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Leighton-led Wellington Gateway Partnership wins Transmission Gully contract

The Wellington Gateway Partnership, led by a unit of ASX-listed Leighton Holdings [ASX: LEI], has won the $1 billion contract to build the Transmission Gully road north of Wellington.

The consortium, made up of Leighton Contractors, HEB Construction, InfraRed Infrastructure General Partner, the Bank of Tokyo-Mitsubishi UFH and the Accident Compensation Corp, won the bid to build the 27 kilometre project with the New Zealand Transport Agency, and New Zealand's first public-private partnership for a state highway. The contract will see WGP design, build and finance the project, as well as operate and maintain the road for 25 years after the expected five-year build finishes in 2020.

The bidders put a $1 billion price tag on the project, while NZTA estimates its net cost will be $850 million, which it says is $25 million less than if it had been a conventional procurement. When the project is finished and open for use, NZTA will make annual cash payments of about $125 million over the life of 25-year contract, the roading agency said in a statement.

"By progressing the project as a PPP we have achieved a good value result and work will get underway on the project in the coming months," NZTA chief executive Geoff Dangerfield said. "Not only do we have certainty that the project will be built to a strict deadline that will see it opening in 2020, but the PPP contract also requires that the project is designed, constructed, operated and maintained to achieve a high standard of performance in the areas of safety, journey times, reliability, and customer satisfaction."

Transmission Gully is part of the 110km Wellington Northern Corridor Road of National Significance, connecting Levin to Wellington. The challengingly steep and geologically complex route uses a road corridor first identified during the Second World War, and has been the subject of local and central government tension for decades.

Leighton will be the special purpose vehicle manager for the project and also holds the operations and maintenance sub contract, while also acting as an equity investor with InfraRed and ACC. The design and construction is a joint venture with Auckland-based HEB Construction, with Leighton taking a majority role, WGP said. At its peak the project is expected to employ 700 people.

"The WGP has integrated local and international experience to successfully address the challenges of constructing 27 kilometres of motorway through steep terrain including 28 bridges," HEB Construction chief executive Derrick Adams said.

The WGP is chaired by New Zealand Post chief executive Brian Roche.

The rival bidder short-listed for the Transmission Gully project was Positive Connection, whose members were Fulton Hogan, Fletcher Building, Macquarie Group and the Morrison & Co-managed PIP Fund.

Shares of Leighton fell 1.3 percent to A$21.82 on the ASX, and have gained 37 percent this year.


Comments and questions

Great. Now how about the Government works on PPP to four lane the rest of State Highway One from Cambridge to Levin so we have a proper national highway to move freight.

People need to consider the bigger picture when suggesting roads are the way to riches.

NZ does not have the traffic volumes to justify the level of expenditure, nor does it have sufficient competition to keep the cost of construction reasonable.

What NZ does have however is an under utilised rail network, which can run on home made energy, rather than imported environment populating oil.

NZ needs to reduce its import costs, create more local employment and make more efficient use of existing resources. Use of electric trains would be a good start; and make them in NZ next time.

The payment of $125 million per year seems steep. You really do have to question whether it derives that level of benefit. Based on Greater Wellington Regions population of 350,000, and some 10% who would use the road, the benefit would have to be $3,600 per annum per user, or 4 hours of reduce travel per week based on $20/hour pay.

This payment amounts to $3.125 billion excluding tolls.

Could this be another think big project by National, and we all know what happened to these!!

The only way this will have value is if there are alot more Asian immigrants in the Wellington Region!

If I read the following correctly:

"When the project is finished and open for use, NZTA will make annual cash payments of about $125 million over the life of 25-year contract, the roading agency said in a statement"

NZTA are doing to pay the PIP $3.125 BILLION for a road that was expected to cost $1 billion if constructed the usual way. Some savings we're leaving our grandchildren

This is wonderful news for regional development, Palmerston North andthe Manawatu.