Region: East Asia and Pacific
Project Agreement (executed in late 2017) between a private consortium (which includes Lendlease, a major Australian infrastructure and property developer, and John Holland, a leading Australian engineering contractor) and the State of Victoria, for the design, construction and maintenance of 9km of underground railway tunnel running through the Melbourne central business district. The term of the contract is over 30 years (including design and construction), ending in September 2048. It is structured on a BOT model and provides an example where the host government retains greater demand / revenue risk under a “availability payment” model.
Key features of the Project Agreement for the Metro Tunnel Project:
Land acquisitions and approvals – the state assumes primary responsibility for:
making the land needed for the project available to the developer (clause 6); and
obtaining the key planning approvals required for the project (clause 8).
State contribution to design and construction costs – a significant portion of the financed design and construction costs of the project are paid by the state to the private consortium during the design and construction phase and shortly following provisional acceptance (clauses 33 to 34A). Additional incentive payments are paid for achieving final acceptance on or ahead of schedule (clause 36).
Quarterly Service Payments and availability abatement – the balance of the private consortium’s project and financing costs are primarily recovered through quarterly service payments from the State during the maintenance phase. These payments are subject to an “availability / reliability” based abatement regime (clause 35). The right to determine and collect user charges (and the associated revenue / demand risk) is retained by the state government.
Step-in rights – the State has step in rights in defined circumstances, including a major default by the private consortium or if a cure notice has been issued by a key subcontractor (clause 41).
Early termination payments – the State may be liable to make these payments to the private consortium if it terminates the project agreement prematurely for:
The quantum of payment varies according to the basis for early termination
certain events of default;
force majeure; and
convenience (clause 45.7).
A more detailed project summary may be accessed on the Victorian Treasury website.
Find more @ Public-Private Partnerships for Transport
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Updated: October 25, 2021