Leighton puts Victoria offside

The Australian: Leighton puts Victoria offside. 1 August 2014. Bridget Carter, Mergers and Acquisitions Editor, Sydney. Damon Kitney, Victorian Business Editor, Melbourne

The chief executive of construction giant Leighton Holdings has been rebuked by the Victorian government, which suggested that the company chose not to progress in the contest to win the first stage of the $8 billion East West Link road and tunnel contract because the project was too risky.

Comments made by Leighton chief executive Marcelino Fernandez Verdes during a results briefing on Monday implied the company had stepped back from the contest to secure the contract, rather than not being selected, due to the risks involved.

They have also triggered fears in the investment community that its ability to win future contracts in the state worth billions of dollars is now in jeopardy.

Leighton bid for the first stage of the East West Link project, worth $6bn-$8bn, as part of a consortium called Momentum Infrastructure with the Bank of Tokyo-Mitsubishi UFJ.

The two rival consortiums — one including French construction group Bouygues, Lend Lease and Spain’s Acciona, and the other including Samsung, Spanish infrastructure company Ferrovial and Italy’s Ghella — have made it through to the final round.

In his first results briefing since being appointed chief executive, Mr Fernandez Verdes told analysts that Leighton did not want to take “any important risk” with respect to the East West Link.

“We consider that the work conditions regarding risks were not acceptable,” said Mr Fernandez Verdes, who is also chief executive of Leighton’s Spanish-controlled parent company Hochtief.

“We had to be consistent in our new culture in tendering, and that is why we didn’t go on in the tendering process.”

However, state Treasurer Michael O’Brien told The Australian the government made the decision to shortlist two of the three consortia based on the quality of the bids.

“As the third ranked consortia, Momentum Infrastructure has not proceeded to the final evaluation,” he said.

The Treasurer’s comments came after he had also told ABC Radio that the Leighton consortium was cut.

The entire East West Link project, worth more than $14bn, comprises an 18km cross-city road connection extending across Melbourne from the Eastern Freeway to the Western Ring Road.

Planning and procurement is under way for the first stage of the East West Link, a 6km section connecting the Eastern Freeway with CityLink and including a tunnel.

Market analysts said they believed there would be repercussions from the comments for Leighton.

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