Transurban mulls legal action over $3.3bn West Gate Tunnel cost blowout

Toll road giant Transurban says if mediation talks with West Gate Tunnel builders CPB and John Holland fail, it will have no choice but to sue.

Transurban can no longer say when the Melbourne West Gate tunnel project in Yarraville will be completed. Aaron Francis/The Australian

Toll road giant Transurban is considering suing West Gate Tunnel builders CPB and John Holland after the $3.3bn cost blowout over the handling of toxic soil, as the project faces years of delays.

Transurban chief executive Scott Charlton said he could no longer say when the project will be finished, after its completion date has been twice pushed out to 2023 and then beyond 2024.

Transurban is in mediation with CPB and John Holland but if those talks fail, Mr Charlton said the company would take legal action.

“We want to move on as quickly as possible and we’re trying to do everything we can,” Mr Charlton said.

“We want to try and find a commercial resolution to the mediation process. If that’s not the case ... there are legal responsibilities under the existing contracts which is a standard sort of PPP (public private partnership) framework.

“So for some reason - we hope is not the case -we can‘t find a commercial resolution, there is obviously the legal pathways. But that’s not our preferred pathway.”

The project has been delayed after the discovery of asbestos-contaminated soil. Meanwhile, the Andrews government says it’s up to Transurban to solve its dispute with CPB and John Holland.

“As previously disclosed, project completion in 2023 is no longer considered achievable and due to the continued uncertainty in relation to the resolution of commercial matters and timing for commencement of tunnelling, a further update on the expected project completion date cannot be provided at this stage,” Mr Charlton said.

It comes as Transurban confirmed Melbourne’s lockdown was costing it $7-9m a week in lost revenue.

But the cost of Sydney’s extended shutdown is greater, wiping $16-18m a week off the company’s revenue. Meanwhile, Queensland Covid-19 restrictions are costing the company $5-6m a week.

Transurban CEO Scott Charlton. Picture: Aaron Francis

Transurban on Monday reported a statutory profit of $3.3bn but this was thanks to the sale of its Greater Washington toll roads, boosting its coffers by $3.73bn.

Excluding the sale, the group posted a loss of $256m in the year to June 30, diving 339.1 per cent deeper into the red. Revenue meanwhile plunged 9 per cent to $2.89bn.

“Traffic and proportional revenue were roughly flat year-on-year, with the impacts of lower traffic largely offset by the contribution of our new assets in Sydney,” Mr Charlton said.

“We saw a recovery trend in our overall traffic volumes throughout FY21, driven by Sydney and Brisbane traffic which largely rebounded to pre-Covid-19 levels. Melbourne and North America were more heavily affected during FY21, given the impacts of Covid-19 were most severe in those markets.”

But Mr Charlton was optimistic the group would rebound once lockdowns eased, whenever that may , as Australia struggles to lift its vaccination rate from 16 per cent to 70 per cent- the “magic” number needed to avoid shutdowns.

“Since the end of the financial year we have seen restrictions reimposed in Sydney, Melbourne and Brisbane, impacting traffic across all three regions. Fortunately, experience has shown us that traffic rebounds quickly when restrictions are lifted although the rate of recovery depends on the length and nature of ongoing restrictions,” Mr Charlton said.

The company will pay a final dividend of 21.5c a share on August 23.