Four interested in $8bn Melbourne road

Cintra, Lend Lease and Leighton holdings are part of the consortia vying to build and operate the availability-based road PPP.

Four local and international consortia have shown interest in building the East West road link, in Melbourne, the largest infrastructure project in the state of Victoria’s history, and one of 2013’s largest single tenders anywhere in the world.

“A mix of local and international consortia have submitted Expressions of Interest to build and operate the largest infrastructure project in Victoria’s history,” Victoria Treasurer Michael O’Brien said in a statement. “The coalition government expects to shortlist respondents and commence the next phase of the tender process by the end of October this year,” he added.

And while the government did not reveal the identity of the consortia, Partnerships Australia, a national infrastructure body, indicated in a newsletter that three of the teams might include:

– Lend Lease, Capella Capital, Acciona and Bouygues;

– Leighton Holdings, John Holland Dragados, Iridium and Bank of Tokyo Mitsubishi UFJ;

– Cintra, REST (a local superannuation fund), Ghella, Samsung and Macquarie.

The identity of the fourth consortium could not be ascertained.

Stage one of the project – a six-kilometre stretch, including a 4.4-kilometre tunnel – which is aiming to improve traffic congestion and travel times around Melbourne and boost Victoria’s productivity, is forecast to cost between A$6 billion (€4.2 billion; $5.5 billion) and A$8 billion.

Construction is expected to commence in late 2014 and complete between 2019 and 2020. The link is being delivered as an availability-based public-private partnership, with the state retaining tolling and traffic risk.

The Victorian budget for 2013-14 allowed for a state contribution to the delivery of stage one, including A$294 million to commence procurement and start early works.

Industry Funds Management (IFM), the Australian fund manager owned by 30-plus superannuation funds, submitted an unsolicited bid to build the road in late May, subsequently rejected by the government.

IFM proposed to build the 18-kilometre East-West Link in one go at a cost of less than $12 billion. It further differed from the government’s proposal in that IFM was willing to take on the financial risk if traffic volumes proved to be lower than expected, according to local media reports. Under IFM’s offer, the project would be funded with a mixture of tolls and availability payments.

But the government rejected the proposal, with Treasurer O’Brien telling the local media: “In relation to that particular proposal, the clear advice that came back was that it did not constitute good value for money.”