The NSW government has settled a year-long legal dispute with construction company Acciona over Sydney’s light rail project, agreeing to a $576 million compensation payout.

The final payout, confirmed by the state government on Monday morning, will take the trouble-plagued project’s total cost to more than $3 billion – almost double the original price tag predicted by then-transport minister Gladys Berejiklian in 2012.

Acciona sued the NSW government for misleading or deceptive conduct in April last year. It was initially chasing $1.2 billion over issues relating to the cost of digging up and replacing Ausgrid powerlines for the project, which has turned Sydney’s George Street – and parts of the city’s eastern suburbs – into a construction site.

It ordered its workers to go on a go-slow at the time, pushing the already delayed project back further.

Of the $576 million payout confirmed on Monday, it is understood $129 million will be held back until construction deadlines are met.

The first portion of the light rail, to Randwick in the city’s east, must be complete by December.

The no-go construction zone on George Street. Photo: Getty

The second leg of the project, to the south-east suburb of Kingsford, will need to be finished by March.

The project was supposed to be finished before the March state election.

The agreement clears $1.5 billion the company was seeking in claims, including the $1.2 billion it was originally suing the State Government for.

Transport Minister Andrew Constance said it had been a “complex negotiation” but the agreement reset the relationship between the parties.

Opposition spokeswoman Jodi McKay said the project cost was “extraordinary” and a sign of the government’s mismanagement.

The 12-kilometre light rail project runs from Circular Quay to Randwick and has caused mass disruption to businesses and foot traffic in some of Sydney’s busiest areas, triggering an inquiry last year.

-ABC