$300m hit for Victorian government looms over mega-uni

The Victorian government faces a financial hit of up to $300m over a scuttled project to build a mega-university city.

Victorian Priority Precincts Minister Gavin Jennings. Picture: Nicole Garmton

The Victorian government faces a financial hit of up to $300m over a scuttled project to build a mega-university city in Melbourne’s western suburbs.

The Australian Education City’s compensation claim has been served on the Andrews government, which is already beset with cost blowouts in major road and rail projects.

The AEC consortium launched Supreme Court action in 2019 after the government backed out of the $30bn deal just days before a key deadline.

Located on public land in East Werribee, the project was supposed to generate almost 100,000 jobs and be home to 50,000 students and 70,000 residents in a development that promised to redefine the western suburbs.

The Chinese-backed consortium, which had spent $90m on the plan after being named as the government’s preferred developer in 2015, was blindsided.

Sources say the consortium was yet to be given an explanation by the government about its backflip. “The consortium wants an ­explanation, but just hasn’t ­received one. They’ve told them nothing,” a source said.

Sources familiar with the deal said under AEC’s settlement offer, the consortium would drop its ­Supreme Court action in return for up to $300m in compensation.

It would also hand over the project’s intellectual property rights to the government, opening the way for the government to ­restart the university city in the future.

A separate source said the $300m compensation sum amounted to about 10 per cent of the value of the intellectual ­property rights to the state on that site.

“Based on the calculation, it (the compensation) would seem reasonable,” the source said.

Despite years of positive negotiations with the Andrews government, the consortium chiefs have been left feeling like victims of a government ambush. “The consortium has been given no indication … clearly (the govern­ment’s) representations to the media … would seem to have shifted over the life of the project from pushing heavily for more and more content to an environment where they no longer desire that,” one source said.

A government spokesman ­declined to comment, citing ­ongoing legal action.

When the government ended negotiations with AEC in July, Priority Precincts Minister Gavin Jennings left the door open to compensating, saying: “There may be some considerations we may enter into.”

Treasurer Tim Pallas said “people have rights and they’re pursuing those”, but promised to “defend the state’s interests” when asked in August whether the government would compensate the consortium for the money it had spent. It is understood the consortium involves a number of powerful Chinese state-owned entities.