Business cans East West Link termination deal

Herald Sun: Business cans East West Link termination deal 15 Apr 2015

BUSINESS leaders have welcomed the State Government’s decision not to pass legislation to avoid paying East West Link compensation, but warned the move to scrap the project has damaged Victoria’s reputation.

The Business Council of Australia — the nation’s peak business group — said the deal to settle compensation claims with East West Link backers removed the immediate uncertainty around the project.

But “serious concerns” hung over the decision not to go ahead in the first place, chief executive Jennifer Westacott said. “The level of sovereign risk and uncertainty created by the decision not to proceed with the East West Link project is simply unacceptable,” Ms Westacott said.

Premier Dan Andrews on Wednesday revealed the Government would pay the East West Connect consortium $339 million to cover costs already sunk into project.

It will also absorb $81 million in fees spent setting up a $3 billion credit facility for the project with lenders including the Commonwealth Bank and Westpac. The Government will ask the banks to transfer that facility for use on the Melbourne Metro rail project.

It had previously threatened to introduce legislation to kill off a $1.1 billion compensation bill owed to project backers for cancelling the $6.8 billion toll road.

Australian Industry Group Victorian director Tim Piper said the move to settle compensation claims without using Parliament had averted a “crisis of confidence” in Victoria as a business destination.

But he said there was a lack of shovel-ready infrastructure projects underway in the state.

“We need to have more projects — both major and smaller — as quickly as possible,” Mr Piper said.

East West Connect includes construction firm Lend Lease, its financing arm Capella Capital as well as French building company Bouygues and Spain’s Acciona Infrastructure.

Lend Lease and East West Connect said the settlement would fully cover their costs but refused to detail how much they had spent, when asked by BusinessDaily.

The CBA and Westpac said they were unable to comment on client deals.

Ratings agency Standard & Poor’s said Victoria would keep its triple-A credit rating under the settlement.

The agency had previously warned that using Parliament to nullify compensation claims risked the state’s prized rating.

The Victorian Employers’ Chamber of Commerce and Industry said the debacle underlined the need for an independent body to advise on major developments.

“The fact that a substantial $339 million in bid process, design and pre-construction costs have already been incurred is unfortunate for taxpayers,” chief executive Mark Stone said.

Committee of Melbourne chief Kate Roffey said the settlement was as good an outcome as the state could expect given the Government’s insistence on dumping the toll road.