Melbourne's East West Link project has been declared dead for a price of $339 million, but the true cost for Victorian taxpayers may be up to $900 million.

Premier Daniel Andrews has agreed to pay the amount to cover the costs incurred by the building consortium tunnel to walk away from the controversial $6.8 billion road tunnel plan.

“No compensation payments for lost profits have been paid or will be paid,” he said.

“This settles the matter.

“This terminates the project and terminates the relationship in these terms and not a dollar more.”

But Opposition Leader Matthew Guy says the costs of design work, geo-technical planning and land acquisition could top another $480 million. Mr Andrews refused to reveal the final cost to Victorian taxpayers as financial arrangements on a line of credit were still being made.

The government paid $81 million to set up a line of credit for the East West Link, but that will be transferred to the Melbourne Metro Rail project. About $110 million in cash held by the East West Connect consortium will be returned to the state.

Homes compulsorily acquired for the East West Link would be available for people to return to if they wish, the premier said. The East West Connect consortium said it looked forward to pursuing future projects in Victoria and the payment ensured the companies involved were “kept whole” for costs incurred.

Treasurer Tim Pallas was confident the agreement would keep Victoria’s AAA credit rating stable.

He said the previous government tried to force a “poison pill” on the Labor government, signing a controversial side-letter committing Victorians to pay $1.2 billion in compensation if the road project was dumped.

Prime Minister Tony Abbott promised to talk to Victoria about other infrastructure projects but said there is nothing else “shovel ready” in the state. Mr Pallas released Treasury figures showing the cost of the project over 25 years would have been $10.7 billion.

This included a $2 billion capital outlay, $1 billion to be paid seven years after financial close, and $7.7 billion in yearly service payments. An audit of the $339 million already spent will be done to make sure the government is paying for work that was actually done.

The Victorian Auditor-General announced he will audit the entire project as a matter of priority.


What Labor says

  • $339 million already spent
  • $1 symbolic fee for East West companies
  • True project cost $10.7 billion over 25 years
  • Hundreds of homes acquired that could be resold or used

What Liberals say

  • Up to $480 million in sunk (already spent) government costs
  • Plus $339 million paid out
  • Finance costs more expensive than necessary
  • Melbourne growing at 100,000 people a year




1999 – Tunnel linking Eastern and Tullamarine freeways is proposed.

2003 – Discussed in Northern Central City Corridor Study.

2008 – Recommended in a transport needs report by Sir Rod Eddington.

2012 – The Baillieu government budgets $15 million to examine the business case.

2013 – Premier Denis Napthine commits to East West Link stage one.

2014 – September 9, East West Connect consortium (Lend Lease, Capella Capital, Acciona and Bouygues) is named the preferred bidder.

2014 – September 11, the Labor opposition says it will not build the tollway even if contracts are signed, and will not pay compensation.

2014 – September 29, the Napthine government signs the $5.3 billion stage one contract, and a side-letter for $1.1 billion compensation if the project is scrapped.


2014 – November 29 – Labor wins the state election.

2014 – December, Premier Daniel Andrews orders a halt to work and releases the business case showing benefit-cost ratio was 45 cents for every $1 spent.

2015 – February – the Andrews government says payment to the consortium will be limited to costs incurred.

2015 – April 14 – French and Spanish embassies raise concerns over impact on companies.

2015 – April 15 – Government says it will pay $339 million+++, and end East West Link.