Transurban has revealed the costs of the West Gate tunnel project in Melbourne could be blown out by about $3.3 billion, if not higher, as the road operator works its way towards a commercial settlement with the involved parties.
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.
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 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.
Meanwhile, pandemic restrictions in Melbourne and North America have affected traffic volumes and weighed on the company’s full-year results.
In Melbourne, toll revenue fell by 17.6 per cent and traffic volume on Citilink fell by a quarter.
But, traffic volumes throughout FY21 were recovered by increases in Sydney and Brisbane traffic, which largely rebounded to pre-COVID levels.
Traffic volumes were roughly flat year-on-year on Sydney tollways once Transurban’s new assets, the M8 and NorthConnex tunnels, were taken into account. But without those assets, volumes would have been down by seven per cent.
Mr Charlton said Transurban intended to bid for both tranches of the NSW Government’s remaining 49 per cent stake in WestConnex, likely funded by an equity raise.
The company is also looking at investment opportunities in the M7 staged widening and M7/M12 interchange in Sydney and Gateway and Logan Motorway widening projects in Brisbane within the next five years.
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.
Shares in the $39 billion dollar company fell on the news by about two per cent, last trading at $14.03.
- Transurban announces leadership re-shuffle
- Transurban confirms West Gate Tunnel 2023 completion ‘no longer considered achievable’
- Transurban annual results impacted by COVID-19 traffic reduction
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