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Tolling giant Transurban admits it could be forced to fork out more cash for the $6.7 billion West Gate Tunnel and has paid builders nearly $200 million to keep construction going on the project, which is running a year late.
Transurban chairman Lindsay Maxsted and chief executive Scott Charlton were questioned about the controversial toll road at the company's annual general meeting on Thursday, including why 3 million tonnes of the project's contaminated soil was being dumped in landfill instead of being cleaned.
Traffic has dropped by 58 per cent on Melbourne's CityLink, Transurban's most profitable toll road, in the last quarter.CREDIT:JUSTIN MCMANUS
Investors also pressed about declining tolling revenues due to the coronavirus traffic slump. Melbourne's CityLink – Transurban's most profitable road – had 58 per cent less daily traffic on average over the last quarter.
The drop on CityLink was far worse than traffic declines on the company's other 17 toll roads and bridges in cities in Australia and the US, where restrictions have been eased. Average daily traffic dropped 9.1 per cent in Brisbane, 1.5 per cent in Sydney and 28 per cent in the US between July and September.
It comes as the company's flagship toll road project — the West Gate Tunnel — is in turmoil. The project's 2022 completion date has been pushed back a year and cabinet documents leaked to [font=inherit]The Age[/font] warn of a possible $3 billion blowout.
Transurban has been at loggerheads with the Andrews government and its builders for the past year in a dispute that is likely to wind up in court over cost overruns on the new toll road linking the West Gate Freeway in Spotswood and CityLink at Docklands.
West Gate Tunnel works are behind schedule.CREDIT:JOE ARMAO
In a question to Mr Maxsted, one investor said security holders had a right to know about the project's total cost, arguing the toll road could not be running a year late without there being cost overruns.
Mr Maxsted admitted the company might ultimately be forced to pay more than the $4 billion it agreed to under the project's deal, with Transurban's financial documents flagging the possibility of extra costs that had not yet been determined.
But he said he did not believe this was likely because the project's construction and design risk lay with the contractors, while the state government carried planning risks.
"There may be – despite the way in which we've written the contract – there may be ... a court or an arbitrator [who] awards against Transurban for part of these additional costs," Mr Maxsted said on Thursday.
“There may come a time when we do need to record an actual liability, but at the moment we don’t have one or we don’t have a liability which can be reliably estimated."
Company documents show Transurban has paid its builders $190 million in advance payments to keep construction going, in addition to the agreed sum in their contract.
When asked why the project's contaminated soil wouldn’t be cleaned instead of dumped, Mr Maxsted said the builders had considered this option, but ultimately deemed it impractical owing to the large volumes involved.
This article first appeared on www.theage.com.au
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