Thursday, April 16, 2015

Finally East-West Link Deal

Malcolm Maiden in The Age "Credit and blame are fairly evenly shared in the East West Link tollway contract dispute that Victorian Premier Daniel Andrews announced on Wednesday had been provisionally settled after months of tense negotiation.
Let's allocate the blame first.
Labor lit the fuse ahead of last November's election, by expanding its opposition to the project to include a commitment to kill it off.
It did so without knowing what the legal and financial consequences were, and its warning that Labor would kill the project if elected raised sovereign risk –the risk that the Victorian government would be regarded as untrustworthy in its dealings with the private sector.
The Napthine government and the East West Connect consortium led by Lend Lease also contributed to the debacle, however, by pushing ahead with a project that was set to return only 45¢ in the dollar, using Infrastructure Australia's cost-benefit methodology.
They pushed the project to its financial close ahead of the election, triggering the first big debt drawdown by the consortium, and they agreed on a side letter to the contract stating that compensation payments set out in the contract would flow if the tollway project was halted, or derailed by a legal challenge. East West was locked in the face of Labor's warnings, and the side letter was written because of them."
More details from The Age

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