A bitter legal battle between the NSW government and Spanish infrastructure developer Acciona over cost blow-outs on Sydney's light rail project has been settled after the government agreed to fork out an additional $576 million to finish it, taking the total taxpayer cost to at least $2.68 billion.

The troubled project was initially forecast to cost $1.6 billion when contracts were signed at the end of 2014, meaning total costs have soared by more than $1 billion.