News State Victoria News Transurban’s West Gate blowout at $3.3b

Transurban’s West Gate blowout at $3.3b

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Transurban has revealed the costs of the West Gate tunnel project in Melbourne have blown out by about $3.3 billion.

The news comes as the company announced a statutory profit of a similar amount – $3.27 billion – on Monday, underpinned by $3.73 billion from the sale of its Chesapeake assets in North America.

The $6.7 billion tunnel project, undertaken in partnership with the Victorian government, was originally scheduled to be completed in 2022 but has been plagued by problems after contaminated soil was discovered at the site.

During an investor presentation on Monday, Transurban chief executive Scott Charlton said the parties involved in the dispute over the soil, which include the Victorian government as well as builders John Holland and CIMIC, would need to make a “meaningful financial contribution” to finish the project.

He said it was “still a challenging situation” and could end up in court, but Transurban wanted to reach a commercial settlement and the parties had agreed to enter mediation.

Transurban has already given the builders more money and is funding preparatory works at the soil disposal site, but at this stage the company could not get a reliable time frame for when the project might be finished, Mr Charlton said.

“We are doing everything we can to help get this project on track,” he said.

Meanwhile, pandemic restrictions in Sydney, Brisbane and Melbourne have affected traffic volumes and weighed on the company’s full-year results.

Overall toll revenue was down by $94 million as travel and mask restrictions have meant less commuters on the road.

Traffic volumes were roughly flat once traffic at its new Sydney tollways, the M8 and NorthConnex tunnels, were taken into account.

But without those assets that opened in the past year, volumes would have been down by 7 per cent.

Mr Charlton said Transurban intended to bid for both tranches of the NSW government’s remaining 45 per cent stake in WestConnex, likely funded by an equity raise.

In Melbourne, toll revenue fell by 17.6 per cent and traffic volume on Citilink fell by a quarter.

Transurban reported statutory earnings before interest, taxation, depreciation and amortisation (EBITDA) of $1.69 billion for the year ended June 30.

The company’s cash reserves decreased by 13.5 per cent on the previous year, reflecting travel restrictions and cost increases.

Transurban has already announced a full-year dividend of 36.5 cents, including a second-half dividend of 21.5 cents to be paid on August 23.

Shares in the $39 billion dollar company fell on the news, trading at $14.20.