UPDATE: THE Opposition accuses the Andrews Government of spending up to $900 million to dump the East West Link, as a senior federal minister slams the payout as “obscene”.

Premier Daniel Andrews and Treasurer Tim Pallas today revealed that the Government will pay $339 million in costs incurred by East West Connect - the group contracted to build the road.

A further $81 million in fees will be absorbed by the Government, after it was spent to set up a credit facility to borrow the project costs.

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The Government says it will effectively purchase the East West Link project company for $1, and take over its assets.

Mr Andrews claims the payout of costs incurred was not compensation and blamed the former Napthine government.

“Today’s agreement is the best possible result we could have achieved and it puts the interests of Victorians first,” he said.

Mr Andrews refused to say how much money had been spent by the Government on the East West Link so far, outside the consortium costs.

In Question Time, Opposition Leader Matthew Guy said the Government had spent closer to $800 million to $900 million to ditch the road, which the Premier rejected.

Mr Guy said scrapping the East West Link was “shortsighted” given Melbourne’s population growth.

Senior federal government minister Scott Morrison slammed the payout.

“For the Victorian government to spend $420 million to pay to a company not to build a road is an obscenity,” the Social Services Minister said.

ANDREW BOLT SAYS PREMIER Daniel Andrews claims the payout of costs incurred was not compensation and blamed the former government. That actually sounds like a lie and a broken promise. More particularly, it is $420 million NOT to build a road this state badly needs. What a ghastly waste. This Government is fast looking worse than even the Kirner Government. Read more

Mr Andrews said the rates, fees, swaps and obligations related to the credit facility will now be worked through between the financiers and the state.

That money will then be used to help fund the Melbourne Metro Rail Project.

Mr Andrews said homes compulsorily acquired for the project would be available for people to return to if they wish.

“Anyone who wants to come back to their home will be able to do so,” Mr Andrews said.

Mr Pallas said the potential payout to the consortium could have been as high as $1.2 billion.

He described the potential for such a payout as a “poison pill” placed by the Napthine government in the contract.

He said ratings agencies had been briefed this morning and the costs and savings of not proceeding with the East West Link would be provided in the Budget.

He was confident the agreement would keep Victoria’s AAA credit rating stable.

In a statement, East West Connect said: “The East West Connect consortium has reached an agreement with the Victorian Government in the form of a non-binding Heads of Agreement providing a satisfactory resolution to the East West Link project.

“The agreement enables the Victorian Government to acquire the Project Companies for a nominal consideration.

“The agreement also enables the sponsors of the Project Companies to cease work on the East West Link project and to be kept whole for fees and costs that have been incurred.

“The East West Connect consortium will now work with the financiers to conclude the formal agreement.

“Consortium members look forward to pursuing future projects in the State of Victoria.”

LONG ROAD TO END OF EAST WEST LINK

BEGINNINGS

1999 - Tunnel linking Eastern and Tullamarine freeways is proposed.

2003 - Discussed in Northern Central City Corridor Study.

2008 - Recommended in a transport needs report by Sir Rod Eddington.

2012 - The Baillieu government budgets $15 million to examine the business case.

2013 - Premier Denis Napthine commits to East West Link stage one.

2014 - September 9, East West Connect consortium (Lend Lease, Capella Capital, Acciona and Bouygues) is named the preferred bidder.

September 11, the Labor Opposition says it will not build the tollway even if contracts are signed, and will not pay compensation.

September 29, the Napthine government signs the $5.3 billion stage one contract, and a side-letter for $1.1 billion compensation if the project is scrapped.

ENDINGS

2014

November 29 - Labor wins the state election.

December, Premier Daniel Andrews orders a halt to work and releases the business case showing benefit-cost ratio was 45 cents for every $1 spent.

2015

February - the Andrews Government says payment to the consortium will be limited to costs incurred.

April 14 - French and Spanish embassies raise concerns over impact on companies.

April 15 - Government will pay $420 million, and end East West Link.

Source: AAP