Lend Lease team to take on $7.3bn Melbourne toll road

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Lend Lease team to take on $7.3bn Melbourne toll road

10 September 2014 | By David Rogers | 0 Comments

A Lend Lease consortium has been named preferred bidder for the first stage of the East-West Link toll road in the city of Melbourne. The project has a total value of US$7.3bn, making it the largest toll-road contract in Australian history.

The Sydney-based property and infrastructure company will undertake to design, build and operate the 18km road alongside French contractor Bouygues and Spain’s Acciona. The three firms will also be taking equity stakes in the road, although the size of these has not been disclosed.

Work is due to begin with the construction of a 4.4km tunnel later this year and is due to be completed in 2019. However, this assumes that the project can overcome a number of political and legal challenges. Local councils and public transport advocates have opposed the project and several community groups have formed to block its construction. At present the project is the subject of two separate Supreme Court challenges and a further case in the Victorian Civil and Administrative Tribunal.

Scott Marshall, an analyst with Shaw Stockbroking told the Sydney Morning Herald that the deal exposed the firms to financial risks if the level of traffic was below that predicted. He said: “If Lend Lease are able to match the tolls to any financial commitments then it should not be a risk but it's a question of what are the boundaries of risk between the public private partnership and the government, and that needs to be clearly spelled out,"

A number of similar Australian road projects have come to grief in the past few years. In February last year, the BrisConnections consortium that had built and operated theBrisbane Airport Link toll road went into voluntary receivership with debts of about US$2.8bn.

Previously, operators have failed in schemes such as the Sydney’s Lane Cove and Cross City tunnels, and Brisbane’s Clem7 tunnel. Australian operators have also suffered disasters in other countries. A nine-mile toll road called the Pocohontas Parkway was built near Richmond, Virginia. In 2006, the Australian concessionaire Transurban paid $611m to the Virginia Department of Transportation for a 99-year lease. In June 2012, the company announced that it was writing down the value of its investment to zero.

Lend Lease is also building Sydney's US$2.7bn NorthConnex motorway in a joint venture with Bouygues.