East West Link Project

Tabled: 9 December 2015

Appendix B. Termination agreements and costs

Termination agreements

The state entered into the following termination agreements with the East West Connect (EWC) consortium on 15 June 2015.

Business Purchase Deed (BPD): The state paid $1.00 for the hard assets and intellectual property (IP) acquired/developed by EWC and the design and construction contractor (D&C) in connection with the Project (sale assets). The IP transferred to the state included the domain name, business name and logo of EWC. It also removed liabilities to the state from the purchase and provided it with representations and warranties for the assets purchased and the mitigation measures undertaken by EWC and the D&C contractor.

Completion Side Deed (CSD)—this document regulated and coordinated the process by which:

  • EWC repaid the debt owed to the banks so that the money owed was equal to the state funds
  • the state paid the agreed net debt amount of $420 million plus its contribution to costs incurred since 15 May 2015
  • certain finance documents were terminated on a no liability/full release basis
  • security granted in favour of the banks and the state was released or returned to the sponsors, and completion occurred under the BPD
  • the termination of certain project contracts (and associated releases) took effect.

Other agreements

  • Disclosure Letter—an agreed form letter under which EWC, the D&C contractor and the Operation and Maintenance (O&M) contractor made disclosures against the warranties given under the BPD.
  • BPD Completion Notice—notice given by the state under the CSD confirming that the completion obligations under the BPD had been satisfied or waived.
  • Deed of Termination and Release (D&C Access Co-ordination Deed)—deed under which the state, EWC, CityLink and Transurban agreed to terminate and discharge the 'EWL D&C Access Co-ordination Deed' between the parties.
  • Deed of Termination and Release (Financiers' Certifier Deed and Financiers' Certifier Direct Deed)—deed under which the state, EWC, Security Trustee and the financiers' certifier agreed to terminate and discharge the 'Financiers' Certifier Deed' and the 'Financiers' Certifier Direct Deed'.

Project costs reimbursed by the state as part of termination

The total contribution to the project costs by the state was $424 million, including the $81 million in fees paid to establish the credit facility and $4 million under the cost sharing regime. EWC had made payments for the following items, as confirmed by the state's due diligence expert.

Figure B1
Payments made by EWC

Item

Description

Costs ($)

Debt related payments

109 578 998

Equity related payments

Bid development fees—paid to the D&C contractor

Fee paid to the D&C contractor for services provided prior to financial close

60 000 000

Financial advisory services fee—paid to the financial adviser

Consideration for financial advisory services provided in relation to the bid and financial close achievement.

45 000 000

Equity development fee

Consideration for the services to develop, lead, formulate, revise and implement a development plan for the bid, those services having been provided between commencement of the expression of interest process and financial close.

11 543 066

Bid cost reimbursement

Reimbursement of bid and closing costs incurred.

13 544 626

Letters of credit fees

The letters of credit were letters guaranteeing that the equity contributions would be received on time and for the correct amount. In the event the partners were unable to make payment on the purchase, the bank would have been required to cover the full or remaining amount of the purchase. There are fees payable for these which it was agreed would be paid out of the partnership.

3 879 315

Total equity related payments

133 967 007

Design and construction related payments

Development success fee

Payment to the engineering arm of the D&C contractor for services to reach financial close.

8 750 000

EWC contractor payments

Construction payment claims as verified by the financier's certifier.

164 051 806

Total design and construction related payments

172 801 806

Other payments

O&M contractor payments

Pre-operations service payments made to fund the elements of O&M activities that must be completed prior to entering the O&M phase to be able to commence operations.

2 289 606

Management fees

Payment for services by the management services provider including accounting and finance, human resources and secretarial.

3 613 950

Independent reviewer costs

The independent reviewer provided oversight of the project, including confirming design and construction in line with requirements and reviewing, for EWC, extension of time claims, variations and corresponding cost claims by contractors.

391 045

Financiers' certifier fees

Costs to certify the progress claims from the D&C contractor on behalf of the financiers.

120 832

Engineering services

Payments for proof engineering services.

415 157

Employment services

Payments for training and employment services.

128 159

Long lead items

Payment to the Linking Melbourne Authority relating to contracts for long lead items (i.e. power supply) which were entered into by the Linking Melbourne Authority but novated to EWC under the D&C contractual arrangements.

338 584

Legal and other advisory services

Payments for legal and other advisory services.

473 767

Total other payments

7 771 100

Total payments made by EWC

424 118 911

Source: Victorian Auditor-General's Office based on information from the Department of Premier & Cabinet.

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