incurred by East West Connect, which is the selected bidder for the project, and lost profits over the 25-year life of the contract.

Local sources report that Premier Denis Napthine defended the legality of the contact:

There is no booby trap in the contract, it is a standard contract, a standard contract to build a major piece of infrastructure. The only one who is being reckless and irresponsible and putting Victorian taxpayers at enormous risk is (Labor leader) Daniel Andrews and the Labor Party.

And according to Labor Leader Daniel Andrews the consortium would not be paid compensation because the contract would be invalid. Mr Andrews stated:

These arrangements, including the secret side deal, aren't worth the paper they're written on. I will release, for all Victorians to see, every piece of paper to do with this rushed and botched project, the full business case, the full contract, and this so-called side deal.

The East West Link project is a 18-kilometre cross city connection north of the Melbourne central business district. The full East West Link will improve the connectivity between Melbourne's established east and rapidly growing west, joining the Eastern Freeway at Hoddle Street with the Western Ring Road in Sunshine West. This first stage of the project involves a new freeway-standard road link, including twin 4.4 km three-lane tunnels, connecting Melbourne's Eastern Freeway with the CityLink motorway.

The project was awarded on 9 September while commercial closure was achieved on 29 September. The project achieved financial closure on 3 October 2014.

The East West Connect consortium is composed by: Capella CapitalLend Lease EngineeringAcciona Infrastructure AustraliaBouygues Travaux PublicsLend Lease ServicesLend Lease Infrastructure Investments, John Laing, Queensland Investment Corporation (QIC), and Bouygues Construction Australia.

The project cost is estimated at A$6 billion (US$5.56 billion). The East West Link project will be delivered as an availability public private partnership (PPP) with the state initially retaining tolling and traffic risk.

The project includes finance, design, construct, operate and maintain East West Link. The project is a 30 year concession, involving a construction period of approximately five years and 25 years of operations.

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