Sydney Light Rail legal disputes settled with revised PPP

Transport for NSW has settled its dispute with Sydney Light Rail contractor Acciona, resulting in a revised public-private partnership agreement with the ALTRAC consortium that is building the scheme.

Under the terms of the agreement, the PPP term has been extended to 2036 and ALTRAC’s shareholders – Acciona Concesiones, First State Super and John Laing – will invest “substantial additional equity” into the project.

Both TfNSW and First State Super said the value of this additional equity could not be disclosed for reasons of commercial sensitivity. Acciona declined to comment. John Laing had not responded to Infrastructure Investor’s request for comment at the time of publication.

The deal resolves more than A$1.5 billion ($1.0 billion; €932 million) of legal claims between the government of New South Wales and ALTRAC.

Acciona has also withdrawn its A$1.1 billion claim against TfNSW for legal misrepresentation. The Spanish company took the state transport body to court after it claimed it had been misled into entering into a contract with ALTRAC. Acciona was seeking to recover costs. It argued that guidelines over the relocation of utilities changed after the contract had been signed, and that this increased the time and costs associated with moving underground cables.

The New South Wales government will commit another A$576 million over the PPP term as part of the deal. This will increase the total project budget from A$1.6 billion to more than A$2.7 billion.

The agreement sets out new milestone and incentive payments for ALTRAC, with target start dates of December 2019 for the first passenger services on the new light rail system between Randwick, in Sydney’s east, and Circular Quay. A second milestone is for passenger services to run between Circular Quay and the eastern suburb of Kingsford by March 2020.

TfNSW said that if either date were missed, ALTRAC and its subcontractors would forfeit revenues from the services as well as incentive payments.

ALTRAC will also pay the outstanding amount drawn down on a A$500 million additional bank facility that was put in place in July 2018. The NSW government has removed its guarantee of this facility.

A revised PPP contract is expected to be published in July as part of TfNSW’s disclosure obligations, Infrastructure Investor understands.

The ALTRAC consortium comprises Transdev Sydney, Alstom Transport Australia, Acciona Infrastructure Australia and Capella Capital, with equity investors Acciona Concesiones, First State Super and John Laing. It won the PPP contract in December 2014.

The Sydney Light Rail project has been beset by delays and was originally supposed to open prior to the NSW state election in March.

The PPP contract covered the design, construction, service relocation, operation and maintenance of the CBD and South East Light Rail project, a new 12km stretch of railway connecting Circular Quay to Kingsford and Randwick.

An NSW parliamentary committee recommended in January that the state’s auditor-general launch a review into the effectiveness of PPPs on large infrastructure projects following the contractual disputes that had arisen over Sydney Light Rail’s construction.