Region: East Asia and Pacific
Country: Australia
Sector: Transportation
Keywords: Road, Standard agreements
Document Link(s):
Document Summary:
West Gate Tunnel Project – Project Agreement between Transurban (an Australia based toll road operator with a substantial international footprint) and the State of Victoria in late 2017, for Transurban to design, construct, operate and maintain the upgraded West Gate Freeway and the new West Gate Tunnel (which connects several existing arterial roadways in the greater Melbourne area). The agreement is for a term of 28 years (including the design and construction phase) ending in 2045 and is structured on a Build Operate Transfer (“BOT”) model. It provides a useful example of a PPP infrastructure project where the demand / revenue risk is substantially passed onto the private sector through a tolling model.
Document Details:
Key features of the Project Agreement:
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Land acquisitions and approvals – the State assumes primary responsibility for (1) making the land needed for the project available to Transurban (see clauses 5 and 6) and obtaining the key planning approvals required for the project (clause 8).
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Tolling arrangements – the agreement contemplates that the State will enact necessary legislative support for Transurban to collect road tolls during the operational phase, which will be used to remunerate Transurban. Transurban’s right to determine and levy road tolls is subject to a number of regulatory and contractual fetters. This includes the requirement that the toll must be determined and levied in accordance with a pre-agreed schedule, which allows the private developer to recover its project and financing costs, plus a margin of return on equity, while providing a ceiling on the toll that road users have to pay (clauses 30 and 31).
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Step-in rights – the State has the right to step-in to carry out the project and operate the road infrastructure in defined circumstances, including a major default by Transurban and certain force majeure events during the design and construction phase (clause 37).
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Early termination payment – Transurban is required to pay the State the “cost to complete” the project if the agreement is terminated during the design and construction phase due to an event of default. Conversely, it is entitled to an early termination payment by the State (calculated with reference to its unrecovered debt and equity investments), if the agreement is terminated for extended force majeure or convenience by the state (clause 42.9).
Updated: October 25, 2021