Transfield Obayashi JV, the group that built Melbourne’s troubled CityLink tunnel tollway, will pay US$80.8M compensation to Transurban Group, the project concessionaire, to cover delays to the scheme. The agreement with Transurban ends the prospect of a lengthy and costly court battle.

But the deal has been criticised for being nearly US$52.6M less than Transurban’s original claim for US$132.4M in damages for the year-long delay on the Burnley tunnel and a six month hold-up on opening the western link.

The delays on the Burnley tunnel were partly caused by water ingress. Last February, a 15m section of wall buckled inwards by 300mm, cracked and started leaking water which led to a week-long closure of the tunnel.

Remedial work designs by Transfield Obayashi have recently been approved by consulting engineer Maunsell McIntyre, Transurban’s technical consultants. These call for the installation of stainless steel dowels, or rock anchors where steel reinforcement cannot be used.

The work will provide additional restraint at the arch-floor joint of the Burnley tunnel after independent inspectors found cracking occurred because the roadway lifted and separated from the walls.

Transurban chairman Laurence Cox said: "This is a great relief for us as it now enables us to focus on our new future path and not worry about what would have become a diversion had it ended up in the courts."

The agreement, one of the largest commercial settlements in Australia’s history, comprises US$63.2M in provisional payments which have already been made plus a further US$17.6M which will be paid in two separate payments by May 2003.

Transurban managing director Kim Edwards said the damages cover lost revenue as a result of delays in opening the two road links.

Meanwhile, Transurban has formed a new company, Transurban Infrastructure Development to market its electronic tolling expertise and tunnel operating and management experience.

Mr Cox said: "We plan to leverage our expertise and use it both here in Australia and if appropriate opportunities arise, overseas as well."

The firm is already planning to bid for the management of Sydney’s Cross City tunnel, in joint venture with Leighton, and the western orbital tollway.